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President Biden unveils spending framework contains a part on Digital Assets

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Pavan A Follow

INDIA

Nov, 01 2021

Nov, 01 2021

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On Thursday, President Biden announced a new $1.75 trillion package to overhaul the nation's health-care, education, climate, and tax laws, pushing past policy disagreements and political feuds that had slowed down his economic policies.

The new framework contains more details than anything else yet released by the White House, having been negotiated by moderate and progressive legislators from his party over months.

The focus in Washington has been on President Biden's multi-trillion-dollar Build Back Better spending package. Progressive Democrats were upset about the changes made to the paid family leave and free college. 

The 1,684-page draft spending bill includes a small section on digital assets. Section 1259 of the Internal Revenue Code describes transactions that are subject to capital gains taxation, which is a type of tax applied on certain investment earnings. The goal is to adapt the concept of "constructive sales" to digital assets.''

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The rule would be extended to crypto transactions if it passed. DXC Technology tax attorney Nathan Perry tweeted an example of how to take advantage of the Bitcoin options market loophole: "You buy [Bitcoin] at $60k. It appreciates to $100k, but it’s a short-term capital gain. So you buy a put with a right to sell it for $100k, thus locking in the gain."

He adds, "Without IRC Sec. 1259 applying, you can turn a short-term cap gain into long-term capital gain."

In September, reports emerged about the wash sale rule and that Democrats were planning to increase tax revenue by applying the existing IRS code to cryptocurrencies. In a wash sale, a person dumps stocks or bonds at a loss, then immediately buys replacements at a lower price. The Blockchain Association and Coin Center, two key advocacy groups, expressed no objections to the proposal.

 


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Pavan A

CBW - External Analyst

INDIA

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