Media: US Democrats in Congress push to close tax loopholes in cryptocurrency transaction reporting

The second infrastructure plan worth $3.5 trillion being developed by the US Congress could be passed with amendments that would extend the “wash-sale rule” (wash-sale rule) to cryptocurrency transactions. Politico.

«The wash-sale rule previously applied to stocks and other securities also applies to goods, currencies and digital assets. It prohibits claiming tax losses while preserving an interest in the asset to which the losses relate. The amendments introduced in this section would apply to taxable years after December 31, 2021», — according to the proposed amendments.

Under current U.S. rules, taxpayers cannot include wash-sale losses in their taxable base. A wash sale is the disposal of securities followed by the purchase of “substantially identical assets” within 30 days.

The aim of this maneuver is to prevent underreporting capital gains tax (the so-called tax-loss harvesting). Currently, this provision does not apply to digital assets.

The authors of the bill also proposed extending the “constructive sale rule” (constructive sale rule) to cryptocurrencies.

«The rule regards the taking of certain offsets on previously held positions as a sale of the previously held position. These rules do not allow taxpayers to realise investment gains without realising taxable gains», — explained in the amendments.

The second $3.5 trillion infrastructure plan is expected to be released for public viewing by the end of September.

As noted, sent to the House of Representatives the first infrastructure funding bill worth $1 trillion includes $28 billion in taxes from cryptocurrency transactions. The document contains new reporting requirements for industry participants and broadens the definition of “broker” in the tax code.

Earlier, the vice president of taxes at the bitcoin exchange Coinbase, Lawrence Zlatkin, saw in the infrastructure plan a threat to millions of Americans. The document also criticised by prominent crypto lawyers and lobbying groups. The campaign was joined by Elon Musk and Jack Dorsey.

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