You can still use BLOOD tokens to buy fancy champagne if you are a Sneaky Vampire Syndicate holder, for example, but it’s not a special offer for the holidays.

Charity-based NFT project, Girlfrens, began minting on the U.S. Thanksgiving holiday -- and they do have a mission to give art supplies to young cancer patients  -- but that seems more like serendipity. 

Top NFT marketplace, Rarible, is ready to help you give something back if your gift recipient is interested in making a green-friendly present. 

Sunil Singhvi, the chief business development officer at Rarible, wrote to explain that between November 30th and December 5th, Rarible will cover enough carbon removal credits to offset any NFT minted in their marketplace.

“In light of our recent partnership with Nori, a high-quality carbon removal marketplace platform, Rarible is covering the cost of carbon removal for any NFT minted on our marketplace… Through this initiative, we are giving back to both our Rarible community and to the environment by limiting our carbon footprint with each NFT minted,”  Sunil Singhvi, chief business development officer at Rarible said. 

Singhvi believes that supply issues in 2021 and an increasing interest in digital ownership make this a great year to give NFTs.

“With ongoing supply chain issues, we foresee digital assets as a popular gifting category this holiday season. As consumers turn to NFTs and other forms of digital assets as gifts, overall sales across the industry will increase,” Singhvi said.

Exchanges and trading platforms are happy to offer little seasonal incentives for buying crypto, but there is not much publicity around what special offers you can access using just crypto -- without cashing it in and creating a taxable event. 

And if you intend to use your lovingly collected portfolio of coins and NFTs to buy some RL gifts, you are going to have at least two levels of taxable events -- at the sale of your digital assets and at the time of your purchase.

Holidays and Taxes

Taxes are a reliable subject to bring up if you want to make a room full of crypto enthusiasts unhappy, and with the passing of the Biden infrastructure bill the level of concern was higher than usual. 

Specifically, there was some consternation on Twitter regarding changes to the Internal Revenue Code (IRC) based on Section 6050i of the $1.2 billion bill. The new rules treat digital currency like other currency, requiring reporting of over $10,000, triggering the need to report, and generally making investors nervous. 

Many articles at the time suggested that this was a major misstep in terms of tax reporting burden for the buyer and for lack of privacy for the crypto and NFT investor. 

Will the new tax regulations have a withering effect on NFT and crypto investing?

We interviewed Wendy Walker, solutions principal at Sovos, Chair of the Information Reporting Subgroup of the IRS, a member of the Advisory Council (IRSAC) and advisor to the IRS on a variety of withholding and information reporting issues impacting the industry regarding the changes and she broke out the changes to the IRC sections and meanings as follows:

Walker believes that the changes will be a net positive for retail investors that they will help streamline reporting to the IRS.

According to the IRS, the reason they levied the John Doe Summonses is because they are not receiving third-party 1099 reporting from the exchanges. By requiring 1099 reporting for crypto transactions, retail investors can look forward to less interaction with the IRS in future years.

Also, third-party reporting of tax information is extremely valuable for taxpayers because it provides them with the details that they need to properly prepare their income tax returns.... Retail investors can look forward to a more efficient annual income tax process where they can rely on Form 1099 reporting rather than trying to piece together thousands of transactions across different exchanges that occurred all throughout the year,” Walker said.

Walker did note that the changes coming from the Biden Infrastructure bill will need to better define and limit the scope of reporting transactions.

We also interviewed Jessica Lanning, CERTIFIED FINANCIAL PLANNER™, who echoed Walker’s sentiments -- this is not something for most investors to worry about.

“These are standard forms for investors.  The only reason to fear these forms is to fear taxes or fear being caught receiving money for an illegal purpose.  An investor who is thinking about getting into digital assets to avoid taxes or arrest might rethink their strategy,” Lanning said.

According to Lanning, these “new” complications are only new to retail investors who are unfamiliar with the process.

“Governments have taxed capital gains for a long time.  That might be a new experience to an investor who has never had a taxable gain.  If the government decides to start taxing unrealized capital gains – that is, gain in an asset that has not been sold yet – that would be a new taxable event. For now, it’s about paperwork,” Lanning said.

But, will this take some of the shine off the idea of buying an NFT that appreciates tremendously?

Conclusion 

Update: Sovos emailed me again in the intervening time since the interview to highlight that with the e-filing threshold changes are still not final, and since the deadline to apply for the necessary filing code already passed, most will need to seek advice from their financial advisors, apply for an exception, or seek out a third-party solution.