US taxpayers who have lost money on their digital asset investments may be able to deduct tax losses. Fried Frank’s Libin Zhang looks at the different types of losses that can be deducted.
The digital asset or crypto ecosystem has experienced a series of ups and downs. Some crypto investors have been unsuccessful following the internet financial advice of professional boxers who had chosen a career of getting punched in the face. US taxpayers who have lost money on their digital asset investments, or had them stolen, may be able to hard fork lemonade classic tokens out of lemons by deducting tax losses.
Capital Losses From Sales or Exchanges
A taxpayer’s most typical losses are capital losses from the sale or taxable exchange of a crypto asset. Capital losses can offset capital gains, both long-term and short-term, and up to $3,000 per year of ordinary income.
Example: Bette purchased some titan for $200,000. She converts the titan into iron later in the year, at a time when her...
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