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Here's a quick summary on ETH2 migration and staking taxes 
#cryptotaxes
The full post is linked at the end.
#cryptotaxesThe full post is linked at the end.
First, if you see anywhere anybody giving black and white answers on this matter, it's a red flag. 
Even the IRS is struggling to understand what's happening and apply the correct tax rules.
Rules were written ~80 years ago. Beacon Chain went live yesterday.
Even the IRS is struggling to understand what's happening and apply the correct tax rules.
Rules were written ~80 years ago. Beacon Chain went live yesterday.
1/ The IRS has not issued any staking specific crypto tax guidance yet.
Until they issue guidance we are left with using existing generic crypto tax guidance to infer crypto tax implications on ETH2 migration and staking.
Keyword: Infer
Until they issue guidance we are left with using existing generic crypto tax guidance to infer crypto tax implications on ETH2 migration and staking.
Keyword: Infer
2/ There are two topics related to ETH2 where the tax treatment is uncertain:
1. Converting ETH into ETH2
2. Earning staking income
This uncertainty is caused by limited IRS tax guidance and the lack of specifics on how the transition will work in the real world.
1. Converting ETH into ETH2
2. Earning staking income
This uncertainty is caused by limited IRS tax guidance and the lack of specifics on how the transition will work in the real world.
3/ According to Coinbase, ETH and ETH2 will work as two different coins. If you trade each other, that will definitely be a taxable event.
(See 6/ before shooting the messenger
)
(See 6/ before shooting the messenger
)
4/ There could also be a situation where ETH2 migration would just look like a coin swap. This will be a non-taxable event.
Your cost basis on ETH will transfer into ETH2.
Your cost basis on ETH will transfer into ETH2.
5/ As to staking rewards, they are definitely taxable.
The question is WHEN they are taxable (at the time of the receipt vs. at the time you sell them)
The former is the conservative tax approach and closely aligns with mining tax guidance.
The question is WHEN they are taxable (at the time of the receipt vs. at the time you sell them)
The former is the conservative tax approach and closely aligns with mining tax guidance.
6/ Finally, it's too early to say how taxes will exactly work on ETH2.
It will depend on:
-How exchanges handle the migration
-Running your own validator vs. staking as a service
-Your specific facts and circumstances and risk tolerance
It will depend on:
-How exchanges handle the migration
-Running your own validator vs. staking as a service
-Your specific facts and circumstances and risk tolerance
