Form 1040 virtual currency query revised for 2021
A draft version released in July of Form 1040, U.S. Individual Income Tax Return, for the 2021 tax year on page 1 retains the question from 2020 regarding cryptoassets but words it differently: "At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency?" (emphasis added). The 2020 form (and 2019, although the question then appeared on Schedule 1) asked: "At any time during [the tax year] did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?" (emphasis added). The new wording, substituting "dispose of" for "acquire" and omitting "send," is consistent with the 2020 instructions for Form 1040 that, in their final form, deleted from draft instructions purchases and acquisitions of virtual currency or financial interests in it, although the question itself for that year retained "acquire."
Certain pre-TCJA cryptoasset trades are not like-kind
IRS Chief Counsel Advice 202124008 stated that exchanges of bitcoin for certain other cryptoassets did not qualify for gain nonrecognition as like-kind exchanges under Sec. 1031 (before that section was amended by the law known as the Tax Cuts and Jobs Act (TCJA), P.L. 115-97, to exclude personal property, effective for exchanges after Dec. 31, 2017). Specifically, an exchange of bitcoin for ether, bitcoin for litecoin, or ether for litecoin did not qualify as a like-kind exchange, the Chief Counsel's office advised.
The "vast majority" of cryptoassets other than bitcoin or ether (such as litecoin) must first be exchanged for bitcoin or ether before conversion into fiat currency, the Chief Counsel's office said. Thus, bitcoin and ether are different in nature and character from litecoin and not of like kind with it under Sec. 1031. Furthermore, bitcoin and ether are different in nature and character from each other, since the Ethereum blockchain through which ether operates, besides acting as a payment network like Bitcoin, also is a platform for smart contracts and applications, the Chief Counsel's office said.
IRS addresses ARPA pension aid rules
In Notice 2021-38, the IRS offered guidance under Sec. 432(k) to sponsors of multiemployer defined benefit pension plans receiving special financial assistance from the Pension Benefit Guaranty Corp. under Section 4262 of the Employee Retirement Income Security Act of 1974 (ERISA), as amended. Both the ERISA assistance provision and Sec. 432(k), which provides related plan rules, were enacted by the American Rescue Plan Act (ARPA), P.L. 117-2. Generally, plans receiving the assistance must reinstate certain previously suspended benefits. The notice provides guidance on (1) whether makeup payments to participants or beneficiaries with respect to previously suspended benefits under Sec. 432(k)(2)(A)(ii) are eligible to be rolled over to another eligible retirement plan under Sec. 402(c); and (2) how to apply Sec. 432(k)(2)(D)(i), under which a plan's receipt of the special assistance is not taken into account in determining contributions required under the minimum funding standards in Sec. 431.
