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The outcome of SBF's prosecution could determine how the IRS treats your FTX losses

Published 12/16/2022, 05:48 PM
Updated 12/17/2022, 07:20 PM

FTX founder Sam Bankman-Fried has received official criminal charges after the collapse of his cryptocurrency exchange, which is more than just a moral victory for the exchange’s roughly 1 million individual investors. While not locked in yet, things appear to be on track for these investors to take a more favorable tax position as SBF’s fate continues to unravel.

Earlier this fall, it appeared that assets lost in the FTX collapse would be considered a capital loss under the United States tax code for the tax year 2022. This capital loss can be used to offset capital gains. But in a year in which the crypto market took a beating as a whole, most investors will not have capital gains to offset in 2022.

Justin Wilcox is a partner at the Connecticut accounting and advisory firm Fiondella, Milone & LaSaracina. He founded the firm’s cryptocurrency practice in 2018, providing tax and advisory services to Web3 organizations and crypto investors. He mines and trades cryptocurrencies.

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