North Carolina Republican Representative Ted Budd’s Virtual Value Tax Fix Act of 2019 has been reintroduced in the House of Representatives and referred to the House Committee on Ways and Means. The bill seeks to amend the Internal Revenue Code to “allow exclusion of gain or loss on like-kind exchanges of virtual currency.”
If passed, the legislation would require that exchanges of one digital currency for another be treated in the same way tax law currently treats an exchange of “real property for real property of like kind.” Under current law, any gain or loss in such like-kind real property exchanges is not recognized for tax purposes.
Under 26 USC 1031:
No gain or loss shall be recognized on the exchange of real property held for productive use in a trade or business or for investment if such real property is exchanged solely for real property of like kind which is to be held either for productive use in a trade or business or for investment.
Supporters of Budd’s bill claim that the change would effectively prevent double-taxation of cryptocurrency transactions.
During congressional testimony in June, Budd told his fellow lawmakers that undue tax burdens continue to represent a real threat to the blockchain industry. At the time, he noted that the laws currently create not only the threat of double taxation, but also an unfair record-keeping burden for taxpayers – both of which could deter innovation and slow adoption of the nascent technology.