Common Sense Recommendations for the Application of Tax Law to Digital Assets

In response to the Joint Committee on Taxation’s July 2023 request for comments on application of various Internal Revenue Code sections on digital assets, we propose a consistent set of rules to apply current law to digital assets. We highlight that the underlying economics and characteristics of transactions should be the primary concern for the application of rules and the valuation of digital assets. We believe any digital asset rules should (1) treat classes of digital assets with unique characteristics differently based on their economics, (2) minimize incentives for users to engage in tax-motivated structuring of transactions, and (3) allow the Internal Revenue Service authority to react to and regulate new classes of digital assets as they are created. We do not believe that the unique features of digital assets are a challenge to applying current law or warrant special tax preferred treatment.

Keywords: Digital Assets, Public Policy, Joint Committee on Taxation, Tax, Law, Internal Revenue Service, Cryptocurrency

JEL Classification: M49, H20, K34, G18, O38

Suggested Citation: Suggested Citation

Foreman, Matthew and Grennan, Jillian and Marian, Omri Y. and Menzer, Tyler and Rabetti, Daniel and Signors, Additional, Common Sense Recommendations for the Application of Tax Law to Digital Assets (April 30, 2024). U of Colorado Law Legal Studies Research Paper #23-22, Wayne State University Law School Research Paper No. 2023-22, UC Irvine School of Law Research Paper No. 2024-01, Saint Louis U. Legal Studies Research Paper No. 2023-14, Cardozo Legal Studies Research Paper No. 2024-06, Arizona State University Sandra Day O'Connor College of Law Legal Studies Research Paper No. 4576425, Available at SSRN: https://ssrn.com/abstract=4576425 or http://dx.doi.org/10.2139/ssrn.4576425