Page 20 - CooperatorNews NJ Expo 2022

REAL ESTATE Real Estate, Cryptocurrency, & Taxes Can You Buy a Co-op With Crypto? BY A J SIDRANSKY Depending who you ask in the world of taxable event. But what might be the implica- finance, cryptocurrency is either the future, tions of that event? or a passing fad. Either way, even still in its infancy, ‘crypto’ is attracting more and more investors—especially among younger mil- lennials and Gen-Z internet natives—and its with Jilleba and Libock, an accounting firm uidating crypto to buy real estate. You use af- applications are expanding. As mentioned located in Westwood. “Section 1001 of the ter-tax cash for the purchase, so it establishes in the previous article in this series, that IRS code says when you buy or sell property, the basis. The tax is calculated based on date expansion even includes some inroads into there is a determination of gain or loss. If you of sale, not date of contract. It’s in no way like the world of real estate. While cryptocur- rency cannot be used directly to purchase but there is a gain if you sell it at a profit. That real estate—it must be converted to cash or gain is subject to tax, either a short-term or equivalents first—it is quickly becoming an long-term capital gain, depending on how and condominium associations is whether instrument in the purchase process. Impor- tantly, the conversion of funds held in crypto coin into cash and cash equivalents triggers a effect on the tax liability relative to the con- A Taxable Event “The sale of crypto currency is a tax- able event,” says CPA John Jilleba, a partner lars and the sale actually occurs. You are liq- sell cryptocurrency for a loss, there’s no tax, a 1031 exchange —and it can’t ever be.” long you have held the instrument.” Furthermore, Jilleba explains, “There’s no maintenance or common charges, or wheth- tract or closing dates.” The value of a buyer’s crypto assets may be pegged on the contract date, but the gain or loss is realized on the date the cryptocurrency is converted to dol- Beware Your Tax Status Another question for co-op corporations they can accept crypto coin for payment of er they can choose to invest reserve funds in cryptocurrency. Steven Ebert, an attorney with Cassin & Cassin, and an expert on the use of crypto- currency in real estate transactions, states categorically that a co-op or condo cannot accept payment of co-op maintenance fees or condominium common charges in cryp- tocurrency. “It’s too problematic,” he says. As for other uses, like holding cryptocurrency in reserve funds, Ebert explains in more depth: “Section 216 of the IRS code deals with a qualified housing co-op,” he says. “It has a series of limits on what instruments can be used to hold reserve funds. Approved in- struments are generally bank-type assets and qualifying stock from the National Co-op Bank. That’s it. Condos,” he notes, “are taxed differently, and might have a little more flex- ibility. The question for them is what do their governing documents permit? Generally, condominiums have restrictions similar to co-ops, so it’s unlikely they can hold crypto- currency as an investment. “The purpose of a condominium asso- ciation or co-op corporation is to organize, manage, and run the community,” continues Ebert. “If the community doesn’t care about certain tax sections and rules and regulations that apply to it, the community can allow in- vesting reserve funds in crypto investments. They might, or would, lose their rights under section 216 relative to certain tax-deductible expenses. This was the case some years ago under the 80/20 commercial income rule. Some buildings had so much potential to make real income from commercial space in the building that they walked away from the tax benefits that limited that commercial income. That law was changed some 15 years ago. The bigger question for a co-op or condo COOPERATOR EVENTS EXPO 2021 WHERE BUILDINGS MEET SERVICES EVERYTHING FROM “A” (ACCOUNTING SERVICES) TO “W” (WINDOWS) (Sorry, no zebra trainer this year.) MEADOWLANDS EXPO CENTER, SECAUCUS — WEDNESDAY, JUNE 8, 10–4 FREE REGISTRATION: NJ-EXPO.COM 18 COOPERATORNEWS NEW JERSEY —EXPO 2022 NJ.COOPERATORNEWS.COM continued on page 30