How to Handle Tax Loss Claims After BlockFi Bankruptcy | Crypto Investors Seeking Guidance

A wave of crypto investors is navigating the complexities of tax loss claims after losing significant assets in the BlockFi bankruptcy. Following the settlement, many are questioning how to accurately report these losses to the IRS.

Investors are grappling with calculating their losses stemming from the BlockFi situation. One person stated, "I bought crypto (BTC, ETH, GUSD) and lost it all in BlockFi bankruptcy. I got a cash return via Zelle, but it doesn't match what I invested. How do I figure out my loss?" This dilemma raises important questions about how to handle asset recovery and reporting.

Investor Concerns and Fragmented Guidance

Many investors find the process of determining their tax implications confusing. Commenters offered insights into calculating losses:

• A user noted that losses should be based on the original purchase price rather than the assets’ value at the time of the settlement. "Remember the loss is off your basis (what you paid for it) not what its value was at the time," they remarked.

• Another post suggested a proportional allocation: "Allocate the recovery proportionally by original asset value, then calculate the loss as the difference between your cost basis and what you recovered. Report on form 8949 and Schedule D."

• A more straightforward approach was advised as well: "Calculate your total cost basis in BlockFi. Deduct values from your cost basis and it will show your loss. Use software to make it easier."

Complications in Reporting Gains and Losses

As tax season nears, many are questioning how to carry losses into future tax years. One asked, "If I lost $40K in 2022 and gained $80K in 2023, how much can I carry over?" This highlights the strategic considerations investors must navigate when reporting their financial activities.

"It's all about getting clarity on what you're actually claiming," a member emphasized.

Key Insights

• 🔻 Calculate losses based on your original purchase price.

• 📈 Form 8949 and Schedule D are crucial for reporting.

• 🤔 Losses can be carried over to future tax years based on IRS rules.

As discussions continue, investors are urged to consult professional tax advisors to navigate these complex regulations effectively. With countless dollars at stake, clarity in reporting is essential for anyone impacted by the BlockFi bankruptcy.