Foreign Tokens – U.S. Tax Characterization: Questions and Discussion

Volume 7 No 2    /    Read Article

By Galia Antebi and Andreas A. Apostolides

Initial coin offerings (“I.C.O.’s”) provide blockchain-based companies with a new way to raise capital. Companies in the U.S. and abroad have been raising capital using blockchain technology since 2016. As this means of raising funds gained popularity, the S.E.C. ruled that some tokens are securities, making U.S. I.C.O.’s subject to Federal securities laws. Tax questions also arose, but not all questions have been addressed by the I.R.S. Specifically, no guidance exists with respect to the proper characterization of a token, and as a result, U.S. investors are not assured of the tax consequences of their investments. Galia Antebi and Andreas A. Apostolides guide the reader through the issues, identify the problems, and suggest solutions where appropriate.  See more →