Plain English
Section 1031 like-kind exchange was historically used by some taxpayers to claim crypto-to-crypto swaps were non-taxable. The 2017 Tax Cuts and Jobs Act restricted 1031 to real property only, effective 2018 onward. Every crypto swap since then is a fully taxable event regardless of pair similarity.
How it actually works
The IRS Office of Chief Counsel issued ILM 202124008 in 2021 confirming 1031 never applied to crypto-to-crypto trades even before TCJA, because BTC, ETH, and LTC are not “like-kind” with each other due to their different consensus mechanisms and economic functions. The matter is fully settled going forward.
What it means for you
Plan every crypto trade as taxable. Use specific-identification to control which lots realize. Coordinate trades with overall tax positioning. The “no 1031” rule is also one of the reasons HNW crypto investors increasingly use tokenized real estate or fund structures where actual 1031 treatment is possible — entirely different asset class with different rules.
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Educational content only. Not investment, tax, or legal advice.