IRS Release proposed regulations for Digital Asset information reporting
Long awaited proposed regulations for Digital Asset information reporting have been released.
The Department of the Treasury and the Internal Revenue Service today issued proposed regulations (2023-17565.pdf (federalregister.gov)) that would require brokers to report sales and exchanges of digital assets by customers. These are to be published in the federal register August 29.
The proposed regulations cover a range of digital asset issues where there have been questions, including defining brokers and requiring proceeds to be reported to the IRS on new Form 1099-DA.
For sales or exchanges of digital assets that take place on or after Jan. 1, 2025, the proposed regulations would require brokers, including digital asset trading platforms, digital asset payment processors and certain digital asset hosted wallet providers, to report gross proceeds on a newly developed Form 1099-DA and to provide payee statements to customers. Brokers, in certain circumstances, would also be required to include gain or loss and basis information for sales that take place on or after Jan. 1, 2026, on these information returns and statements, so that customers have the information they need to prepare their tax returns.
The proposed regulations would also require real estate reporting persons, such as title companies, closing attorneys, mortgage lenders and real estate brokers, who are treated as brokers for dispositions of digital assets, to report the disposition of digital assets paid as consideration by real estate purchasers to acquire real estate in real estate transactions that close on or after Jan. 1, 2025. These real estate reporting persons would also be required to include on Form 1099-S the fair market value of digital assets paid to sellers of real estate in real estate transactions that close on or after Jan. 1, 2025.
Finally, the proposed regulations set forth gain (or loss) computation rules, basis determination rules and backup withholding rules applicable to digital asset sale and exchange transactions and propose many useful definitions.
Written comments regarding the proposed regulations must be submitted by Oct. 30, 2023. A public hearing has been scheduled for November 7, 2023, with a second public hearing date for November 8, 2023, if the number of requests to speak at the hearing exceed the number that can be accommodated in one day.
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