Aave-related transactions

Koinly Support
1

I’m struggling to understand how Koinly treats Aave-related transactions. Specifically, if we take this workflow:

I deposit 10K USDC to Aave
Borrow 1 ETH (FMV $3K)
<wait 1 week>
“Aave Swap” 1 ETH (FMV now $2K) for 2K USDC
Swap the borrowed 1 ETH for 2K USDC on a dex
Repay the 2K USDC borrowed
Withdraw original 10K USDC
I end with same 10K USDC I started with

What is the tax effect of this using default behavior of Koinly?

2

Hi @Taka_Binancio

Please refer to Self-appreciating derivatives (“cTOKENS”) - cUSDC, wstETH

3

Thanks. Doesn’t really answer my question though as it was more about the lending market internal swap and an external dex swap tax effect.

My understanding is that the 1 ETH borrowed will have a $3K basis. So when I swap that on a dex, it will have $1K loss effect. Separate from that, I have no idea what the expectation is for swapping the Aave debt (is this a taxable transaction? Do I now have another $1K loss?).

As far as I can tell, the flow I provided either nets me a magical $1K (or more depending how Aave swap works) loss, even though I didn’t lose anything.

4

Hi @Taka_Binancio

If you need further help with this, I suggest you reach out to our Support team via the in-app chat.