Tax-Loss Harvesting with Cryptocurrencies
58 Pages Posted: 17 Feb 2022 Last revised: 29 Apr 2022
Lin William Cong
Cornell University - Samuel Curtis Johnson Graduate School of Management; National Bureau of Economic Research (NBER)
Wayne R. Landsman
University of North Carolina Kenan-Flagler Business School
Edward L. Maydew
University of North Carolina at Chapel Hill
Daniel Rabetti
Tel Aviv University - Coller School of Management
Abstract
We study investors' responses to increasing tax reporting awareness and scrutiny in the crypto markets. We document significant taxation effects on investors' behavior and preferences for crypto exchanges using novel data on retail investors' trading. In relation to international peers, U.S.-based investors decrease taxable events while exploiting tax-loss harvesting to balance portfolio losses. We further examine billions of trades on the trading books of large crypto exchanges and discover widespread tax-loss harvesting trades on U.S.-based crypto exchanges, amounting to billions of dollars in tax revenue losses for the government. Finally, we discuss ongoing anti-tax-loss harvesting proposals in anticipation of traders' likely reactions.
Keywords: Tax-Loss Harvesting, IRS, Trading Behavior, Cryptocurrencies, NFT, DeFi.
JEL Classification: G15, G18, G29, K29, K42, O16.
Suggested Citation: Suggested Citation
Lin Cong

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )
Ithaca, NY 14853
United States
HOME PAGE: http://www.linwilliamcong.com/
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Wayne R. Landsman

University of North Carolina Kenan-Flagler Business School ( email )
McColl Building
Chapel Hill, NC 27599-3490
United States
919-962-3221 (Phone)
919-962-4727 (Fax)
Edward L. Maydew

University of North Carolina at Chapel Hill ( email )
McColl Building
Chapel Hill, NC 27599-3490
United States
919-843-9356 (Phone)
HOME PAGE: http://www.kenan-flagler.unc.edu/faculty/directory/accounting/edward-maydew
Daniel Rabetti (Contact Author)
Tel Aviv University - Coller School of Management ( email )
Ramat Aviv
Tel-Aviv, 6997801
Israel
972-54-9107234 (Phone)
HOME PAGE: http://https://en-coller.tau.ac.il/
Do you want regular updates from SSRN on Twitter?
Paper statistics
Related eJournals
-
Financial Accounting eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS3,505PAPERS18,102This Journal is curated by:Ross L. Watts at Massachusetts Institute of Technology (MIT) - Sloan School of Management -
Emerging Markets: Finance eJournal
Emerging Markets: Finance eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS1,991PAPERS17,642This Journal is curated by:Erik Berglöf at Institute of Global Affairs, London School of Economics and Political Science -
Accounting, Corporate Governance, Law & Institutions eJournal
Accounting, Corporate Governance, Law & Institutions eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS1,726PAPERS9,780This Journal is curated by:Vernon J. Richardson at University of Arkansas at Fayetteville -
Regulation of Financial Institutions eJournal
Regulation of Financial Institutions eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS1,709PAPERS10,879This Journal is curated by:René M. Stulz at Ohio State University (OSU) - Department of Finance -
International Accounting eJournal
International Accounting eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS1,231PAPERS3,299 -
Regulation of Financial Institutions eJournal
Regulation of Financial Institutions eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS1,185PAPERS10,410This Journal is curated by:Howell E. Jackson at Harvard Law School -
Tax Law: International & Comparative Tax eJournal
Tax Law: International & Comparative Tax eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS1,157PAPERS4,349This Journal is curated by:Paul L. Caron at Pepperdine University - Rick J. Caruso School of Law, Robert A. Green at Cornell University -
Cryptocurrency Research eJournal
Cryptocurrency Research eJournal
Subscribe to this free journal for more curated articles on this topic
FOLLOWERS1,015PAPERS932 -
Forensic Accounting eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS928PAPERS776 -
Accounting Technology & Information Systems eJournal
Accounting Technology & Information Systems eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS846PAPERS982This Journal is curated by:Vernon J. Richardson at University of Arkansas at Fayetteville -
Emerging Markets Economics: Industrial Policy & Regulation eJournal
Emerging Markets Economics: Industrial Policy & Regulation eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS389PAPERS2,367This Journal is curated by:Erik Berglöf at Institute of Global Affairs, London School of Economics and Political Science -
Law & Society: Public Law - Tax eJournal
Law & Society: Public Law - Tax eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS347PAPERS6,418This Journal is curated by:David Gamage at Indiana University Maurer School of Law -
Other Accounting Research eJournal
Other Accounting Research eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS289PAPERS743 -
Information Systems & Economics eJournal
Information Systems & Economics eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS235PAPERS13,719This Journal is curated by:Erik Brynjolfsson at National Bureau of Economic Research (NBER) -
Investments eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS226PAPERS1,817 -
Portfolio Management eJournal
Subscribe to this free journal for more curated articles on this topic
FOLLOWERS218PAPERS945 -
Global Investment Strategy eJournal
Global Investment Strategy eJournal
Subscribe to this free journal for more curated articles on this topic
FOLLOWERS199PAPERS1,025 -
Taxation eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS150PAPERS212 -
International Political Economy: Investment & Finance eJournal
International Political Economy: Investment & Finance eJournal
Subscribe to this fee journal for more curated articles on this topic
FOLLOWERS75PAPERS11,553