On December 22, President of the United States Donald Trump signed a new U.S. tax code amending IRC Section 1031 (a)(1). The new tax code is concerned with cryptocurrency trading apart from general taxation.
The amendment concerns a part of the tax code regarding “like kind exchanges,” which used to allow investors to swap assets without paying taxes for that, and have long been used by traders to avoid taxation for the operations.
The tax act in Sec. 13303 amends IRC Section 1031 (a)(1) to delete “property” and replace it with “real property” … So, you can see that now I can no longer take the position that my Bitcoin to Litecoin exchange was a like kind one under Sec. 1031, and I have to recognize the gain when I do it.
a partner at the law firm Murtha Cullina
According to the tax code, all cryptocurrency trading, including swapping one cryptocurrency for another, will become taxable starting from January 1 of 2018.
Until now the owners of digital currency had to pay taxes only when they exchanged cryptocurrency for fiat or physical goods, but the new rule now means that all crypto transactions become taxable.