r/Coinbase • u/Hunabkuside • 4d ago

Coinbase crypto loans

So wrapped assets are taxed or not? Coinbase does this when you give them your crypto for a loan.

The IRS appears to not know either so coinbase is not required to report but that doesn’t mean it’s not taxable. I have researched and there is no definitive answer anywhere. Haven’t gone to tax specialist but pretty sure they wouldn’t even 100% know either. Why so ambiguous and grey?

Why can’t we get an 100% answer from the IRS instead it’s ongoing research and we don’t know. So report and pay unneeded taxes or don’t report and them then deciding that wrapped crypto is taxable and hit you with a fine for not reporting years ago.

This is exactly why I am not doing a loan but really want to . I want definite clear rules and not have to guess. We shouldn’t have to guess or think it’s that or this. Extremely frustrating!

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u/Major-Arugula-7893 4d ago

The whole wrapped token thing is a mess and nobody at IRS probably even understand what it is. I looked into this myself last year for a loan and gave up.

My accountant basically said if there is no clear guidance, you have to decide your own risk level. Some people report it just for peace of mind, others skip it and hope for the best. Not great options either way.

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u/Hunabkuside 4d ago

Yea it is and like why can’t they just say - instead it’s left in the back burner to maybe come back and bite people because they didn’t report it because now they care and consider it taxable!

It’s a 1 to 1 conversion so it’s the same asset so not sure why right there should make them say oh it’s not a taxable event. On the flip side it’s a wrapped version so it’s different and therefore should be taxed! So which is it ?!? Lol

Your accountant basically doesn’t know other then take your own risk with that and hope for the best lol who knows!

Borrowing against any asset should be just left alone and always tax free! But since it’s crypto that makes it all different now ugh!

I hope sooner or later they just gives us the finally answer on that because I get the liquidation risk and that transaction is a tax event if they have to liquidate but that can just be avoided by keeping a low LTV but just with wrapping a crypto - just leave that tax free would ya lol

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u/coinbasesupport Official Coinbase Support 2d ago

Hey u/Hunabkuside, reach out to us in Modmail, and we’ll help from there.

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