Based on consultations with our tax advisers, cryptact handles these transactions as follows. Keep in mind that there’s no clear guidance on how to treat borrowed or returned cryptocurrencies for tax purposes in any of the jurisdictions cryptact supports at the moment. This could change in the future.
■Borrow (Action=BORROW when uploading as a custom trade)
The book value is calculated as though the position was acquired at the market value. Borrow transactions do not generate PNL.
Example:
You purchased 1BTC for 30,000USD. Then you borrowed 1BTC at the market value of 50,000USD. The book price for your BTC position is ((30,000*1)+(50,000*1))/2=40,000USD.
■Return (Action=RETURN when uploading as a custom trade)
The PNL is calculated as: (borrow price - book price) * quantity.
Example:
If the borrowed coin in the above example is returned, it will result in a profit of (50,000-40,000)*1=10,000USD. The book price for the remaining 1BTC position will remain to be 40,000USD.
* If you trade the borrowed coin before you return it, naturally the book price will change and so will the PNL.
This accounting method is not specific to cryptocurrencies. It is based on the general accounting principles for returning what was borrowed.
For more information on how to upload borrow/return transaction history as custom trades, please refer here.