On August 25, 2023, the Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) issued proposed regulations (88 FR 59576) that detail the information reporting requirements with respect to brokers of transactions involving digital assets (Proposed Regulations).

Generally, a person who regularly provides any service effecting transfers of digital assets on behalf of another person for consideration is required to report certain information regarding each transaction under section 6045. The Proposed Regulations clarify when such reporting is required and the information required to be reported with respect to each transaction.

The Proposed Regulations, if finalized, would require brokers to report gross proceeds from sales of digital assets occurring on or after January 1, 2025, and would require brokers to report the adjusted basis and character of any gain or loss with respect to sales of digital assets occurring on or after January 1, 2026.

The Proposed Regulation address the following topics:

1. The types of property subject to reporting under section 6045, including defining “digital assets” and providing coordination rules with respect to securities, commodities, and real estate;
2. Rules applicable to financial contracts involving or referencing digital assets;
3. The types of brokers required to report under section 6045;
4. The types of sales subject to reporting under section 6045, including the sale of digital assets for cash, stored value cards or other digital assets;
5. The information and amounts required to be reported for sales of digital assets and how such amounts are calculated, including gross proceeds and adjusted basis;
6. Ordering rules to address which digital asset is sold where a customer has multiple units of the same digital asset that it acquired on different dates or at different prices;
7. Rules applicable to sales of digital assets effected at an office outside of the United States;
8. Rules for barter exchanges that effect exchanges of digital assets;
9. The calculation of the amount realized under section 1001 with respect to sales of digital assets;
10. The determination of a taxpayer’s basis in a digital asset under section 1012, including rules by which a taxpayer may identify which digital assets are sold where a taxpayer has multiple units of the same digital asset that it acquired on different dates or at different prices and disposes of less than all of such digital assets;
11. Delaying transfer statement reporting under section 6045A and issuer reporting under section 6045B for digital asset transfers that are not sales or are not transfers to accounts maintained by persons that the transferring broker knows or has reason to know are also brokers; and
12. Coordination rules with respect to reporting under section 6050W.

The Eversheds Sutherland team is currently analyzing the proposals above, and will be publishing additional alerts discussing specific aspects of the proposed regulations. 

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