Cryptocurrency is still relatively new and, as a result, there are a lot of questions about how it operates and how it should be taxed. One question many people have is “can cryptocurrency be exchanged under section 1031?” In this article, we are going to discuss whether or not it’s possible to exchange bitcoin and other cryptocurrency under section 1031 of the Internal Revenue Code.
Real Property vs. Personal Property
The short answer to the question at hand is, no. Cryptocurrency cannot be exchanged under section 1031 of the Internal Revenue Code. But why is that the case? It all comes down to real property vs. personal property.
The question of exchanging cryptocurrency was hotly debated until recently when the Tax Cuts & Jobs Act went into effect. Prior to this law, taxpayers could defer their capital gains taxes on both real estate and personal property. The TCJA explicitly limited 1031 exchanges to real property, and excludes personal property outright. Since cryptocurrency is not classified as real property, it is not allowable under section 1031.
Get the 1031 Exchange Help You Need
Our 1031 intermediaries have twenty years of experience in the 1031 exchange field and understand the like-kind exchange process inside and out. We can guide you through each step of the process, while advising you, answering questions, and preparing your 1031 documentation. Reach out to the qualified intermediaries at CPEC1031, LLC today to learn more about your 1031 exchange options. Our main office is located in downtown Minneapolis but we serve clients throughout Minnesota and the United States.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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