Donald Trump's meme coin, launched prior to his inauguration, has stirred interest in the crypto industry. However, it is now facing legal and tax scrutiny.
Legal Scrutiny of TRUMP
The TRUMP meme coin raises questions about its classification as a security. The US Securities and Exchange Commission (SEC) considers digital assets offered through ICOs as securities if they meet the Howey Test criteria. However, the TRUMP team stated on their website that the coin is not a security and does not promise future profits. The SEC has not yet commented on TRUMP.
Tax Implications of Distribution
According to US tax laws, profits from cryptocurrency investments are subject to capital gains tax. Trump's team holds 80% of the TRUMP supply, which will be unlocked over three years. There is a dilemma whether the unlocking event is taxable. Tax applies when assets are sold or traded. Once TRUMP is traded or exchanged, it will incur capital gains tax based on the market price.
Political Donation Risks
TRUMP is seen as a potential means for political donations, which could breach strict US laws on transparency and limits. While there is no evidence of coins being used for political donations, the concept itself raises concerns.
The launch of TRUMP raises complex questions about legal and tax obligations, requiring careful analysis, and may have significant political ramifications.