Crypto Investors Get Temporary Win as Biden Plan Stalls
(Bloomberg) -- The turmoil around President Joe Biden’s signature economic plan is a temporary victory for crypto investors who were facing the possibility of higher capital gains taxes if it was enacted.
Tucked inside the House’s version of the plan passed in November were two measures that would limit tools those investors can currently use to lower their taxes -- restrictions that already apply to stocks and other securities. The provisions were retained in an unfinished version of the Senate Finance Committee’s portion of the plan released earlier this month.
Biden’s $1.75 trillion tax and spending plan hit a wall Sunday when moderate Democratic Senator Joe Manchin announced his opposition after months of negotiations between lawmakers and the White House. There’s still a possibility that Democrats move a scaled-back version of the plan next year, but it’s unclear where or if the crypto measures fit into that.
“The bill stalling is a win for crypto investors,” said Lisa Zarlenga, a partner at the law firm Steptoe & Johnson LLP, who advises clients on crypto-related tax issues. “But as you know, once legislative language is out there, it never really goes away,” she said, suggesting the proposals could resurface at a later date.
One of the proposed changes would impose capital gains taxes when investors take offsetting short and long positions on a digital asset and the other would bar investors from claiming a deduction when they sell their crypto at a loss if they buy a “substantially identical” asset within 30 days before or after the sale.
Subjecting digital assets to these “constructive sale” and “wash sale” rules were estimated to bring in about $16.8 billion over 10 years to help pay for new social spending initiatives.
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