Taxation of an Initial Coin Offering (“ICO”) or initial tokenization.

Want to tokenize some art, an piece of property, or even yourself??

How is the tokenization taxed?
Crypto is so new and unique that we don’t have full guidance on it for tax.

So in looking at an ICO, we have to think about how the token will behave.

Equity - if the feels like equity, long term participation and upside, it’s like an IPO and generally no tax to the issuer.
Debt - If it feels like debt, interest paid, and no upside, then it’s like a debt issuance and should not create tax to the issuer. Note if there is no interest, but determined to be debt, there could be deemed periodic taxable interest income to the investor.
Prepayment for goods and services - if the tokens are a prepayment this could be taxable to the issuer. Depending on terms, could be deferred.

Property - typically taxable. This is basically just a sale.

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