I have an opportunity to exchange some crypto coins for Security Tokens. The company that distributed the Cryptocurrency Dynexcoin is phasing it out and allowing people to trade it for security tokens in Switzerland. Would doing the conversion be a taxable event? The cryptocurrency is currently worth 1.5 cents each, but the Security Token is supposed to be valued at 1 euro each when it starts trading. The minimum amount you can invest is 100,000 tokens. Would I instantly get hit for taxes on 100,000 euros if I went ahead with the conversion? I am in the United States. I acquired about 20K of the coins from mining and purchased the remainder. I have held 58,000 of them for over a year. I am worried that if I go ahead with the conversion, I will get stuck with a large tax bill on an asset that may not be very liquid. Trading in the crypto coins will end when they convert to the token. So it is a convert or lose it kind of situation.
Crypto to security token conversion — taxable event? US person tax implications
byu/Expensive_Credit_468 intax
Posted by Expensive_Credit_468
2 Comments
exchanging property A for property B, unless there is an exception, is generally a tax realization event.
the exceptions would be if they were both real estate and the formalities of a 1031 (like-kind) exchange were followed, or for some corporate mergers/reorganizations.
so you are giving up one type of property for another – that’s taxable. Unless they somehow obtain a private letter ruling from the IRS that it isn’t, which I think would be unlikely.
Yes, converting your crypto will be a taxable event.
In addition, a token is often treated as a security, not property. So make sure you review if this is a tokenized investment and might be subject to things like the wash rules moving forward.