How are my investments taxed?
Crowd SAFE investments: Crowd SAFE investments grant the holder a contingent right to receive stock or cash at a later period of time. Generally, these investments do not generate a taxable event until some type of liquidity event (e.g. when the issuer engages in an initial public offering or is acquired). Crowd SAFE instruments typically do not afford an investor the right to receive K-1s or similar tax documents.
Token DPA investments: The Token DPA is a debt-like instrument which affords the investor the right to a future cash payment or tokens. If the investor receives cash with interest, tax will be due on the interest gained. If the investor receives tokens, tax guidance is unclear as to whether there is a taxable event. You may have to pay tax on the value gained then or pay tax when you sell or trade the tokens. Token DPA instruments typically do not afford an investor the right to receive K-1s or similar tax documents.
Other instrument types such as the Crowd SDA and Crowd TPA will be taxed based on facts and circumstances unique to each instrument. You should consult with the issuing company and your tax advisor.
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