Plain English
Section 1031 like-kind exchange historically allowed deferral of capital gains when swapping one investment property for another similar one. Before 2018, some taxpayers attempted to apply this to crypto-to-crypto trades. The Tax Cuts and Jobs Act of 2017 restricted 1031 to real property only, ending any debate going forward.
How it actually works
Under current US law, every crypto-to-crypto swap (ETH → BTC, USDC → ETH, ARB → ETH) is a taxable event. Pre-2018 returns may have claimed 1031 treatment on crypto swaps; the IRS has been audit-active on these and has generally disallowed them. The Coinbase John Doe summons of 2017 was largely about identifying users who had used 1031 to avoid reporting.
What it means for you
No current planning relies on 1031 for crypto. Every swap is a sale of the outgoing asset. Plan accordingly: realize gains and losses intentionally, batch trades to coordinate with your tax plan, and never assume a crypto-to-crypto trade is tax-neutral.
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Educational content only. Not investment, tax, or legal advice.