Loan repayment isn't a profit. How to treat?

Koinly Support
1

Describe the problem:
When paying back crypto loan, Koinly treats the withdrawal as a sale.

For example. Borrow BTC against USDC collateral. BTC appreciates 50k. Pay back BTC against USDC collateral. Koinly thinks this is a 50k profit.

No money has been made. The BTC you were holding was netted out against your debt. Paying back the same asset is not a tax event in the US. Koinly doesn’t recognize this with their loan and loan repayment tags.

How can I manually configure paying back loans to not show as profit? If there is a profit where was it? What is the basis for this treatment? There never was an accession to wealth as your debt also went up as the same time as your borrowed assets.

If you borrow a Pokemon card from a friend and it goes up one million dollars and you payback that same Pokemon card to your friend, do you owe one million in taxes? No one would say that.

If you rent a car, when you return it, do you get to claim a capital loss based on the value of the car going down from the mileage you put on it?

Can someone please explain to me how to fix this Koinly treatment?

2

Hi @V6veggie

Please check our guide on Loans for both crypto and fiat here - https://support.koinly.io/hc/en-us/articles/9918467633564-Crypto-loans-repayments-and-collateral-CDP-

Paying back a loan in crypto is a wtihdrawal, therefore a taxable disposal. May I ask which country you are from, or which guidance you are following to suggest it is non-taxable?

Ultimately, it’s down to you how to report it. If you want to neutralise the gains on this withdrawal, simply edit the worth of the transaction, to equal the cost-basis of the asset being paid back. To edit the worth, click into the transaction Edit menu, and click “change worth”