Company: DEFI
Filing Date: 2025-03-17
Form Type: S-1/A
Source: 0001387131-25-000058
Chunk: 235

Company: Tidal Commodities Trust I
Filing Date: 2025-03-17
Form: S-1/A
Chunk 235
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 such is obligated to pay U.S. federal and applicable state and foreign corporate taxes on its taxable income. This differs from many investment companies, which elect to be treated as “regulated investment companies” under the Code in order to avoid income tax obligations at the entity level. Under current law, the Fund is not eligible to elect treatment as a regulated investment because the Fund’s investments consist primarily of bitcoin. As a result, the Fund will be obligated to pay U.S. federal and state taxes on its taxable income unlike other investment companies which are not so obligated. The amount of taxes currently paid by the Fund will vary depending on the amount of income and gains derived from investments, and such taxes may reduce your return from an investment in the Fund.

The Fund invests its assets primarily in bitcoin and carbon credit futures contracts. In the case of bitcoin, some of the carbon credit futures used by the Fund may be “Section 1256 contracts.” Any gains or losses on Section 1256 contracts are generally considered 60% long-term and 40% short-term capital gains or losses (60/40) although certain foreign currency gains and losses from such contracts may be treated as ordinary in character. Also, Section 1256 contracts held by the Fund at the end of each taxable year are “marked to market” with the result that unrealized gains or losses are treated as though they were realized and the resulting gain or loss is treated as ordinary or 60/40 gain or loss.

In the case of bitcoin, due to the new and evolving nature of digital assets and the absence of comprehensive guidance with respect to digital assets, many significant aspects of the U.S. federal income tax treatment of digital assets such as bitcoin are uncertain. Our dealings in or in connection with digital assets, as well as transactions in digital assets generally, could be subject to adverse tax consequences in the U.S., including as a result of changes in the legal regimes regulating digital assets, and our operating results, as well as the price of digital assets, could be adversely affected thereby.

Many significant aspects of the U.S. federal income tax treatment of digital assets (including with respect to the amount, timing and character of income recognition) are uncertain. In 2014, the IRS released a notice (the “Notice”) discussing certain aspects of digital assets for U.S. federal income tax purposes and, in particular, providing that such digital assets (1) are “property,” (2) are not “currency” for purposes of the rules relating to foreign currency gain or loss