Separating a yield-bearing position into tokens for its principal and future yield, allowing those components to trade separately.
Each step in tokenization (wrap, split, trade, redeem) can be a taxable exchange, and the two resulting tokens have different tax characters: the PT produces gain at maturity, the YT produces income during its life and a loss at expiry. Positions need to be tracked as two assets from the split forward.
Because it turns one asset into two with different treatment, and every wrap, split, trade, and redemption is a potential exchange. Each has to be valued and recorded.
Source: No IRS guidance as of September 2026; IRS Notice 2014-21 (property treatment)
Last reviewed September 18, 2026. Tax rules change; confirm current law before acting.
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