What Are the Primary Tax Challenges When Applying Mark-to-Market to Decentralized Crypto Futures? ▴ Learn

What Are the Primary Tax Challenges When Applying Mark-to-Market to Decentralized Crypto Futures?

The main challenges are determining the fair market value on year-end for illiquid or obscure contracts, and the lack of official tax statements from decentralized platforms. Tracking the complex transaction history, including funding rates and collateral movements, adds complexity.

Furthermore, the IRS has not explicitly confirmed Section 1256 status for most decentralized finance (DeFi) derivatives, leading to uncertainty.

Are All Regulated Futures Contracts Considered Section 1256 Contracts?

How Does the Lack of Physical Delivery Affect a Trader’s Tax Obligations?

Are Cryptocurrency Options Generally Treated as Section 1256 Contracts?

What Is a Section 1256 Contract and How Does Its Tax Treatment Differ from Regular Stock Trading?