KATWIJK, NETHERLANDS – DECEMBER 17: In this photo illustration, visual representations of digital …
Relying on this tax law and the murky crypto tax guidance that existed before 2018, some cryptocurrency holders applied like-kind exchange treatment to crypto-to-crypto trades and paid no taxes on gains.
So, relying on more authoritative §1031 of IRS tax code, some taxpayers applied like-kind exchange treatment for crypto-to-crypto transactions occurred before 2018.
The Memorandum released on June 18, 2021 explicitly mentions that exchanges between bitcoin, Litecoin and ether prior to January 1, 2018 are not eligible for the like-kind exchange treatment.
Accordingly, no inferences should be made based on this chief counsel advice that are not explicitly set forth in this advice”.
That said, if we apply the analysis used in this memorandum on other cryptocurrency transactions, almost all crypto-to-crypto trades would be considered taxable events and not eligible for the like-kind exchange treatment, without any doubt.