This Supreme Court Case and IRS Broker Rule Together Could Redefine Crypto Taxation

cryptonews.com:

A critical Supreme Court case and its ruling could redefine the taxation of digital assets. Intersecting with the vexed IRS broker rule announced earlier, this case may potentially reshape crypto tax reporting and compliance on a fundamental level.

The case in question, Moore v. U.S., revolves around a dispute concerning the tax treatment of certain investments. Charles and Kathleen Moore, the plaintiffs, are challenging a tax imposed on their investment in an India-based company. They argue that they had not realized income from this investment when the law was enacted, meaning they had not cashed in their profits or brought these profits back to the U.S. to make them subject to taxation under the 16th Amendment. Ratified in 1913, the 16th Amendment grants Congress the power to levy income taxes without apportioning them among the states based on population.

The argument focuses on the definition of “income” and “realized income”, questioning whether unrealized gains should be subject to tax. While this case primarily concerns overseas investments, its outcome could spark a broader debate about the taxation of various investment types, potentially influencing the tax code’s treatment of emerging asset classes, including digital assets like cryptocurrencies.

The Supreme Court will hear the case on Dec. 5, and the outcome of Moore v. U.S. could carry significant consequences for cryptocurrency investors. If the Moores lose, it could enable the government to tax digital asset investments like Bitcoin, Ethereum, or altcoins based on increased values, regardless of whether these gains have been cashed in or not. Conversely, a win for the Moores might establish that gains from such investments are not taxable until they are