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Taxation of Non-Fungible Tokens: Tax Issues of Creators, Purchasers, Sellers; IRS Notice 2023-17

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Thursday, August 17, 2023

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This webinar will address the latest guidance for reporting and calculating the tax consequences of acquiring and disposing of non-fungible tokens (NFTs). Our dynamic speaker will provide examples of the tax treatment for creators, sellers, and purchasers of these popular assets using common scenarios and under unique circumstances, including donating NFTs.

Description

Determining the tax treatment of non-fungible tokens (NFTs) is complex. There are many levels of taxation, and the consequences vary depending on whether an NFT is sold or exchanged and how it is held--perhaps as a collectible or inventory. The problem is exacerbated by the lack of IRS guidance. Recently released, Notice 2023-27 states that NFTs can be treated as collectibles and consequently subject to the higher 28 percent tax rate. The notice provides a "look-through analysis" that can be impractical in a digital world.

The sale of an NFT could be taxed at ordinary or capital gains rates. The sale generally generates ordinary income for a creator. In addition to calculating the gain or loss on the disposition, creators could sell an NFT using the installment method or sell the property with or without its intellectual property rights creating further tax issues.

In addition to the nuances of the acquisition and disposition of NFTs, there are unique circumstances that create other tax problems. A seller could retain royalty rights, or a taxpayer might donate an NFT to a charity. Tax professionals working with individual taxpayers must effectively report the buying and selling of NFTs considering the limited guidance available.

Listen as our digital tax expert explains the proper treatment of NFTs for taxpayers acquiring and disposing of these assets and other unique taxable events.

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Outline

  1. Non-fungible tokens (NFTs): an introduction
  2. Defining NFTs
  3. Reviewing the limited guidance available
  4. Taxation of NFTs
    1. Creator
    2. Seller
    3. Purchaser
  5. Other tax scenarios
    1. Donating NFTs
    2. Other unique circumstances

Benefits

Our speaker will cover these and other critical issues:

  • Determining whether an NFT is taxed at ordinary or capital gains rates
  • IRS guidance regarding the taxation of NFTs
  • Calculating the tax benefits of a donation of an NFT to a charity
  • How an NFT creator is taxed
  • Taxing NFTs as collectibles under Notice 2023-27

Faculty

Kramer, Andrea
Andrea S. Kramer
Founding Member
ASKramer Law

Ms. Kramer is widely regarded as one of the foremost authorities on the regulatory, tax, commercial, and governance...  |  Read More

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