This article describes possible adjustments to transactions that may be needed to correctly document reimbursements received after Chapter 11 (bankruptcy) proceedings.

Important to note before reading:

🟥 Your situation might be different than the scenario described in this article. Always consult with a tax professional before making any changes to your transactions.

🟥 This article uses an example scenario to present how to perform the adjustments in Koinly to account for the assumed tax implications. It's a showcase of tools/tags available in Koinly, not a walkthrough to follow

🟥 If you're using universal cost tracking (as opposed to wallet-based: see Settings > Wallet-based cost tracking) then the question when (with what date) to document the transactions is as important as how. If in doubt, consult this with a tax professional.

There are most likely two main scenarios to consider:

If you received all the funds you will ever receive in one go as reimbursements for the funds held on the platform, then the situation is somewhat simple and requires you to decide whether these reimbursements should realize gains (losses) or not.
✋ Neither of those methods should be used directly if you will receive secondary reimbursements in the future - see the section about partial reimbursements

You held 1 BTC and 2 ETH bought in 2021 in Voyager and now received 0.5 BTC for your Bitcoin and 800 USDC for your Ethereum. After importing all the data, your transaction history looks as follows, without any edits:

You believe the refund is like reverse-share-splitting and the new assets should have the same cost basis as the old one. This is a variation of the rebase scenario as described in Token rebases and symbol swaps (AMPL, DOR, BTT).

🟦 Example: Assuming the above scenario, you want this 0.5 BTC to have the same cost of acquisition as 1 BTC had, same with ETH.

After going through those steps the transaction list looks as below. Note how the (manually set) worth of the deposits matches the cost basis of withdrawn/lost assets:

You believe you can realize capital losses equal to the difference in value of the assets held and received.

✋ You may need to manually set the worth of the received asset if it shouldn't be valued on the day of receipt and instead, for example, on the day of bankruptcy

Remember to use a different placeholder token for each transaction that you reconcile in this manner.

If you were refunded in a different cryptocurrency then you don't need to use the NULLx token - just merge the withdrawal with the received asset.

After applying these changes, the transactions should look as below:

If you receive the same asset you originally held, you may believe some "your" asset (with your original cost basis) was originally returned, while the rest is lost - either realizing capital losses or not. Here let's assume you want to realize losses equal to the cost basis of the partial BTC that was not returned.

🟦 Example: Assuming the above scenario, you want this 0.5 BTC to have the same cost of acquisition as 0.5 BTC you originally had, while the remaining 0.5 BTC that was not returned should be a capital loss, same with ETH.

After those steps, the transactions will look as follows. Note how the worth of the "unrecovered" 0.5 BTC was manually set to $0.00 to realize full capital losses equal to the cost basis:

A complex distribution plan created by Celsius requires multiple calculations done even before making any transaction changes. We describe the details of the recovery plan in our blog post - Celsius Tax Write Offs & Bankruptcy: Complete Guide 2024? - so below we concentrate on calculations and documenting them in Koinly.

With partial reimbursements, there are two additional steps needed to be done before you adjust those transactions in Koinly:

The same as with Voyager - 1 BTC and 2 ETH held. We are assuming that assets received were the same as held and in the same proportions, for ease of calculation. But this may not be the case. To show how complex those calculations may be, see the sheet we created for this example:

According to our calculations, the initial reimbursements should be equal to 0.28 BTC and 0.51 ETH. Assuming they were returned to Coinbase, transaction history will look as below:

Based on our calculation, the 0.28 BTC corresponds to 0.73 BTC originally held.

How to document this? Refer to the Voyager section for alternative approaches - you could consider this a rebase, a trade, or a partial transfer.

Here, we assume it's a rebase, so the cost basis of 0.73 BTC is directly transferred as the cost of the acquired 0.28 BTC. Same goes with ETH, where 1.46 ETH of 2 ETH held on the platform is reimbursed in the form of 0.51 ETH.

To document the rebase:

Secondary reimbursements haven't happened yet, so they most likely cannot be written off yet.

The question remains, however, what should happen with the portion of assets still held on Celsius (not yet reimbursed). If you're using universal cost tracking, your funds (their cost basis) still stuck on Celsius may be used in other trades on other exchanges.

If you believe they shouldn't and the cost of these assets should "wait" for the secondary reimbursements then these should be "locked" - we will use NULLx placeholders for that. This is only necessary if you are using universal, not wallet-based, cost tracking.

We will use the USD claim value of each asset as the amount of NULL1 to trade for as a "lock" for shares in Ionic and NULL2 as a "lock" for illiquid assets distribution.

✋ The date of this "lock" matters. Your accountant may even decide that the lock should happen earlier than all the reimbursements - ie. on the date Celsius shut down, or when the trial ended

In our example, we are locking the remaining portions on the same day the initial reimbursement took place.

Once the shares are distributed, you can create a trade of all NULL1 for the USD value of the shares. Same with illiquid asset distribution.

The final set of transactions (for now) on the day the distributions started would look as below:

The options listed above may cause more confusion than give answers - that's due to the complexity of the issue and lack of official guidelines from Celsius or the IRS. With all the different possible treatments mentioned, this article doesn't touch on a completely different type of loss you may file - a Ponzi loss - that may be more beneficial to some, depending on their exact situation.

That is why it is highly recommended that you consult your case with a certified tax professional before making any adjustments to your transactions in Koinly. See our moderated list of crypto-aware tax accountants if you are looking for help or a second opinion.