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The IRS views virtual currency as property, not securities or currency. Beyond this though, the IRS has provided little guidance. It would appear Bitcoin investors would not have to worry about wash sale rules, as stock buyers do. Under a wash sale, someone taking a loss on a stock is not permitted to purchase the same stock 30 days before or after a sale. In theory, Bitcoin owners could buy and sell anytime without restrictions and still apply Bitcoin losses against income. Then theres the 1031 exchange rule, where the IRS allows someone to defer paying capital gains taxes after selling a property if the person reinvests the proceeds into a like kind property within 180 days. The program has been big in the real estate world. But the rule applies to other areas that the IRS considers as property, such as gold, which can be exchanged for gold coins without paying capital gains taxes. As a result, some experts speculate the rule might extend to Bitcoins, where Bitcoins could be exchanged for other cryptocurrencies, such as Ethereum, without paying taxes. But Green isnt so sure. He noted that while gold can be traded for gold coins, it cant be traded for silver coins under the 1031 rule.
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