A defi platform called Thorchain froze all assets in it’s lending product back in January. This week, all claims were converted into a new debt token called TCY. Every $1 of crypto (eth, btc, etc) that a person had locked was then converted to 1 TCY ($1 of Eth = 1 TCY). TCY started trading at $0.10 (now at $0.27). The token needs to be claimed to show up in a wallet.
Would the TCY debt token be taxed as income when claimed? Can I claim the loss of the original asset at the time it was frozen?
Unfortunately, Koinly cannot provide tax advice, so you should definitely speak to a qualified tax accountant, especially since the tax treatment here could vary by country and the specifics of your situation.
That said, here are some general points you can consider and discuss with your accountant:
• Claiming TCY: When you claim TCY, the fair market value at the time of the claim could potentially be seen as income, depending on local tax laws.
• Loss on original assets: If your original crypto was frozen and became inaccessible, some tax authorities may allow you to realize a capital loss, but others may require a formal declaration of worthlessness or abandonment.
• Disposal vs. replacement: Since the original crypto was converted to TCY at a 1:1 notional value, some might argue this is a disposal event, triggering a capital loss (difference between original cost and $1), while the TCY acquisition could be treated as a new asset.
In Koinly:
• You could tag the original frozen assets as “Lost”, if your accountant agrees this qualifies.
• The TCY claim can be imported or added as a “Reward” or “Airdrop” depending on how it is treated (check the settings), and its value at the time of the claim.
Please discuss all of this with your accountant to get the most accurate tax outcome.