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Tax law surrounding crypto assets is currently convoluted and confusing, even despite Congress demanding the IRS clarify the law, and the IRS taking steps to provide more clarity to crypto investors in the United States.

However, given some recent comments from an IRS official regarding like-kind exchanges, crypto investors based in the US may want to consider going back and amending their tax returns to ensure they comply with the law.

IRS Clarifies Law Surrounding Like-Kind Exchange

Ever since Facebook unveiled its Libra cryptocurrency, the United States government and its many branches of government office have taken notice of the young, wild-west-like crypto industry, and the assets traded within it.

Related Reading | Confusing U.S. Tax Laws Lead to $5 Billion In Unrealized Crypto Losses 

Concerns over the disruption of the current monetary system, its use for illicit crimes like money laundering or terrorist funding, and more, have caused the US government to crack down on the crypto market.

It’s also caused the IRS to suddenly take more interest in crypto assets, and have updated tax forms to include if a taxpayer owns crypto assets – to ensure they aren’t missed on tax returns. Confusion remains around uncommon aspects of the industry, such as airdrops, but the IRS has finally begun to clarify the law in important areas.

According to a recent statement by IRS Associate Chief Counsel Suzanne Sinno, the office’s policy regarding like-kind exchanges never applied to cryptocurrencies.

Wikipedia says that a “like-kind exchange under United States tax law, also known as a 1031 exchange, is a transaction or series of transactions that allows for the disposal of an asset and the acquisition of another replacement asset without generating a current tax liability from the sale of the first asset.”

Like-kind exchanges that fall under a 1031 exchange include personal property such as vehicles, or even livestock. The law, however, is clear that it doesn’t include stocks, bonds, notes, or “other securities or evidences of indebtedness or interest.”

Crypto Investors Should Speak To a Tax Professional

Cryptocurrencies, according to Sinno, do not fall under the 1031 exchange tax code and would need to be reported on income taxes.

Prior to 2018, the common belief across the cryptocurrency community was that like-kind exchanges didn’t need to be reported, and thus any trades of Bitcoin into another crypto asset like Ripple, for example, did not need to be specifically reported – only when crypto was traded for cash.

The IRS claims it will be focusing its crackdown on individuals who haven’t reported their crypto taxes at all, and not those that have made mistakes in reporting. But because many crypto investors may not have reported like-kind exchanges, it could put them into the former category.

Related Reading | Overwhelming Majority of Bitcoin and Crypto Investors Refuse to Report Taxes 

Crypto investors who failed to report like-kind exchanges prior to 2018 or at all, would be wise to speak to a tax attorney or accountant to understand their risk exposure, and if filing an amended tax return is suggested.

Filing an amended tax return could result in a taxpayer owing back taxes on crypto trades, especially during the 2017 bull run, however, it is likely a small price to pay compared to the fines and potential jail time for failing to properly report income taxes.

Tony Spilotro , 2019-11-14 19:00:25

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NewsBlock © 2019 - 2020 All rights reserved.

NewsBlock © 2019 - 2020. All rights reserved.


While Bitcoin’s price seemingly moves without rhyme or reason — collapsing by dozens of percent and embarking on face-melting rallies on a whim — the cryptocurrency market is filled to the brim with fractals.

Related Reading: Analyst: Bitcoin Price Likely to Fall to Low-$8,000s as Chart Remains Weak

A brief aside: A fractal, in the context of technical analysis and financial markets anyway, is when an asset’s price action is seen during a different time. This form of analysis isn’t that popular, but it has proven to be somewhat valuable in analyzing Bitcoin.

One recent fractal popularized by a well-known cryptocurrency trader is implying that BTC is going to return to the low-$7,000s in the coming days.

Bitcoin Fractal Implies Retracement to Low-$7,000s

A well-known crypto trader going by “Tyler Durden” on Twitter recently posted the chart below, which shows that a Bitcoin price fractal may be playing out. The fractal has four phases: horizontal consolidation marked by one fakeout, a surge above the consolidation phase, a distribution, then a strong drop to fresh lows.

If the fractal plays out in full, BTC could reach the low-$7,000s again, potentially as low as $7,100. This would represent a 20-odd percent collapse from the current price point of $8,800.

It isn’t only a fractal that is hinting Bitcoin has the potential to visit its lows. As we reported on Saturday, Bloomberg believes that if the GTI Vera Convergence Divergence Indicator flips red, a downtrend could push the cryptocurrency back to $7,300.

Related Reading: Stephen Colbert Pokes Fun at Bitcoin in Monologue: Mainstream Gone Wrong?

Can Bulls Step In?

But again, many believe it is irrational to have such bearish interpretations of the cryptocurrency’s chart at the moment. As reported by NewsBTC earlier, Popular crypto trader Mayne recently noted that the “people waiting for $6,000” are irrational. He quipped that Bitcoin retracing and consolidating after its fourth-biggest bull move in history ($7,300 to $10,500, a 42% gain) is perfectly par for the course, but noted that it’s totally possible we can go lower from $8,800.

The medium-term technicals support this.

Trader and CoinTelegraph contributor FilbFilb found that by the end of November or start of December, the 50-week and 100-week moving averages will see a “golden cross,” which he claims is far more significant” for the Bitcoin market that other technical crosses.

Also, a Bitcoin price model created using Facebook Prophet machine learning found that the leading cryptocurrency is likely to end the year at just over $12,000. What’s notable about this model is that it called the price drop to $8,000 months in advance, and forecasted a ~$7,500 price bottom for BTC.

To put a cherry on the cryptocurrency cake, Crypto Thies observed that when Bitcoin bottomed at $7,300, it bounced decisively off the 0.618 Fibonacci Retracement of the move from $3,000 to $14,000, which correlates with the two-week volume-weighted moving average. He added that summer 2019’s consolidation was marked by Bitcoin flipping major resistances into support levels, implying that a bullish reversal and subsequent continuation is likely possible in the coming weeks.

Featured Image from Shutterstock


Nick Chong , 2019-11-10 12:00:38

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