United States Senate Financial Services Committee Chairman Ron Wyden and Ranking Member Mike Crapo released an open letter to the digital asset community on July 11 requesting information on the taxation of digital assets . The senators are seeking solutions to highly complex tax issues, so much so that they offered background readings from the Joint Committee on Taxation to prepare respondents.
The 1986 Internal Revenue Code provides “no direct classification for digital assets,” the senators said. They asked a large number of questions grouped into nine subject areas, explaining:
“In recent months, the Finance Committee has initiated a bipartisan effort to identify key questions that lie at the intersection of digital assets and tax law.”
The letter covered issues related to mark-to-market accounting, commercial safe harbor to encourage foreign investment, digital asset lending, wash sales, constructive sales (which are closely related to short sales), staking and mining income, “non-functional currency”, foreign company reports, and valuation and justification on an exchange. The questions make frequent reference to specific sections of the tax code.
Related: US Lawmakers Blame Crypto Firms for ‘Tax Gap’ in Letter to Treasury
Much of the effort of the Internal Revenue Service (IRS) regarding cryptocurrencies thus far has gone into countering criminal activity. Earlier this year, he bragged about seizing $10 billion worth of crypto in total in his enforcement efforts.
— Bill Hughes: wchughes.eth (@BillHughesDC) July 11, 2023
The IRS is also becoming more proactive with regard to income taxes. It claimed in a recent case, for example, that it issued a subpoena to crypto exchange Kraken in 2021 to obtain user information on all transactions over $20,000. The U.S. District Court for the Northern District of California ordered Kraken to provide that information on June 30.
The Senate committee will accept responses to the letter until September 8.
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This post US Senate Finance Committee asks digital asset community how to tax them in open letter
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