Yes. Prior to 2018, most cryptocurrency users chose only to report cryptocurrency transactions when trading crypto back for fiat. Trades between different cryptocurrencies (i.e; trading Bitcoin for Ethereum) were often not reported, with traders claiming that such trades were “like-kind” exchanges. A like-kind exchange is a common tax deferral strategy, typically used in real estate, that delays the taxation on swaps of similar property until the property is ultimately converted to fiat. This strategy is not allowed for stocks and securities. The IRS has stated that cryptocurrency is treated as property for U.S. tax purposes.

As part of the 2018 tax reform, the IRS clarified that like-kind exchanges are only allowed for “real property,” or in other words, real estate. This clarified that cryptocurrency traders recognize a capital gain or loss each time that they trade cryptocurrency, in addition to when they sell cryptocurrency for fiat. This new amendment essentially treats cryptocurrency similar to securities. To further eliminate any confusion, the IRS released a notice specific to holders of cryptocurrency that they must report every transaction, and failure to do so can result in penalties, interest, and criminal prosecution.

Did this answer your question?