Celsius Earn Question

Tax Questions
#1

In the US, for Celsius earn, how do the capital losses for tax year 2024 work?

For example, suppose I had only 1 BTC and 10 ETH in Earn, and I received 0.25 BTC and 2.5 ETH back on PayPal, in-kind.

Which of the following is correct?

  1. I report that 0.75 BTC and 7.5 ETH were sold at a price of zero on the date of the distribution, using the original cost basis for those 0.75 BTC and 7.5 ETH.
  2. I have to sell the 0.25 BTC and 2.5 ETH first, but when I do, I use the cost basis of the entire 1 BTC and 10 ETH.
  3. Neither of the above are correct, because they both fail to account for possible future recoveries.

Any idea what is correct here? If 3 is correct, please elaborate.

#2

Hi @John_Smith2

Please refer to the article below to document this:

Chapter 11 Reimbursements (Celsius, Voyager, Mt. Gox)