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June 28, 2024

IRS and Treasury release final digital asset broker reporting regulations and transition relief for certain brokers

The IRS and Treasury Department today released final regulations (TD 10000) requiring custodial brokers to report sales and exchanges of digital assets beginning in calendar year 2025. Further, cost basis reporting will be required by certain brokers, for transactions occurring on or after January 1, 2026. In addition to the broker reporting rules, the final regulations provide rules for calculating basis, gain and loss from digital asset transactions and an optional, aggregate reporting method for certain sales of stablecoins and non-fungible tokens over a de minimis threshold. Importantly, the guidance requires reporting by digital asset brokers providing custodial services and delays the extension of the definition of broker to non-custodial persons that provide facilitative services, while Treasury and the IRS study the issues including decentralized exchanges within the definition of digital asset broker.

The IRS and Treasury also issued three pieces of additional guidance. Notice 2024-56 provides transition relief from reporting penalties and backup withholding for brokers who are not able to timely and accurately file information returns and furnish payee statements during calendar year 2025 if the broker makes a good faith effort to comply. Notice 2024-57 identifies six types of digital asset transactions — including staking and digital asset lending — that will not be subject to information reporting until Treasury and the IRS issue further guidance. The IRS cautions that the deferred reporting should not be regarded as a conclusion that such transactions do or do not constitute sales or are otherwise subject to or exempt from tax. Revenue Procedure 2024-28 creates a safe harbor under IRC Section 1012(c)(1) for allocating the unused basis of digital assets held within each wallet or account of a taxpayer as of January 1, 2025. A Tax Alert is forthcoming.

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Published by NTD’s Tax Technical Knowledge Services group; Chris DeZinno, legal editor