I want to know what happens when a ‘receipt’ token is issued during a staking transaction and has a fair market value and appreciates during the staking period, but must be returned for whatever the original token’s value is at the end of the staking period. There seem to be gains on the receipt token, but these gains are erased when unstaking.
Consider BNT and vBNT from Bancor. When you stake BNT at Bancor, you get 1 vBNT (a receipt token) for every 1 BNT you stake, and the same in reverse when you unstake. You can’t get your BNT back if you don’t have vBNT. At the same time, vBNT is tradable and has a market value, quite separate from the value of BNT (vBNT has about 1/3 the value of BNT). If the receipt token appreciates during the staking period, you should recognize a gain when you trade it back in for your original token. However, you don’t get this increased value back in more original tokens, you just get back the same amount you started with whether the original token has gone down, up, or stayed the same during the staking period.
This effectively erases any profits from your receipt token’s appreciation. You are literally forced to trade the receipt tokens back, not at their current value, but in their current quantity, for whatever the value of the original token is at the time of redemption.
If you stake CAKE on BSC you get a SYRUP receipt token, but in this case SYRUP has no tradability, that I know of, and no market value. In this case, there will never be any reportable gains, so it’s easy to deal with it from a tax perspective.
I can’t find a discussion of this anywhere and it’s driving me nuts.