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ICO

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Initiate

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I am interested in investing in ICOs some have gone up in price and some dow has gone down. I suspect just like any investment I pay CGT on the gain i.e sell - buy price. However what information is required for filing my taxes? Just the amount of gain/loss?

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Devotee

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Hi Ren I think I know this one. An ICO is an Initial Coin Offering and they take ETH or BTC at a specific rate.

Aka for 1 eth you would get 800 tokens lets say, listing the rate is irrelevant because how many tokens you got and how much ETH you paid, inherently contains the rate.

So.... for accounting: retain the date of when you sent ETH/BTC funds in and what/when you got Tokens in return. The amount and the private wallet address.

I think for ICOs with Ethereum, exchanges ask you not to send to ICOs because the smart contract will have issues sending you coins to a Token wallet that doesn't exist there, and in general.

I personally think recording exchange deposit addresses as 'your wallet' is problematic and false, but if you have a private wallet, like metamask or MEW etc. then sure recording this cannot hurt, because all the info on etherscan is relevant to you. Where info on an exchange addy is often not relevant to you at all. Depending on how that exchange sorts out their accounts and manages their cold/hot wallet.etc

But at the time you traded X-Eth/BTC for X-Tokens, those tokens were worth anything because they weren't trading anywhere (usually, unlike EOS which was selling on Kraken, during the ICO, as tokens were released daily). What will be important is when you sell those tokens, this will show profit or loss (for tax).

Spending on an ICO would be considered a outgoing and what ever you get for them when you trade them is incoming, the difference determines profit or loss. 

Best practice is to keep records of every transaction. Cointracking can help dredge up historical data. 

1ETH for 800Tokens not yet worth anything, will make sense with your next bit of data, which is the inevitable sale. If the Tokens aren't selling anywhere, then it is a loss? Until sold? That's my presumption. 

I think this is only complicated because technically you can trade any token even during ICO on EtherDelta/ForkDelta, by pasting in the Smart Contract address. But anyone buying there would be rare, because if they knew the Smart Contract to look, they would know the ICO is running. And you selling there would only be selling at a profit. I think that's irrelevant anyway, the loss and profit is determined at point of sale, so if you manage to sell it or how you sell it, all that matters is the price you got.

I think the ATO or accountants are going by historical average prices, not realizing a lot of these coins and tokens have very thin markets and the error reporting in data is very high. I've noticed it throughout trading this year, but it never meant anything to me because it wouldn't affect me. 

The best you can do is record what you bought/sold, when and that's it really. The base markets ETH and BTC do have very good average prices though and high volume (like DOGE), so recording this price in AUD at that time, should tell if you made profit.

If you spreadsheet it all. Then in the data will be how much ETH you bought, the price in AUD, the ammount of ETH you disposed of, the ammount of Tokens you got. (loss). Then ... the ammount of ETH.etc you got selling the tokens, then record the value of that base currency at the time to determine how much that is worth. 

Spent/got, Spent/earned/loss. It is only really selling in this market. Selling AUD for x-coin/token Selling x for AUD or coin/token. Every trade is a sell. So that I guess is why they want every trades value in AUD to determine if that trade was a profit or loss. 

I'm just a trader/user, so idk.

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Devotee

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Ok lets say you disposed of 1ETH and for ICO price got 800tokens.... 1ETH was 700AUD at the time.
Meaning you disposed of 1ETH worth 700AUD. When you bought that 1ETH it was originally with 200AUD worth of BTC.

Therefore you are tracking a capital gain of 500AUD.

This is where wording is important and I use 'tracking' because the term "you have made a captial gain of 500AUD" confuses me, because I know... in retrospect I havn't as I later lose that 500AUD gain on some other 2000 trades (really just the market trending down into bear mode). 

So really, you're figuring out every trade, to 'track' every event that lead to your present asset holding, from your original AUD spending. 

It doesn't matter if the token was selling for more at the time elsewhere, UNLESS you sold it for that better price elsewhere and thus made a capital gain... as you could buy more of BTC worth more. aka thus the determined value of your token at that time, for you. The market price i'm unsure how is relevant unless you lack your own trading information.

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Devotee

Replies 0

Hi @Ren

 

Thanks for posting! We'd need some more information from you to explain how we think tax might apply to your plans to invest in an ICO. 

 

We'd suggest contacting our early engagement team to find out more - the team can discuss your plans and explain how tax law might apply. It's a free service, and we usually respond within a few days of receiving your request. 

 

You can find the request form for a follow up email or phone call from the team over on our website. 

 

Thanks. 

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Newbie

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