Digital Asset "Wash Sale" Rules: Corporate Tax-Loss Harvesting Strategy
The Executive Verdict
1. The Core Definition: The "Loophole" vs. The Law
Stocks (IBM) represent Securities (30-day rule). Crypto (BTC) represents Property (No statutory 30-day rule). However, abuse triggers the Economic Substance Doctrine penalty.
Regulatory Gap Diagram. Equities in a Steel Cage (Section 1091). Crypto in a Laser Grid (Economic Substance).
2. The Trap: The Economic Substance Doctrine
The "30-Second" Trade: Selling and rebuying instantly is a sham transaction. Defense: You must be out of the market long enough to experience "Market Risk." (Conservative: 3+ Days).
3. Strategy: The "Correlated Asset Swap"
Don't buy the same asset back. Swap Asset A for Correlated Asset B (e.g., Sell BTC -> Buy ETH). Avoid BTC -> WBTC (Substantially Identical risk).
Correlated Swap Strategy. Path A (Bad): Sell BTC -> Buy BTC. Path B (Good): Sell BTC -> Buy ETH.
4. Operational Nuance: Exchange vs. Wallet Harvesting
FIFO vs. Specific ID (HIFO). Ensure your Sub-Ledger is synced. Don't let the exchange default to FIFO, or you might accidentally sell your low-basis coins (triggering a gain).
5. Related Party Sales: The Section 267 Firewall
You cannot deduct a loss on sales to a Related Party (Subsidiary). Common mistake: Moving assets between Treasury and Ops wallets of different entities and booking a loss.
6. The "Constructive Sale" Rule (Section 1259)
Shorting against the box (Shorting BTC you already own) to hedge risk triggers an immediate Capital Gain tax event. Use Options Puts instead.
7. Future Legislation: The "Closing Window"
Assume the loophole will close. Conservative corporations should adhere to a "Mock Wash Sale Rule" (30 days) to future-proof against retroactive legislation.
8. Summary Checklist: The "Safe Harvest" Protocol
1. Economic Substance (Time Gap > 24hrs). 2. Asset Swapping (Different Assets). 3. Related Party Check. 4. Lot Identification (HIFO). 5. Document Investment Thesis.
š The Audit Trigger
F.A.Q // Logical Clarification
Does wrapping BTC to WBTC trigger a taxable event?
"Yes, it is a disposal. But it likely cannot be used to harvest a loss because they are "Substantially Identical.""
Can I sell personal crypto to my business?
"No. Violates Section 267 (Related Party). Loss is disallowed."
Do these rules apply to NFTs?
"Yes, but NFTs are unique. Swapping Ape #100 for Ape #101 is likely a safe harvest strategy (Distinct Assets)."
Module ActionsCW-MA-2026
Institutional Context
"This module has been cross-referenced with Legal & Regulatory / Tax Strategy standards for maximum operational reliability."