How to track borrowed assets?

Hi,

What’s the correct classification for borrowed assets?
Say I borrowed USDC for DeFi? Should I mark it as Add funds or Liquidity Pool?

And I guess repaying these borrowed assets should be classified as Payment instead of Fee right?

Thanks,
Romeo

Can I get more information about the particulars for your borrowed assets?

Here is the breakdown of classifications: Crypto Tax Classifications : Accointing AG
Here is how you are taxed per classification: https://www.accointing.com/the-hub/?s=classifications&id=3300&post_type=post

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Let’s say I borrowed stable coin on Celsius/Nexo/BlockFi. The way I did it is that, I marked the transaction as ignored so it the collateral doesn’t leave my wallet thus not incur a taxable event. But not sure how to classify the stablecoin (DAI/USDC/USDT) I received if it’s “add funds” or “liquidity pool”.

Another example is in DeFi’s (like Solend, Aave, Geist, etc.) where I deposit assets like SOL. Borrowed stablecoin on it, this time, I marked the deposit as internal (created another wallet and received the collateral there). Then I borrowed assets, not sure how to classify if “add funds” or “liquidity pool”. When I repay, I classify it as “payment”, not sure if it’s the right classification.

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For the collateral, it might be better to make it an internal transfer similar to how you handle staking.

You do not want to add the received funds as a “liquidity pool” transaction because that is only for liquidity pool rewards. Therefore that classification would be the same as income received.

When you borrow the asset though, you could do a manual transaction of Fiat currency classified as “Add Funds” then do an “order” transaction between the fiat and the currency you received. This is because the “add funds” designation is meant for use with fiat deposits.

When you return the asset borrowed you could do exactly the opposite, make an order transaction for fiat then a manual withdrawal of that fiat classified as removed funds.

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Not sure where you are located, but keep in mind that the above implies treating the transaction as a loan (and thus not taxable). This is a gray area in the tax law currently as it could be seen as a sale. However, the above should work to treat as a loan (vs sale).

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Thanks. I would imagine that would be very tedious for DeFi as there’ll be a lot of transactions, but mine I think is still manageable.

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Are you familiar with the Settle function in Solana Dexes (Serum/Raydium exchanges)?
How would you classify these transactions?
Here’s a scenario.

  1. Set a limit order on date 1, funds left wallet
  2. Order was fulfilled on date 2
  3. Settle assets on date 3, I got my tokens

Or

  1. Set a limit order for an NFT on date 1, funds left wallet
  2. Order was fulfilled on date 2 for a cheaper price
  3. Settle assets on date 3, I got my NFT and a change

Thanks

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Scenario 1 - the withdraw of your asset in step 1 and the deposit of your asset in step 3 are just classified as a “swap”.

Scenario 2 - the withdraw on step 1 and the refunded deposit on step 3 should be ignored. A new withdraw should be created with the actual amount spent. then classify that new transaction as a “swap” with the deposit of your new asset on step 3.

In both scenarios, the date listed on step 2 doesn’t really matter since it doesn’t create a transaction on the blockchain at that time.

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Awesome, thanks! Though that may be hard to automate since each scenario will have different TX hash each time (withdraw and settle), plus Accointing does not handle swaps from CSV (yet). Does swap must have the same TX hash and within a reasonable time frame?

Actually i tested it and it doesnt produce the correct results, I do not know why. you can handle both of these situations though by manually changing them to an order transaction on the day you received your new asset.

just put the exact amount of the asset sold and the amount bought and put the time the same as in step 3. that will work 100%. or you can do the same as above just classified as ICO instead, but the Order transactions would be better since it isn’t an actual ICO.

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