On October 28, 2021, the House Rules Committee released the latest version of HR 5376, the Build Back Better Act. This draft reflects the most recent attempt to forge compromise among Democratic lawmakers, as Congress moves towards a vote on a comprehensive infrastructure bill. Section 138152 of the Build Back Better Act (the Act) would amend Internal Revenue Code (Code) section 1091, which currently disallows losses for so-called “wash sales” of “stock or securities” (or contracts or options to acquire or sell stock or securities), to apply to a wider range of investment assets and to apply to acquisitions of substantially identical assets by related parties.
While the Code currently has a wash sale loss disallowance provision for stock and securities transactions, passage of this legislation would be a significant development that could affect the entire financial services industry, including proprietary trading, speculative transactions, personal investment activity, and digital currency trading activity. Wash sales could be particularly difficult to track in the context of digital assets, as there are a few cryptocurrencies (e.g., BTC and ETH) that are used to access many other protocols.
For more information about this topic, read the full Client Alert at this link.