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The IRS has published guidance stating that pre-2018 swaps among Bitcoin, Ether, and Litecoin are not eligible for 1031 tax-free exchange treatment. This means that investors who made swaps among these three cryptocurrencies before 2018 are liable for income tax on the gains realized. This guidance only applies to swaps before 2018, because the Tax Cuts and Jobs Act of 2017 eliminated § 1031 tax-free exchange treatment for personal property beginning after 2017, so that all cryptocurrency exchanges beginning in 2018 would be subject to income tax.

Continue reading the full GT Alert.