A) The IRS has a wash sale rule for securities but it currently does not apply to digital assets like Bitcoin and Ether (IRS views digital assets as property).
B) US tax code states that wash sale rules apply to stocks and securities, digital assets have not been officially classified as one of these. There has been talk lately of closing the Tax Loss Harvest (TLH) loop hole but no official ruling has been made. See more here.
C) Taxbit - A crypto tax software, designed by CPA's & Tax Attorneys, gives detail on TLH here.
D) Things to consider when TLH'ing:
- There are transaction fees for the sell and repurchase.
- Impairment (loss of units) can occur due to these transaction costs and short-term market movements.
- Notional amounts over $1m in BTC or $500k in ETH should be done by a professional in an effort to minimize slippage via use of electronic exchanges and OTC desks.
- The investor should consult with their accountant about this procedure and reference the projected tax loss to be claimed and how it will work.
At DAIM we TLH for clients as part of our service.
!This is not tax advice and this is not investment advice! See the full disclaimer here.