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IRS scrutinizes tax strategy used in crypto-linked ETFs

Treasury Secretary Scott Bessent said the IRS and Treasury are serious about cracking down on transactions meant to dodge taxes or exploit the federal tax code.

Reported · Written up by our desk · Market Structure

The Internal Revenue Service is scrutinizing a crypto-linked ETF tax strategy as the Treasury Department and IRS intensify efforts against structures designed to avoid taxable gains, CryptoSlate reports. The agencies have highlighted digital assets as an area where fund managers may be pushing tax provisions beyond their intended purpose.

On X, Treasury Secretary Scott Bessent said the IRS and Treasury are serious about cracking down on transactions designed to dodge taxes or exploit the federal tax code, framing the notice as part of a broader campaign against tax-motivated investment strategies, according to CryptoSlate.

The scrutiny adds a fresh tax question to the crypto ETF market after the SEC approved in-kind creations and redemptions for spot crypto exchange-traded products last year, a change the SEC said could reduce costs and price slippage. Treasury reportedly did not challenge conventional ETF redemptions, focusing instead on structures that use in-kind style transactions to pursue tax outcomes regulators say may have little relation to the intended purpose.

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