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Tax Treatment of Non-Fungible Tokens: Applicable Tax Rules, Characterization Issues, Crypto Transactions

Recording of a 90-minute premium CLE/CPE video webinar with Q&A

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Conducted on Wednesday, November 9, 2022

Recorded event now available

or call 1-800-926-7926

This CLE/CPE course will provide tax counsel, accountants, and other advisers with critical analysis, non-fungible token (NFT) tax treatment, and reporting obligations for taxpayers and investors. The panel will discuss the difference between NFTs and other cryptocurrencies, IRS rules, and define proper reporting and tax treatment for NFTs.

Description

The recent explosion of the creation and sale of NFTs has brought about significant concerns regarding the taxation of these transactions for sellers, purchasers, and investors. Tax counsel and accountants for clients holding and selling NFTs must understand applicable tax rules, reporting requirements for these transactions, and the tax treatment of NFTs.

An NFT is a digital certificate of certain rights associated with a digital or physical asset. Thus far, NFTs have been created and sold for various assets within the art, music, and sports industries worldwide. However, since NFTs and NFT transactions are relatively new, the IRS has yet to issue guidance directly addressing NFTs. This forces taxpayers to rely on general tax law principles and current IRS guidance on digital assets and virtual currency.

NFTs are typically acquired in exchange for virtual currency and, as such, are treated as property resulting in recognition of gain or loss on the taxpayer. However, the characterization of an NFT and related transactions can depend on how the transactions are facilitated. If an NFT is treated as a collectible versus a digital asset, it can result in different tax treatment (i.e., a primary transfer may be considered a license, while a secondary market transfer is regarded as a sale).

Tax counsel and advisers must recognize applicable tax rules for NFTs, distinguish differences to cryptocurrencies, and define proper reporting and tax treatment for NFT transactions.

Listen as our panel discusses critical tax considerations for NFT transactions, tax issues for creators and investors, and other essential issues for NFTs.

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Outline

  1. Overview of NFTs
  2. Applicable tax rules
  3. Characterization of NFTs and NFT transactions
  4. Treatment of costs for creating NFTs
  5. Reporting and compliance
  6. State and local tax considerations

Benefits

The panel will review these and other key issues:

  • How are U.S. tax rules applied to NFTs and NFT transactions?
  • What characterization issues arise for NFTs under current tax law?
  • Are the costs associated with the creation of NFTs deductible?
  • What are the reporting requirements and compliance pitfalls for NFTs and NFT transactions?
  • What are the state and local tax challenges of NFT transactions?

Faculty

Bass, Jordan
Jordan Bass, Esq., CPA
Founder
Taxing Cryptocurrency

Mr. Bass is a both a Certified Public Accountant (CPA) and a tax lawyer, and is the founder of Taxing Cryptocurrency....  |  Read More

Kalinski, Jonathan
Jonathan Kalinski
Principal
Hochman Salkin Toscher Perez

Mr. Kalinski specializes in both civil and criminal tax controversies as well as sensitive tax matters including...  |  Read More

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Strafford will process CLE credit for one person on each recording. CPE credit is not available on recordings. All formats include course handouts.

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