How do I account for a forced margin liquidation in crypto where all my assets were sold and my net was zero?

[MinhT1]

You will enter the liquidation as a sale of cryptocurrency, just like a normal sale.

Please read this TurboTax Help topic for instructions.

[Travelingman]

So even though it was sold in a cascade decline and my ending balance was zero crypto..I input the purchase price as the cost basis... and the proceeds as zero?

[ErnieS0]

No. You would report the sale price for each transaction against the purchase price. Your liquidation generated money to pay for your margin call so generally your proceeds would be what your account was worth at the time of the call (if it all happened at once).

Check your statement or spreadsheets for the sales proceeds.

[G Kumaran]

Thanks for this response. I can now understand why it showed up with a "profit" even though I lost all my margin. However, can I still file another loss for the original $31,091.72? Thanks!

- 20.41028857 ETH

Cointracker - BybitCSV

Fiat value

$1,776.72 per ETH

$36,263.29

Cost basis

$31,091.72

Gain

$5,171.57

[Mike9241]

what loss?  as explained you made a $5K profit on the $31K purchase.

gain or loss even for crypto is measured by the difference between what you paid to buy it and what you sold it for.  margin loans do not affect the gain or loss (sort of like a mortgage on a home)

[G Kumaran]

Makes sense if I retained the initial crypto after liquidation. In this case, it was a complete liquidation, i.e. I lost my entire position (went to $0, see Closed P&L) due to the liquidation event (on ByBit.com). 

Contracts	Closing Direction	Qty	Entry Price	Exit Price	Closed P&L	Exit Type	Trade Time
ETHUSD	Close Long	235,517	1,865.15	1,622.00	-26.09365592	Liquidation	2/22/2021 9:16

[NCperson]

@G Kumaran - please re-read @Mike9241 comments as he is spot on.

you have to separate in your mind the purchase and sale of assets (Crypto) from loans (margin)

1) you have to report the profit or loss of the crypto which is based on the purcahse price and sales price of the asset.  

2) the loan (margin) has nothing to do with this; it has no tax implication at all.

3) you bought ETHUSD and then sold it.  from your original screen shot, there was a gain of $5,000.  That is the reportable gain... 

4) The fact that you had to use the proceeds from that sale to pay off your margin loan is immaterial to the situation,  This second transaction is not reportable on your tax return. 

5) and you did retain the crpyto after its sale...but just for the nanosecond as the proceeds were used  to pay down the margin loan.