The US Internal Revenue Service (IRS) has announced that it is seeking feedback on the taxation of non-fungible tokens (NFTs).
The Treasury Department and the IRS issued a notice regarding the tax treatment of non-fungible tokens as collectibles. It seeks feedback regarding taxability of NFTs under section 408(m) of the Internal Revenue Code.
The IRS is open for comments until June 19.
Look-through analysis for NFT taxes
The IRS seeks to investigate whether a particular NFT falls under the collectible category through a “look-through analysis.” This means that it must pass the definition of a collectible in the tax code.
It states, “A gem is a collectible article under section 408(M); Therefore, an NFT evidencing ownership of a gemstone is a collectible.”
28% long-term capital gains tax can be imposed
sheehan Chandrasekhar, Head of Tax Strategy at CoinTracker, told BeInCrypto, “This notice provided a lot of clarity to an area that we had not seen any type of guidance before. The guidance is not final, but their analysis helps us think more clearly about NFT taxes.”
However, he believes that this isn’t necessarily good news for anyone classifying NFTs as collectibles. Sheehan explains, “If an asset is taxed as a collectible, you may be subject to a higher long-term cap gains tax rate (28%) compared to the regular 20% long-term non-collectible assets. “
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