Investors who lost money on now-bankrupt crypto exchanges are stuck in limbo this filing season, tax practitioners say, unable to claim losses on digital assets with little recourse for obtaining relief.
Several cryptocurrency firms filed for bankruptcy last year—including FTX, once one of the world’s largest. That has left many investors with assets frozen in bankruptcy proceedings. Outside the courts, the IRS has eliminated the option for taxpayers to claim losses under tax code Section 165 if they’ve experienced a steep decline in value.
Tax professionals say investors’ best bet is to keep thorough records and wait for more information from the courts or more guidance from the IRS to determine the next step toward relief.
“It makes sense right now to kind of take a wait-and-see approach,” said David Kemmerer, co-founder and CEO of crypto tax software firm CoinLedger.
Read the full article: Crypto Bankruptcies Leave Taxpayers in Limbo in Filing Season (bloombergtax.com)
