Celsius distributions

[alkaloid]

So my situation is this: Let's say I had 500 USDC, 0.005 BTC, and 0.07 ETH at Celsius. I received 0.006 BTC and 0.09 ETH in the settlement, probably because the majority of my Celsius holdings were USDC. So I actually received a little bit more BTC and ETH in the settlement. I'm still thinking to do a manual transfer for each, and then the extra BTC and ETH amounts marked as income? Or marked as conversion from USDC as "Realized Profit/Loss"?

Or should I just treat the USDC, BTC, ETH as investment loss, and then the new BTC and ETH that I received in PayPal as income?

I would be interested to know which is better way. Thanks again for any insights that you may have!

[RobertB4444]

When an investment becomes worthless (or almost worthless in this case) you can take the loss as soon as you are certain that it is done.  Sometimes that means the court case finishes or you get a report in the mail.  In your case that means you received a final settlement and you're done.  

So what you will need to do in this case is figure out the value of what you had in Celcius (not what it was worth, what you actually paid for it).  And then you will enter the transactions as -

Date purchased - actual purchase date

Amount paid - what you actually paid for the crypto

Date sold - the date that you received the settlement

Amount sold - the value of the crypto you received on that date

You could lump it all in in one transaction and call it the Celsius settlement or you could do it in three s\transactions based on those three types of currency that you listed.  If you do it the second way then it sounds like two of them would have a profit and one would be a total loss which probably offsets everything.  But that's up to you.

Lastly, you'll be left with cryptocurrency that you'll be carrying forward.  That will have a purchase date of the date you received the settlement and a basis or cost equal to the amount you entered for it's value an the date that you received it.  That will be information to file away for when you sell it.

@alkaloid 

[alkaloid]

@RobertB4444 Thank you for your info!  One more clarification - so as you said below:

Lastly, you'll be left with cryptocurrency that you'll be carrying forward.  That will have a purchase date of the date you received the settlement and a basis or cost equal to the amount you entered for it's value an the date that you received it.  That will be information to file away for when you sell it.

So the BTC and ETH that I received in PayPal, they can be treated as purchases, not income?  Does that mean if treated as purchases, don't need to pay tax as income?

Thanks again for your help!!

[RobertB4444]

They ARE income, but you're using that income against the Celsius losses that you took.  So you aren't paying taxes on receiving them now.  You WILL pay taxes on any profit you make when you sell them so you need to keep records of what they were worth on the day that you received them so you know the basis of the currency when you sell it.

@alkaloid 

[mattmouth182]

Sorr I know this is old but it's all I could find searching...

So how do we get these loss/gains into turbo tax? I seem to be going in loops in the Income section trying to add Crypto disposal info

Thanks

[JamesG1]

Follow the instructions of @RobertB444 above.

In TurboTax Premium Online, follow these steps.       

1. Down the left side of the screen, click Federal.
2. Down the left side of the screen, click Wages & Income.
3. Click the down arrow to the right of Investments and Savings.
4. Click to the right of Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B).
5. Click Add investments.
6. On the Let's import your tax info screen, select Enter a different way.
7. On the OK, let's start with one investment type screen, select Stocks, Bonds, Mutual Funds, then Continue.
8. At the screen Which bank or brokerage, enter the information.  Click Continue.
9. Do these sales include any employee stock, enter No.
10. Do you have more than three sales, enter No.
11. Do these sales include any other types of investments, enter No.
12. Did you buy every investment listed, enter Yes.  Continue.
13. On the screen Now, choose how to enter your sales, select One by one.  Select Continue.
14. At the screen Look for your sales on your 1099-B, select Continue.
15. You will now be able to enter $0 total proceeds (sales) and your cost basis, along with the sales category. select Continue.
16. At the screen Let us know if any of these situations apply to this sale, select This was a worthless security.
17. At the screen Review your sales, select Add another sale as necessary.
18. When completed, close the record and click Continue.

@mattmouth182 

[michinori-kaneko]

sorry repplying to an old post.  I was researching for something else and stubled to this post. I've already filed my 2023/2024 tax returns already without claiming the loss (I was previously told by my tax accountant when she was filing for 2023 that the loss is NOT realizable but I just need to maintain the cost basis when I sell the assets)  but I believe I received small amount of crypto in 2025 as well so I am wondering if this method is still appropriate or I need to refiile my 2023/2024 returns to realize these losses and put a new cost basis for the assets I received back.

Q1: I have not sold any of the assets received back, so can I just assign cost basis to them (obviously not beneficial from tax purposes not realizing loss right away) until the day I sell them?

Q2: I had three assets on Celsius, BTC / ETH / USDC. But the distribution was in form of BTC and ETH only, and when I asked how to assign the cost basis, I was told I can assign BTC and USDC's cost basis to BTC and ETH's cost basis to ETH, but as long as I follow some logical rule anything is ok. Assuming answer to Q1 is ok, can I follow this guidance on how to breakout cost basis?

Q3: We all "earned" interest while the crypto was held at Celsius, and would have paid taxes via 1099-int on those interest (which at the end of the day we really never received), which should be included in the cost basis, but I have no way to split out between the BTC and ETH "interest" I received. How should I treate those? 

Thank you!

[RobertB4444]

1.  Yes.  Since you haven't sold them yet assigning a value that follows them until you sell them is fine.

2.  That is exactly how I would figure out the value.

3. If you never received the money at Celcius and it was never actually added to your account then it can't be part of the basis of the currency.  If it never existed it can be ignored.

@michinori-kaneko 

[michinori-kaneko]

Hey Robert, thanks for your input. I'm grateful to hear your thoughts on no.1 and no.2, but would like to further get your thoughts on no.3.   

You mentioned "If you never received the money at Celcius and it was never actually added to your account then it can't be part of the basis of the currency" but I think this is inaccurate.  My account value and holdings did increase on Celsius, I just never cashed out but I could have if I did so before their default.  It was an interest payment, so effectively its like I got the interest , then i bought additional shares with that money.  I paid taxes on the interest because i got 1099 at the end of the year. So effectively my cost basis on those shares i received as interest payment should be what I paid taxes on interest income via 1099? Please let me know your thoughts.