With bitcoin's meteoric rise in value, some investors are wondering if using it to purchase another digital asset means they can delay paying taxes on their gains.
Under the Republican tax bill expected to be voted on next week, the answer is no.
Because the IRS views bitcoin as property rather than a currency for tax purposes, there's been discussion about whether a certain kind of transaction known as a 1031 exchange can apply to bitcoin and its brethren.
A 1031 exchange allows taxpayers to exchange one type of asset for a similar one, thereby postponing capital gains taxes. The asset also must be used for business or investment purposes and meet other requirements.
In simple terms, such an exchange can result in getting taxed at a lower rate when the new asset is eventually sold.