President Biden’s Spending Bill Includes New Language Addressing Crypto Asset Regulation

President Biden’s new agenda could expand how capital gains taxes apply to crypto assets.

Included in H.R. 5376, also known as the “Build Back Better” bill, is a clause that would amend the Constructive Sale rule to apply to cryptocurrencies and other digital assets.

The Constructive Sale rule was created in 1997 to prevent investors and hedge funds from taking advantage of a loophole in the law that allowed them to lock in investment gains without having to pay capital gains taxes, according to Investopedia.

Constructive sales are defined as making short sales against identical or similar properties and then entering into futures contracts that call for the same property to be delivered.

Currently, according to U.S. Code 1259, the Constructive Sale rule only applies to appreciated financial positions, which are defined as “any position with respect to any stock, debt instrument, or partnership interest if there would be gain were such position sold, assigned, or otherwise terminated at its fair market value.”

The proposed legislation would amend this clause by adding the words “digital assets” after “debt instruments,” meaning that crypto investors would no longer be able to skirt capital gains taxes by making constructive sales.

The new law would take effect as soon as the bill is passed, and would only apply to contracts signed after its enactment.

 

Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any losses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.

Featured Image: Pixy/5767319/