What if NFTs Are Taxed as Collectibles?

investopedia.com:

The IRS wants to tax non-fungible tokens (NFTs) as collectibles and is seeking public comments on whether that's a good idea. If NFTs are treated as collectibles, any profit you make from selling one could be subject to a higher capital gains tax rate.

On Tuesday, the IRS issued a notice providing general information on the tax treatment of NFTs as collectibles and requesting public comments on various aspects of NFT taxation.

An NFT is a token issued via a blockchain that represents something unique such as digital art, music, or a collectible trading card. The NFT phenomenon has been promoted as a new way to monetize content in an age when various forms of art can be copied, pasted, and sent around the internet with a few clicks. Fans are rewarded with the ability to prove their patronage to a particular artist, while the creators gain access to a new source of revenue via the original sale of the tokens—and potentially a percentage of future sales.

When it comes to taxes, NFTs can be complicated because they can be viewed through a number of different lenses. Creators are generating new digital assets out of thin air, crypto market participants are day-trading them, and platforms like OpenSea are building marketplaces to trade them.

The IRS intends to use “look-through analysis” to determine whether NFTs should be treated as collectibles under the tax code. That means NFTs that are associated with materials that would traditionally be deemed collectibles will also be considered collectibles. “For example, a gem is a collectible under section 408(m); therefore, an NFT that certifies ownership of a gem is a collectible,” the IRS said.

The Treasury Department and the IRS are seeking comments on how NFTs function at a