Transfer of digital assets under certain agreements

(a) Transfers under agreement (1) In general Section 1058 of the Internal Revenue Code of 1986 is amended— (A) in subsection (a), by striking securities (as defined in section 1236(c)) and inserting applicable assets, and (B) by adding at the end the following new subsection: (d) Applicable asset For purposes of this section, the term applicable asset means— (1) any security (as defined in section 1236(c)), and (2) traded digital assets.. (2) Conforming amendments (A) Subsections (a) and (b) of section 1058 of such Code, as amended by paragraph (1), are each amended by striking securities each place it appears and inserting applicable assets. (B) The heading of section 1058 of such Code is amended by striking securities and inserting assets. (C) The item relating to section 1058 in the table of sections for part IV of subchapter O of chapter 1 of such Code is amended by striking securities and inserting assets. (b) Treatment of certain legal entitlements and obligations which accrue during period of agreement Section 1058(b)(2) of the Internal Revenue Code of 1986, as amended by subsection (a)(2), is amended by inserting (including, in the case of a traded digital asset, to the extent provided by the Secretary, amounts equivalent to any protocol distribution or staking reward with respect to such asset, or to any transaction fee, priority fee, or tip allocated to the owner by reason of staking) after and other distributions. (c) Payments with respect to loans (1) In general Section 512 of the Internal Revenue Code of 1986 is amended— (A) in subsection (a)(5)(A), by striking in respect of a security (as defined in section 1236(c)) and inserting in respect of an applicable asset (as defined in section 1058(d)), and (B) in subsection (b)(5), by striking securities (as defined in section 1236(c)) and inserting applicable assets (as defined in section 1058(d)). (2) Inclusion of certain payments Section 512(a)(5)(A)(i) of such Code is amended by striking or other distributions and inserting property, legal entitlements, or other distributions. (3) Conforming amendments (A) Section 512 of such Code is amended by striking payments with respect to securities loans each place it appears in subsection (a)(5) and (b)(1) and inserting payments with respect to applicable asset loans. (B) Section 512(a)(5) of such Code is amended— (i) by striking the security each place it appears and inserting the applicable asset, (ii) by striking securities each place it appears and inserting applicable assets, and (iii) by striking securities loans in the heading thereof and inserting applicable asset loans. (C) The following provisions of the Internal Revenue Code of 1986 are each amended by striking payments with respect to securities loans (as defined in section 512(a)(5)) and inserting payments with respect to applicable asset loans (as defined in section 512(a)(5)): (i) Section 509(e). (ii) Section 514(c)(8)(A). (iii) Section 851(b)(2)(A). (iv) Section 4940(c)(2). (D) Section 263(g)(2)(B)(iv) of such Code is amended by striking a payment with respect to a security loan (as defined in section 512(a)(5)) and inserting a payment with respect to an applicable asset loan (as defined in section 512(a)(5)). (d) Effective date (1) In general The amendments made by this section shall apply to transfers after the date of the enactment of this Act. (2) No inference The amendments made by this section shall not be construed to create any inference with respect to the non-recognition treatment of the transfer of any traded digital asset (within the meaning of section 1058(d) of the Internal Revenue Code of 1986, as added by this section) pursuant to an agreement that would otherwise qualify under 1058 of such Code before the date described in paragraph (1).