US Crypto Tax Law Study

Researchers from Indiana University and the University of Maine recently collaborated on a study that investigated the present condition of tax legislation in the United States regarding cryptocurrencies. The findings of the research are summarized in a series of recommendations that are directed for the Internal Revenue Service (IRS). If these suggestions were carried out, it would be impossible for taxpayers to deduct losses from bitcoin investments against profits from other types of investments.

The purpose of this study paper, which is named “Crypto Losses,” is to shed light on the myriad of different types of losses that may be incurred by firms and people who have invested in cryptocurrencies. In addition to this, it suggests a new tax structure to be applied to such losses.

At this time, the IRS has not issued definitive instructions on cryptocurrencies; nonetheless, bitcoin losses normally adhere to the same taxes regulations as other types of capital assets. In most cases, they may be deducted against profits from the sale of a capital asset, but not against gains from other sources, such as income. However, there are some restrictions regarding the times and ways in which deductions can take place.

For example, the amount of a loss that may be deducted for bitcoin transactions that are classified as a “sale” or “exchange” will be limited. On the other hand, taxpayers are eligible to deduct the full amount of their losses if their cryptocurrency was lost, stolen, or destroyed in any other manner (such as by burning it or through some other destructive method).

According to the findings of the research, the existing tax system does not adequately account for bitcoin losses, and it suggests adopting a different strategy in order to solve this problem. The tax system that is being suggested would make a difference between losses that are incurred as a consequence of transactions and those that are the result of the irreversible loss of assets.

According to the framework that has been presented, the only way for taxpayers to deduct losses related to cryptocurrencies that emerge from transactions is to do so against other types of capital gains. On the other hand, losses incurred as a consequence of the irretrievable destruction of assets would be totally deductable against other types of income.

In general, the findings of the research underscore the need for more clarity in the regulations governing the taxation of cryptocurrencies, as well as a more nuanced approach to the problem of how to handle bitcoin losses. Because of the widespread use of cryptocurrencies, it is imperative that the Internal Revenue Service (IRS) remain current with the rapidly evolving world of digital assets and provide transparent direction to taxpayers about their respective tax responsibilities.


Tagged : / / / / /

President Biden’s Spending Bill Includes New Language Addressing Crypto Asset Regulation

President Biden’s new agenda could expand how capital gains taxes apply to crypto assets.

Included in H.R. 5376, also known as the “Build Back Better” bill, is a clause that would amend the Constructive Sale rule to apply to cryptocurrencies and other digital assets.



The Constructive Sale rule was created in 1997 to prevent investors and hedge funds from taking advantage of a loophole in the law that allowed them to lock in investment gains without having to pay capital gains taxes, according to Investopedia.

Constructive sales are defined as making short sales against identical or similar properties and then entering into futures contracts that call for the same property to be delivered.

Currently, according to U.S. Code 1259, the Constructive Sale rule only applies to appreciated financial positions, which are defined as “any position with respect to any stock, debt instrument, or partnership interest if there would be gain were such position sold, assigned, or otherwise terminated at its fair market value.”

The proposed legislation would amend this clause by adding the words “digital assets” after “debt instruments,” meaning that crypto investors would no longer be able to skirt capital gains taxes by making constructive sales.

The new law would take effect as soon as the bill is passed, and would only apply to contracts signed after its enactment.

Don’t Miss a Beat – Subscribe to get crypto email alerts delivered directly to your inbox

Follow us on Twitter, Facebook and Telegram

Surf The Daily Hodl Mix




Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.

Featured Image: Pixy/5767319/


Tagged : / / / / / / /

Former pro sailer brokers tax-haven passports for wealthy crypto clients

A Russian expatriate and former professional sailboat racer, Katie Ananina, Plan B Passport — a firm that brokers citizenship through investment schemes for tax-haven nations that don’t impose capital gains on crypto holdings to wealthy investors.

According to a July 11 report from CNBC, Plan B brokers hundreds of passports for predominantly western clients each year. Customers select from one of seven jurisdictions: Saint Kitts and Nevis, Antigua and Barbuda, Dominica, Vanuatu, Grenada, Saint Lucia, and Portugal.

“If the government starts affecting me, I will take all [my assets] into my hands and go elsewhere,” said Ananina, adding:

“I was smart enough to figure out that $200 in bitcoin will be worth $100,000 at some point. I don’t think the government should have 40% of that.”

The safe-haven states offer citizenship through investment schemes requiring six-figure investments into local businesses, real estate, or government bonds. Some jurisdictions accept payment as donations, with Ananina estimating most passports cost between $100,000 and $150,000.

“It’s basically a donation into the sustainable growth fund of the country. So, clients make a $100,000 or $150,000 donation, plus some due diligence fees, government fees, and then $20,000 for my legal fees,” she said.

Plan B’s clients will also incur exit taxes should they revoke their existing citizenship.

Ananina became a Bitcoin maximalist after witnessing a 50% crash in the price of Russian rubles while living in Spain and competing for Russia’s national sailing team in 2015.

“My macroeconomics professor wasn’t able to explain that to me. There was no chance I could run my equations and figure out what happened there. I realized I wasn’t happy with how money works.”

Related: 2020’s 5 countries friendliest to crypto and blockchain

Citizenship through investment schemes have come under increasing scrutiny recently, following a series of investigations by Al Jazeera that revealed wholesale corruption among the officials overseeing the programs in Cyprus and the Caribbean — with some Caribbean states being found to offer diplomatic passports for the right price.

Cyprus abolished its citizenship through investment scheme in October 2020.