What are some common misconceptions when one crypto is swapped for another? 1. "I didn't cash out to a bank account, so it's not taxable." The IRS does not care if the money never touched a traditional bank account or fiat currency. The moment the swap executes on-chain or on a centralized exchange, the tax liability is triggered. 2. Like-Kind Exchanges (Section 1031): Taxpayers used to argue that crypto-to-crypto swaps were tax-deferred "like-kind" exchanges. The Tax Cuts and Jobs Act explicitly shut this down, clarifying that Section 1031 applies only to real property (real estate).
Ralph Mendoza, EAShare
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