The Tax Cuts and Jobs Act of 2017 restricted IRC Section 1031 to exchanges of real property. Stocks do not qualify (and never did), but virtually any real estate held for business use does. Real estate held primarily for sale does not-in other words, if a developer is building to sell, or a real estate “flipper” is buying a house to remodel and sell, they cannot trade those assets for other properties in a 1031 exchange. As a result, any item outside of real estate held for investment or used for business is not eligible for a 1031 exchange transaction. The statute specifically excluded all personal and intangible property, such as machinery, equipment, vehicles, artwork, collectibles, patents, and intellectual properties.

The Internal Revenue Code has traditionally permitted investors to exchange real property used for business or held for investment purposes for other business or investment property of the same type and has referred to these swaps as “like-kind exchanges.” Thus, making such an exchange would not expose the taxpayer to taxes on any gain unless they received the increase as non-like property or in money. In addition, the code requires that the investor follow specific timelines to maintain eligibility for the deferral of the tax. The exchange has strict rules associated with the transaction, primarily designed to ensure that the taxpayer does not have control over the proceeds from the sale of the relinquished asset before the replacement property is acquired.

However, the “like-kind” allowances are typically lenient, with multi-family housing being exchangeable for commercial office space or retail swapped for farmland. Based on guidance issued by the IRS in a Chief Counsel Advisory, cryptocurrency swaps did not qualify for 1031 exchanges even before the restrictions put into place by the TCJA. According to the IRS, cryptocurrency, or virtual currency, is a digital representation of value and treats it as property rather than money. Interestingly, while the IRS seems open-handed in its treatment of business property in applying the definition of like-kind swaps, it used a more restrictive standard in other cases, such as the digital currency. In IRS Notice 2014-21; Rev. Rul. The investor can even exchange real property for a fractional interest in a DST via a 1031 exchange. 2019-24, they discussed the distinct characters of various cryptocurrencies and their respective functionalities to conclude that they played fundamentally different roles in the marketplace and did not allow a like-kind exchange. Did Cryptocurrency Swaps Ever Qualify?

The first wallet program, simply named Bitcoin, and sometimes referred to as the Satoshi client, was released in January 2009 by Satoshi Nakamoto as open-source software. In version 0.5 the client moved from the wxWidgets user interface toolkit to Qt, and the whole bundle was referred to as Bitcoin-Qt. Bitcoin Core is, perhaps, the best known implementation or client. They have an inverse relationship with regard to trustlessness and computational requirements. There are several modes in which wallets can operate. After the release of version 0.9, the software bundle was renamed Bitcoin Core to distinguish itself from the underlying network.