Ron Wyden, Chair of the United States Financial Services Committee, and Mike Crapo, a ranking member, sent an open letter to the digital asset community with an aim to request taxation on digital assets.
The senators gave background information reading from the Joint Committee on Taxation to aid the respondents in giving relevant answers. They appreciated that the Internal Revenue Code of 1986 doesn’t give a clear categorization for digital assets.
Taxation on Digital Assets
Following this, a number of questions came up with each of them managing to cover nine major issues for discussion. This was supposed to help the members to understand the challenges to the taxation of digital assets.
The members were able to explain that the Finance Committee had given a lot of effort to identify major questions at the cross points of digital assets and tax laws. The letter that was written dealt with a variety of topics such as loans on digital assets, encouragement of foreign investment through the safe trading harbor as well as wash sales. Other topics were constructive sales, earnings gained from mining and staking digital assets as well as non-functional currency, and evaluation of an exchange.
In the letter, a few sections of the tax code were quoted to give a background for posing questions. The Internal Revenue Service has started taking a more refined and active approach to the taxation of income. At the beginning of the year, they announced that they had managed to collect 10 billion dollars from cryptocurrencies as a part of the enforcement of laws.
Recently, the organization showed an emphasis on the taxation of income when it summoned the Kraken exchange market in 2021. Demand for user information on all transactions that were more than $20,000 was made and the District Court for the Northern District of California made Kraken do as asked.
The members interested have until 8th September to answer the letter sent by the committee while providing their views and thoughts on the subject matter.