How to calculate tax for pooling and farming

Tax Questions
#1

Hi there,

I need help on how to calculate tax when I have staked my asset in a pool or farm. Koinly explain very well that this will be seen as miscellaneous income. However I do not see WHEN this is consider so by the taxman.

For example on Jan 1st, I put 100 CAKE on pancakeswap in a CAKE pool @ 10% interest per month.

On Jan 31st, I now have 110 CAKE. first of all, my wallet has no record of those 10 extra CAKE that await from me when I click the withdraw button.

Let’s say I want to take 20 CAKE from the pool. I do so. Then what? are 10 of the 20 considered to be the new ones I “just” earned? or can I say I “choose” 20 of the original CAKE and so the 10 new ones are not yet to have seen the light of day in my wallet?

Let’s assume I know leaves CAKE after 2 months at the end of feb. In Jan I would have been at 110 - 20 I took from on 31st = 90 and then through Feb I earn 10% and get therefore to 99 CAKE.

I withdraw all of them at the end of Feb (the 99). Koinly will tell me something is wrong as I put 100 CAKE and in total I have now withdrew 20+99=119.

To balance it all, I have to create a record stating “19 CAKE as reward” (I suppose) but AT WHICH PRICE!!??? those 19 CAKE were earned through 2 months, not on the last day of Feb where CAKE is worth a certain price.

now, the matter get worse with AUTO COMPOUND as my reward are put in my wallet every 8 hours or so (depending on the protocol etc). Now, does that mean I have to write a record every 8 hours with the price of the asset at that moment in time?? Seems impossible to track.

Any help would be appreciated, especially for the autocompound issue.

2 Likes
#2

I have no answer to that but know you’re not alone. Autocompounding-Rebasing-LP-Borrowing-Lending etc…
there are so many what and ifs in regards to everything Defi at this point that I actually plan on challenging the tax authorities to tell me how much I actually owe them and letting THEM figure it out.

The simplest of LP/staking scenarios;

  1. Token X/Y creates Token X rewards
  2. that are then staked to get rewards in both X & Y.
  3. Which then are re-invested into 1. again

rinse and repeat.

at what point do you label X/Y ‘Staking Rewards’ without double counting them over and over as Staking rewards during this loop process??

#3

I have the same question. How do we have the pool rewards show up on koinly?

#4

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