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Basswood Counsel (formerly Klug Counsel) serves digital asset financial services firms, miners and stakers, token projects, investors, and companies exploring cryptocurrencies in a variety of ways to fulfill the unique needs of the industry. We have helped clients with crypto exchanges, acquisitions of digital asset firms, private equity formation and investment, tax implications of domestic and international hedging strategies against the risk of market decline, and international and domestic tax structuring of large crypto mining ventures.

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Crypto Tax and Funds

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Our clients include investors, traders, and miners of cryptocurrency. The correct classification is important as it determines the tax implications of virtual currency transactions. We have experience guiding these clients through the relevant tax implications of their crypto investments and providing sound tax planning solutions. We are experienced with both the tax planning opportunities and the requirements to be compliant with the tax filings, including international informational forms.

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We have represented multiple domestic and cross-border crypto funds and crypto mining ventures in providing tax-efficient structuring. These ventures involved equipment worth hundreds of millions of dollars. The tax planning for an international crypto fund and mining venture requires an analysis of federal, international, state, and local tax rules. The tax structuring implications include:

(1) whether to lease or purchase the equipment and whether there are relevant treaty positions to reduce taxation;

(2) whether certain business lines have effectively connected income or could avoid permanent establishment status through a relevant tax treaty;

(3) whether to separate the equipment, land, and operations into separate entities or to combine them under a single parent entity;

(4) FIRPTA implications;

(5) real and personal property taxes;

(6) tax implications of the minted coins;

(8) tax implications of hedging strategies to minimize risk; and

(9) a number of other important tax considerations.

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