MtGox losses and tax deductions

[ekstremista]

There must be someone in the same boat, but a good number of web searches turned up little, except that the IRS considers bitcoins to be property, not currency.

Long story short, I wired some funds to MtGox and bought BTC just before they went under (yeah, I know, but it's a long story). The money is gone now, of course, but I've no idea what kind of a tax loss can be claimed. All I have is an emailed receipt from MtGox indicating how much USD arrived.

I don't know if it even matters that I bought BTC or not... I can simply say that I wired money to an account aaaand... it's gone, just as in the South Park skit.

Thanks for any suggestions.

[readysalted89]

There is a thread discussing this here.

https://bitcointalk.org/index.php?topic=485260.0

The OP seems to know what he is talking about and had this to say about Gox and filing tax returns.

Anyway, worth noting that if it turns out that we never get the coins back from MtGox, you will be able to report them as a loss next year, i.e when you file your 2014 taxes in 2015. However, the catch is that you need to be able to show the cost basis, and probably any other documentary evidence in case you are audited. This means you needed to have downloaded your trade history from MtGox.

It may be that they come back online, or in their Gox rebranding that they will give you access. I suggest you grab it as soon as you can if you have not already done so.

If you do lose coins, you can claim a loss for their cost basis only. So if you had bought 1 BTC in April 2013 for $100 and it's now gone, you can only claim $100.

[haploid23]

I lost a fat sum on there too, but there's no way to prove this. The only proof I still have is that I sent some of the funds from bank account to dwolla, then transfered to mtgox. But this was back in 2011 though. This isn't the majority of my loss, but at least can I still file a loss for this chunk?

The majority was in BTC and fiat from the traded BTC. This won't have any history that I can prove since none of us has access to trade history.

[Lethn]

This is where the blockchain comes incredibly handy, if you get the addresses you sent to mt.gox the amount you transferred should still be there, the problem then is law enforcement realising that this is legitimate data they can use which will of course be pretty difficult since they're always fairly useless with brand new technology.

[Kprawn]

Is there a expiry time frame for claiming tax losses in your country? I think you have to claim within the same year the losses occurred. 

I guess with MtGox it was not that easy, with years of litigation and no knowledge, if you would receive any compensation for your losses.

Anyways..... good luck with that. 
 

[caga]

This is where the blockchain comes incredibly handy, if you get the addresses you sent to mt.gox the amount you transferred should still be there, the problem then is law enforcement realising that this is legitimate data they can use which will of course be pretty difficult since they're always fairly useless with brand new technology.

I think majority of the people here are worried about cash transfers they did(from what I understand from the thread titles and post).

[Lethn]

Ouch yes, that's going to suck, especially if it was a transfer to some shady off-shore account, thing is it might be able to get things started if they explain there's a lot more within the banking system.

[ekstremista]

There is a thread discussing this here.

https://bitcointalk.org/index.php?topic=485260.0

Thanks, that's useful, though things might get tricky during an IRS audit. At mtgox.com, I can still get my BTC and USD balances in effect when MtGox came crashing down, but that's it -- no transaction history or other details. The only documentation I have is the MtGox email confirming receipt of funds, which at least should serve as the cost basis for my loss. I can only hope that this receipt will mollify the IRS agent who conducts the inquisition.

[bitcointaxes]

This is an interesting one, and the current thought is that you will have to claim MtGox coins as a casualty loss for their cost basis.

However, it's likely that you can't even do that this year since the bankruptcy process is ongoing and you might actually be awarded some values for your coins, albeit tiny. If that were the case, you could claim a capital loss. However, once they finalize the bankruptcy and creditors are paid off, (fiat balances may be paid something, I'm guessing coin balances will get nothing) then losses will be taken in that tax year.

They already said it will be at least 2015, so not you file in 2016 before you can add them to your tax forms.

If you do have casualty losses, first, you need to be able to prove the cost basis of those coins. This means you need good records of your past purchases to be able to identify the coins in MtGox that are gone. Remember you can only claim the original basis and not their market value.

Next, you have to reduce casualty losses by $100 and then 10% of your AGI. So if you had 10 coins that you had bought at $800, you aren't going to see anything if your AGI is $80k or less. 10x800 - 100 - (10% * 80,000) = -100. (This is for personal property.)

If you have large losses, speak to a tax attorney.

[ivonna]

I lost a fat sum on there too, but there's no way to prove this. The only proof I still have is that I sent some of the funds from bank account to dwolla, then transfered to mtgox. But this was back in 2011 though. This isn't the majority of my loss, but at least can I still file a loss for this chunk?

The majority was in BTC and fiat from the traded BTC. This won't have any history that I can prove since none of us has access to trade history.

I believe that at one point gox was allowing people to enter their login credentials to view what their system of record reflected as the balance on your account. However if your account did not have your identity verified then it may be more difficult to prove the funds in the account were belonging to you

[DeathAndTaxes]

However, it's likely that you can't even do that this year since the bankruptcy process is ongoing and you might actually be awarded some values for your coins, albeit tiny.

This is the key point for US residents (not sure about how it is handled in other countries).  A loss doesn't occur until any chance of recovery is gone.  In this case it would be when you are either paid (some tiny %) or if you are not paid when MtGox completes bankruptcy and ceases to exist.

IIRC the trustee report indicated they had about 10% of the USD owed and about 20% of the BTC owed so in theory there is some funds remaining.  The bad news is the bankruptcy may stretch on for years and the court and trustee costs will be paid out of MtGox assets.  Until it is complete though under US tax code nobody has incurred a 'loss' yet.

[ozycash]

 The bad news is the bankruptcy may stretch on for years and the court and trustee costs will be paid out of MtGox assets.  Until it is complete though under US tax code nobody has incurred a 'loss' yet.

thats usa for you, any money recoverable is completely used up by the legal system wasting time, nobody else will see a cent from mtgox! just look at many other cases the lawyers get the money until there is no money left! so much for justice in usa!

[BitCoinNutJob]

There must be someone in the same boat, but a good number of web searches turned up little, except that the IRS considers bitcoins to be property, not currency.

Long story short, I wired some funds to MtGox and bought BTC just before they went under (yeah, I know, but it's a long story). The money is gone now, of course, but I've no idea what kind of a tax loss can be claimed. All I have is an emailed receipt from MtGox indicating how much USD arrived.

I don't know if it even matters that I bought BTC or not... I can simply say that I wired money to an account aaaand... it's gone, just as in the South Park skit.

Thanks for any suggestions.

To complicate things even further you will likely be getting back some of those funds depending if you verified your account or not.  What % you will see is unknown.  What if they find MK guilty of fraud and take his 300k personal bitcoin stash to divide to gox customers.

[Blinken]

You don't know what you lost until the bankruptcy proceedings close.

If you wired them $5000 and they send you check 3 years from now for $150, then you claim the $4850 as a loss. In other words, as long as you have proof you wired them the money and proof they sent you back amount X as a final settlement, then you can claim it as a loss.

I would not attempt to claim anything until that happens.