Democrats eye expanded rules for cryptocurrencies as part of trillion-dollar tax and spending plan


Congressional Democrats in the House and Senate are solidifying plans for a multi-trillion-dollar spending package.

Citing sources with knowledge of the plan being developed, Politico reported Monday that Richard Neal, chairman of the House Ways and Means Committee, wants to include a series of measures to pay for the spending package, which could weigh in at as much as $3.5 trillion. 

A Ways and Means explainer document obtained by The Block mentions the wash sale rule and its application to cryptocurrencies. It notes:

"This section includes commodities, currencies, and digital assets in the wash sale rule, an antiabuse rule previously applicable to stock and other securities. The wash sale rule in section 1091 prevents taxpayers from claiming tax losses while retaining an interest in the loss asset. The amendments made by this section apply to taxable years beginning after December 31, 2021."

Neal's office did not immediately respond to a request for comment by press time.

Under US rules, a taxpayer can't deduct the losses from wash sales, defined as when a stock or security is sold and then, within 30 days, "substantially identical securities" are then purchased. The idea behind wash sale rules is to prevent their use for so-called tax harvesting, a practice employed to offset gains elsewhere. Currently, cryptocurrencies aren't subject to these rules — a state of affairs that critics say constitutes a loophole

The W&M document also highlights the application of constructive sales rules to digital assets. 

"This provision includes digital assets in the constructive sale rules, anti-abuse rules previously applicable to other financial assets. The constructive sale rules in section 1259 treat the adoption of certain offsetting positions to previously owned positions as sales of the previously owned position. These rules prevent taxpayers from locking in investment gains without realizing taxable gain. The amendments made by this section apply to taxable years beginning after December 31, 2021," the document notes.

The final bill is expected to be unveiled before the end of the month. Congressional leaders have been tight-lipped about the spending package ahead of what many expect to be a protracted fight over tax and spending policies. 

This report has been updated with new information from a Ways and Means Committee document, link included.

Trending Stories

Get Your Crypto
Daily Brief

Delivered daily, straight to your inbox.

Will Sanctions Drive Russia into the Arms of Cryptocurrencies?

From the removal of many Russian banks from SWIFT to a seemingly constant flow of new sanctions, Russia’s invasion of Ukraine has left many to wonder: Is the country likely to lurch towards cryptocurrencies? And if so, what does this mean for businesses that are holding and/or using crypto? Crypto and sanctions evasion Although crypto […]
Read Full Story
Sponsored Post

Layer-2 Scaling Solutions: A Framework for Comparison - Commissioned by Polygon

Ethereum had a breakout year in 2021. It’s native asset, ETH’s, market capitalization surpassed $500 billion for the first time. Its network facilitated upwards of $7 trillion value transfer. Non-fungible tokens (NFTs) emerged as another “killer application” that have put its technology on the global stage and caught the attention of the masses.
Read Full Story
May 5, 2022, 3:17PM UTC