Proposed regulations on information reporting for digital assets

In brief

Treasury and the IRS on August 25 released proposed regulations on information reporting (Forms 1099, etc.) and calculation of gain or loss for digital assets. The 2021 Infrastructure Investment and Jobs Act expanded the rules regarding how digital assets should be reported by brokers. The proposed regulations provide guidance for how brokers and payors are to comply and provide rules to determine the amount realized for purposes of computing gain or loss upon the sale, exchange, or other disposition of digital assets, as defined in Reg. sec. 1.6045-1(a)(19). 

Digital assets subject to information reporting are broadly defined and include stablecoins and non-fungible tokens (NFTs). The proposed regulations would not apply to other types of virtual assets that exist only in a closed system or to uses of distributed ledger technology for ordinary commercial purposes that do not create new transferable assets.  

The proposed regulations would clarify that brokers required to report include digital asset trading platforms, digital asset payment processors, certain digital asset hosted wallet providers, and persons who regularly redeem digitals assets they created or issued. In addition to data traditionally reported by brokers, digital asset information reporting would include items such as transaction hashes and wallet addresses.  

The proposed regulations would require information reporting of certain sales occurring on or after January 1, 2025. 

Taxpayer comments on the proposed regulations are due to the IRS by October 30. A public hearing has been scheduled for November 7, 2023 (and November 8, 2023 if needed), in Washington, DC. 

PwC will publish a detailed insight on the regulations in the coming days.