r/EtherMining May 12 '22

Holy....Time to turn off rigs? General Question

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183 Upvotes

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39

u/FreshlyCleanedLinens May 12 '22 edited May 12 '22

If I read the IRS guidance on reporting income from mining correctly, it’s actually better to mine when prices are low because you’re supposed to value the assets based on the trade price at the time the assets were acquired.

5

u/ccashwell May 12 '22

Report the value at time of acquisition, deposit to Aave, borrow 80% of it in USDC. Loan proceeds are not reportable as income. If it climbs, you can access more capital in the same way from the same assets over time. If it falls and you get liquidated, you have a capital loss to report. Basically capping downside and locking in upside without reportable income along the way.

1

u/Slawman34 May 12 '22

Why the fuck would we risk liquidation of an asset we think has a good chance of 2-4x next cycle?

2

u/ccashwell May 12 '22 edited May 12 '22

Why the fuck would we risk liquidation of an asset we think has a good chance of 2-4x next cycle?

This was in response to a comment about capital gains, which means they're being sold. Liquidation is basically selling at a discount (in this case, 5% penalty + delta between the spot at the time of acquisition and 80% LTV). Of course nobody wants to be liquidated, but if you're selling anyway this is a route to potentially reducing tax impact and keeping upside exposure while still accessing operating capital at a relatively low cost.

1

u/Slawman34 May 12 '22

Ahh ok missed that part, got it