Safemoon V1 to V2 Migration

Hello Accointing Team,

In December 21 Safemoon startet the Migration of the V1 to V2. For that i need to make a swap.
I know it’s a new contract but i didn’t really bought a new coin, just upgraded. I heared that this should be tax free but in the report the migration (swap) is of course listed as a taxable position.
What is true and if it’s not taxable how can i change that?

best
Marcus

To be honest I am doubtful that it will be tax free, because of reflections generated. Probably this will be treated as staking / lending and similar in Germany and tax-free hold period will be increased to 10J. Reflections are not displayed in Accointing, but you can see them in Safemoon Wallet.

This would very interesting to hear how Safemoon denomination event will be handled. I currently see no feature to indicate token as denomination event.

The wonderful thing with SafeMoon that this is technically not PoS and PoW chain, therefore taxation would be very interesting topic to follow.

P.S You need to do so called consolidation, in case you do swap with V1 tokens - you will lose all funds. Smart Contract now destroy all funds in case you execute any actions with V1 contract. This called 100% taxation. You can find in Reddit info about this.

yes it will be interesting to see how safemon would be taxed in the future. But what my question was, is the migration from v1 to v2 really a swap? Or just an upgrade. Because if you are holding v1 in an exchange they will do the migration and you get the v2 without any swap on your side, so not a taxable thing. But in the safemoon wallet and on the chain it’s seen as a swap which will be taxed. so what to do.

I do not know right answer unfortunately, therefore let’s wait what others will say.

I will ask our tax professional :slight_smile:
However, if CMC lists is as a new coin, then it will probably be taxable, if not then it will probably be tax free.
Let me talk with him.
[Is there some official document that we can look at besides this tweet? Like an aticle published by Safemoon?(https://twitter.com/safemoon/status/1472192422704816130)

Hi Marcus,

The only guidance that we currently have is based on the FAQ’s published by the IRS at: Frequently Asked Questions on Virtual Currency Transactions | Internal Revenue Service . What we know is that cryptocurrency is taxed as property and each time you trade one for another, it’s a taxable event.

This does bring other questions that we have no answer on, such as network upgrades which you are asking about. Not too different from the ETH > ETH 2.0 or wrapped coins conversation.

Unfortunately, we have no concrete guidance here. In general, if you acquire a different (crypto) asset, it’s a taxable event. But what constitutes a different asset, in this case, could be open to interpretation. As a CPA, I don’t think many updates should be taxable. Why? Substance over form argument, while it may “technically” be a different asset, a taxpayer is in no different position from a network upgrade. If you had 10 coins then the network upgraded, and you still have the same coins after, I would argue there is no taxable event. I could see however, a different conclusion if the upgrade makes the coin / utility substantially different.

Bottom line is we just don’t have an answer for your question. What I would do, is make sure you understand the network upgrade and what this means to the coin, then you will have to take a position on your tax return and either say “I don’t think this is taxable bc of XYZ” or “it is taxable so here is my gain reported”. You don’t actually have to disclose this position, simply by filing one way or the other you would do this. So depending on the outcome you want, you may have to manually edit the transaction in Accointing to obtain the right tax answer. If you do, I would make a note in the comments of the transaction about why you are doing this - always best to have good records.

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