Hi.
I acquired SingularityNET (AGI) tokens in late 2019. In late May 2021, SingularityNET replaced the ERC20 AGI token with the ERC20 AGIX token on a 1:1 basis. That is, my AGI tokens were permanently frozen and I received the replacement token, AGIX, at a ratio of "1 AGIX : 1 AGI".
AGIX is a hard-fork of AGI. AGIX provides the same functionality that AGI did, plus cross-chain capabilities. The swap did not increase the original asset value. More information can be found here: https://blog.singularitynet.io/singularitynet-phase-ii-launch-sequence-activated-agi-token-to-be-hard-forked-to-10ede4b6c89
Given that AGI was replaced with AGIX, is AGIX considered to be the original AGI token for tax purposes? Did a CGT event occur during the token replacement?
The reason I am asking is because in July 2021, I disposed of all of my AGIX for ETH and BTC, thus triggering CGT events. Given that I purchased AGI in 2019 and held onto it for over a year, I would like to know if my disposal of AGIX in July 2021 is eligible for the 50% long-term capital gains discount? I have assumed it was, based on advice in these links:
https://community.ato.gov.au/t5/Cryptocurrency/Tokens-redenomination/td-p/137703
https://community.ato.gov.au/t5/Cryptocurrency/Token-migration-and-cashing-out/td-p/140636
https://community.ato.gov.au/t5/Cryptocurrency/Token-migration/td-p/137166
This is a loose summary of events that occurred:
Late 2019: AGI purchased for approx $25,000
May 2021: AGI is replaced with AGIX (AGI was valued at approximately $220,000-$360,000 in days prior to the replacement)
July 2021: AGIX sold for approx $240,000
There are two scenarios that I can foresee:
Scenario 1: AGI-AGIX replacement is not a CGT event. AGIX is considered the same as the original AGI token. Therefore:
- Proceeds of AGIX less cost basis of AGI/AGIX: $240,000 - $25,000 = $215,000 capital gain.
- 50% discount can be applied to $215,000 capital gain as AGI/AGIX was held for over a year.
Scenario 2: AGI-AGIX replacement is a CGT event. AGIX is not considered the same as the original AGI token. AGIX cost basis is $0. Therefore:
- AGI cost basis is written off at time of replacement: ($25,000)
- Proceeds of AGIX less cost basis of AGIX: $240,000 - $0 = $240,000 capital gain.
- Net capital gain: $240,000 gain - $25,000 loss = $215,000
- 50% discount cannot be applied to $215,000 because AGIX was only held for approx 1 month.
I purchased the original AGI asset with the intention of applying the long-term 50% CGT discount in the future, and I hope that the token replacement has not derailed this strategy.
I plan to engage a suitably experienced cryptocurrency accountant to prepare my return, but I wanted to consult here first.
Kind Regards.
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