@KamS2 wrote:
Thank you for all the answers. I was able to recover all the crypto from my Wallet, but not from the Interest account on that exchange, as they used these assets for other investments and they don't even have them anymore. They are trying to recover their investments and pay back cash to the clients, although it will probably be only a fraction of the money owned. I assume that's exactly the scenario you described and I have to wait for the recovery update. Is that correct?
If you recovered your original investment, and you lost only interest income that was never paid to you, then:
You have no loss, and nothing to deduct. Any interest that is eventually paid will be taxable income, even if it is less than you were promised.
If you were given 1099-INT statements in prior tax years and paid income tax on this interest (even though it remained in your account and you never cashed it out) then you will be allowed an adjustment for the fact that you paid tax on money that was never actually paid. But I'm not sure how to claim this adjustment, and the adjustment can't be calculated until you know how much you will actually receive.
