Wash-Sale Rules (Cryptocurrency Application)

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Discussion
The wash-sale rule is an IRS regulation prohibiting taxpayers from claiming loss on the sale of a security and subsequent purchase of a substantially identical security. The period of time associated with a wash sale is 30 days before and after the date of disposition. Exceptions exist, however, if the taxpayer is a dealer in securities and the loss is sustained in the course of their ordinary course of business. The basis of the subsequently acquired security will be adjusted by the disallowed loss.

Although the IRS has not specifically ruled that cryptocurrencies are a type of security, other agencies, such as the CFTC and the SEC, view cryptocurrencies as commodities (a type of security) for enforcement purposes. Likely, this designation will be adopted by the IRS, and cryptocurrencies will be subject to rules affecting securities (including the wash-sale rules).

References
https://www.law.cornell.edu/uscode/text/26/1091
https://www.law.cornell.edu/cfr/text/26/1.1091-1
https://www.law.cornell.edu/cfr/text/26/1.1091-2

Disclosure
Any accounting, business or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties.