Hi all, loving he product, just a bit confused around the correct way to keep the auto compounding projects up to date for Tax reporting, in my case im in the UK.
i dont think there is anyway or maybe no need to report on each and every rebase and some of these projects rebase every 20 mins so thousands of transactions,
do i only need to report on the transactions that hit my wallet?
from a tax perspective i believe its classed as capital gains on the additional assets received (more coins) and income tax on the additional value of the coin (hopefully the value has gone up).
recently the contracts for some of these projects have changed to their V2 which included a replacement coin to be released, do i just mark this as an exchange from old to new?
Thatâs a confusing topic indeed and there isnât much guidance at all on this yet, regardless of country. What makes it very hard for Koinly to reflect this is that those tokens change amounts at the smart contract level, so there arenât transactions we can pick up to reflect itđŹ .
Technically though, we can make it work with Koinly with a few manual edits
A rebase can be construed in Koinly as 2 trades, let me explain:
A trade from the original amount of token to a fictitious âNULLâ token.
And then a trade of that âNULLâ token back to the rebased amount of your token.
Toggle on âignore reported balances in your APIs settingsâ so that your balances are in line with your edits.
Those trades will have to be added manually, see article on that herehttps://help.koinly.io/en/articles/3664156-how-to-add-transactions-manually
You will also want to check with your accountant a few things:
How frequently should those rebase be reflected (daily/weekly/etcâŚ)?
And also should this rebase be considered a taxable event? If not then you will want to label those trades as âswapsâ and no gains will be generated, the cost basis will simply carry over.
Many thanks for the reply, for the new coins that have come out i have just removed the airdrop of the new coin as there will be only one Titano going forward Koinly seems to have worked it out.
ill speak to the accountant regarding the frequency of updating manually the total amount of coins.
Hi There, i understand from an accountant in the UK that each rebase is a taxable event, the suggestion is to keep Koinly updated with the actual amount of coins in your wallet , weekly or monthly will do but on a regular basis.
I believe that the taxes will be based on the price of the coin at the time you update the amount in Koinly.
the question is, what happens if the price of the coin dies completely or the project is rug pulled, i suppose the issue is that tax still needs to be paid even if the value of the coin is 0.
