Bloomberg Tax
Free Newsletter Sign Up
Bloomberg Tax
Advanced Search Go
Free Newsletter Sign Up

IRS Official Says Pre-2018 Crypto Exchanges Aren’t ‘Like-Kind’

Nov. 13, 2019, 10:36 PM

Taxpayers aren’t able to defer taxes on exchanges of cryptocurrency, even for transactions that occurred before 2018, an IRS official said.

Up until now it has been clear that taxpayers can’t use like-kind exchanges for cryptocurrency trades beginning in 2018 due to changes made in the 2017 tax overhaul. Like-kind exchanges allow taxpayers to postpone paying tax on the gain of a sale if the proceeds are reinvested in similar property.

But tax practitioners have disagreed about whether that tool be an option for cryptocurrency transactions prior to 2018.

Suzanne Sinno, an attorney in the IRS Office of the Associate Chief Counsel (Income Tax and Accounting), said it is the agency’s position that like-kind exchange principles were never applicable to cryptocurrency. Sinno, who worked on recent cryptocurrency guidance, spoke Nov. 13 at the American Institute of CPAs conference in Washington.

Sinno’s comments come at a time when the IRS is ramping up enforcement in the cryptocurrency space. The push has raised alarm within the industry, with some saying it is unfair given the breadth of answered questions.

The IRS has said it is focused mostly on people who aren’t reporting their transactions at all, rather than those who have tried to comply but made mistakes.

‘Promotional Airdrops’

The IRS also clarified the scope of recent IRS guidance (Rev. Rul. 2019-24) that said individuals have to pay income tax on new coins they receive following a transaction known as a “hard fork,” during which one cryptocurrency splits into two.

The IRS generally defines this distribution of new coins to multiple users as an “airdrop.” More commonly, however, the term is used in the industry to describe situations where a company gives cryptocurrency holders free coins as a way to market a new offering and build awareness among potential customers.

The revenue ruling doesn’t apply to the second situation, said Christopher Wrobel, an attorney in the IRS Office of the Associate Chief Counsel (Income Tax and Accounting).

The IRS hasn’t yet decided whether such promotional airdrops should be treated as taxable, he said.

To contact the reporter on this story: Allyson Versprille in Washington at

To contact the editors responsible for this story: Patrick Ambrosio at; Colleen Murphy at