I lost 81% of my crypto assets with the Celsius bankruptcy. I did receive 19% back. I have not sold the crypto assets. How do I claim the capital loss for the 81%

[William-Martincavage]

I lost 81% of my crypto assets with the Celsius bankruptcy. I did receive 19% back. I have not sold the crypto assets. How do I claim the capital loss for the 81% of crypto assets that I did not get back from the bankruptcy filing?

[DawnC]

You cannot claim a loss from this decrease on your tax return until there is a closed and completed transaction, such as a sale or exchange.  If your digital asset investment account is frozen or your digital assets are tied up in bankruptcy proceedings, you can’t claim a taxable loss because you don’t have a closed and completed transaction. 

Once your account has been unfrozen or the bankruptcy proceedings completed, you will have to reassess your situation.  If your digital assets and your ownership of them have remained intact, and they have any value, then you don’t have a recognizable loss.  If you received a settlement (regardless how small) from the bankruptcy proceedings in exchange for your digital assets, this is considered a sale and you (or let TurboTax do it for you) should calculate your capital loss (or gain) on Form 8949 and report it on Schedule D (Form 1040) for the year you received the settlement.   

If you still have tokens or shares outstanding, that might have some dollar value in a bankruptcy proceeding, you have to wait until the bankruptcy proceeding is completed.  Then, you can report the final disposal of your tokens or shares using the price you originally paid as the purchase price (basis), and the final payment from the bankruptcy as the selling price (proceeds).  If you receive less than you originally invested, that is a capital loss. 

Where do I enter my capital gains and losses?   Follow the instructions in this link to report your gains/losses.   TurboTax will prepare the Schedule D and/or Form 8949 when you enter the dates and amounts (proceeds and basis) in the Investments Income section.  

All cryptocurrency sales are taxable transactions that have to be reported on your tax return. Unlike stocks and bonds, cryptocurrency exchanges are not required to provide a Form 1099-B or summary tax statement for cryptocurrency transactions. You may need to go to your exchange’s website and download your order or trading history.   A discharge order or final decree will be useful in the case of bankruptcy pay outs.  

Cryptocurrency Guide

[William-Martincavage]

Thank you, I had 1.757137 BTC @ $19,881 & 10.38506 ETC @ $1,088.171 at the day of the bankruptcy. Afterwards, I was left with 0.35903 BTC. I can take a loss of 10.38506 ETC @ $1,088.171 = $11,300.72 and 1.398107 BTC @ $19,881 = $27,795.77. So at the end of the day I will have a $39,096.49 capital gains carryforward loss? Correct?

[DianeW777]

Yes, as long as you have the correct calculations and the bankruptcy documents, as well as any other proof you need to show your loss due to the bankruptcy which is completely finished as far as any proceedings.

Enter your loss as indicated by @DawnC: Where do I enter my capital gains and losses? 

@William-Martincavage 

[William-Martincavage]

I was thinking about the ETH in my example and I paid $42k for the crypto. The price decreased to $11k at the time of bankruptcy. At bankruptcy, I lost all of it. My loss is $42k not the $11k. My cost basis is $42k and my sales price is zero.

[JamesG1]

You are correct.  Your cost basis in ETH is $42,000.  Your sales price will be $0.

Stocks, stock rights, and bonds (other than those held for sale by a securities dealer) that became completely worthless during the tax year are treated as though they were sold on the last day of the tax year.

A stock may become worthless when the corporation files for bankruptcy, stops doing business, and has no assets. Financial difficulties will not make a company's stock worthless unless there's no hope that the company will survive.  Worthless stock includes abandoned stock, permanently surrendered for no consideration.

Stocks that become wholly worthless during the tax year are treated as though they were sold on the last day of the year.

Enter a worthless stock like any stock sale but with a sales price of zero and the word worthless in its description. 

See IRS Publication 550 Investment Income and Expenses, page 54.

Follow the excellent advice of @DawnC above.