MTGOX Repayment taxation in US

[redthreat]

How should the MTGOX repayment be reported to IRS and taxed?

Assuming the creditor has chosen to be repaid in BTC/BCH, he will receive BTC, BCH and cash. My understanding which is propably wrong, hence this thread, of how each of the 3 (BTC, BCH, cash) should be taxed:

BTC Since BTC held at MTGOX was not exchanged for other crypto or sold for fiat, BTC repayment is not taxable.

IRS treats BTC as property. Since we are dealing with civil rehabilitation repayment, which is a type of bankruptcy proceeding specific to Japan's legal system, it would help to establish if/how property recovered in a bankruptcy case is taxed.

BCH Since BCH was a hard fork, it is taxable as income. "To determine when [hard fork] tokens are actually ‘received,’ the IRS defines this as when the transaction is ‘recorded on the distributed ledger’, and allows you to have control over the crypto asset such that you are able to sell, transfer or otherwise dispose of it."

Cash We have to figure out what the cash payment is for before we can determine its tax treatment. The term "Non-Allotment Portion of BTC Claims" is used by the Tokyo Court to describe cash portion of the repayment.

Is it the market value of BTC when MTGOX became insolvent in 2014? Is "Non-Allotment Portion of BTC Claims" payable to creditors who filed the original bankruptcy claim, the one that preceded the civil rehabilitation claim?

OR

Is "Non-Allotment Portion of BTC Claims" delay damages, interest on the claim?

Any information would be appreciated. 

[zasad@]

I don't know American tax laws, but I know my country's tax laws.
According to general rules, the return of lost funds should not be taxed, and the payments will be made at a rate of slightly more than 400 dollars per bitcoin.
All investor losses were proven in statements and verified by the exchange commission, so I am sure that these amounts should not be taxed. And all other payments that are higher than the amount of losses should be taxed, but an American tax lawyer knows better!

[pakhitheboss]

It is simple either hire a professional to do the taxes or check this link: https://www.irs.gov/businesses/small-businesses-self-employed/digital-assets

We are not tax advisors here and therefore we can only suggest what is best for you. You will not incur tax as you are getting Bitcoin or an altcoin in your wallet as it comes under a holding. But, you will incur tax under capital gains or if you are selling them for USD. I can only advise you to continue holding if you are getting your refunds in Bitcoin and wait for the right moment to sell them.

[UmerIdrees]

I don't know American tax laws, but I know my country's tax laws.
According to general rules, the return of lost funds should not be taxed, and the payments will be made at a rate of slightly more than 400 dollars per bitcoin.
All investor losses were proven in statements and verified by the exchange commission, so I am sure that these amounts should not be taxed. And all other payments that are higher than the amount of losses should be taxed, but an American tax lawyer knows better!

Yes in my part of the world, we are not taxed on our investments or belongings. It is on the capital gain. By the way, Crypto is not legal here so unless we cash out bitcoin / crypto, we can't be taxed. Americans may have different laws and since these MTGox affectees are being refunded after so many years, the lawyers can tell in a much better way.

I can only advise you to continue holding if you are getting your refunds in Bitcoin and wait for the right moment to sell them.

What is the right moment to sell?  In the bull market  
But these people are already in a lot of profit as they got Bitcoin so cheap back then.

[BlockExplorer24]

Hey redthreat,

Regarding your question on how the MTGOX repayments should be reported to the IRS and taxed, here’s a breakdown:

BTC: Since the BTC held at MTGOX was not exchanged or sold for fiat, the repayment itself is not immediately taxable. However, any future sale of the repaid BTC will be subject to capital gains tax based on its value at the time of receipt​.

BCH: Since BCH is considered a hard fork, it is treated as income at the time it is received. The IRS will tax it as ordinary income based on its fair market value at the time of receipt​.

Cash: For the cash portion, it's crucial to determine its exact nature. If it represents the market value of BTC at the time MTGOX became insolvent, it should be reported as part of the bankruptcy claim and treated accordingly. However, if it’s considered a recovery of the investment, it might have different tax implications​​.

Hope this helps clear things up a bit!

[NotATether]

^---- Don't use ChatGPT as a replacement for real tax professionals because if you make even one small mistake on your tax return and the IRS finds out then you will absolutely be hounded by them about the discrepancy and they will demand you fix it after paying a penalty.

Not saying that I am a professional or anything, but assuming you had bought X amount of BTC at price A when you put it on Mt Gox and you are now going to liquidate all of it (let's call it Y BTC) at price B, what you're really being taxed on is difference between the dollar value of the BTC you lost when Gox crashed and the dollar value of the bitcoin you had bought when you first moved it to Gox.

So either a capital gain or a capital loss.

Either way, it would be better to call a tax professional to help you sort out the file details with them.