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David Schwartz, Ripple Labs CTO Emeritus and one of the founding architects of XRP Ledger, recently disclosed that he threw the letter 6174 from the U.S. Internal Revenue Service (IRS) “right in the trash” he had received only a few days ago.
The Ripple veteran made the remark in response to the crypto tax expert Clinton Donnelly claiming that the IRS was “dramatically” increasing the number of letter 6174 notices being sent to crypto traders.
The “large-scale mailing campaign” is designed to put pressure on crypto taxpayers to review their past filings and take corrective action but it’s not an audit, Donnelly assured.
Schwartz said the letter is “just a reminder to follow the law,” so he threw it “right in the trash.”
Understanding Ripple, XRP and XRPL (3:17)
Understanding IRS letter 6174
Virtual currency is considered property for federal income tax purposes in the U.S. and all transactions involving them must be reported to the IRS.
The IRS sends the letter 6174 as a reminder to American taxpayers holding virtual currencies, including cryptocurrencies like Bitcoin (BTC) and Ether (ETH), to report related transactions to the agency.
The letter asks the recipients to file amended or delinquent returns if they didn’t accurately report their virtual currency transactions on a federal income tax return.
In short, the letter 6174 is nothing but a “crypto is taxable, so you better report it” reminder from the IRS.
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Schwartz says he paid $1.7 million in capital gains tax on XRP sales in 2025
When a social media user enquired Schwartz about his tax payments on XRP sales in 2025, the Ripple veteran said he sold approximately 2.5 million XRP tokens — received in 2020 and 2023 — last year and paid approximately $1.7 million in capital gains tax on those sales.
He also revealed that he hadn’t bought XRP in a long time because of his discomfort with risk. He said he has sold nearly all of his digital asset holdings and only holds “quite a bit” of Ripple stock which “alone is more risk than I wish I had.”
Schwartz also said he sells XRP using a written sales plan to avoid being accused of using inside information such as XRP Ledger bug reports to make trades. He was referring to the Rule 10b5-1 trading plan under U.S. securities law.
In simple terms, it is a pre-arranged written plan that allows company insiders, such as CEOs, executives, and directors, to sell their company shares according to a predetermined schedule.
The shareholder must establish the plan when they are not aware of material non-public information and specify the amount, price and timing of trades, or provide an objective formula for determining them. In short, the Rule 10b5-1 is designed to prevent insider trading.
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