Loans and their repayments

Arman Azardar

Modified on: Sat, 16 Nov, 2024 at 8:15 AM

In this article we are going to explain how to enter loan and repayment transactions in CoinTracking.

The following examples cover all coins received through staking, lending, or other DeFi (Decentralized Finance) activities. Examples include various platforms like for example Compound Finance, DharmaLever, Celsius, BlockFi, or Nexo.

There are two possibilities to enter a loan and its repayment into CoinTracking, depending on how you and your country's tax laws see the ownership during the loan:

1) You loaning to others

2) You receiving a loan

1) You loaning to others

There are two different options loaning to others:

a) You remain the owner of the coins which you loan

b) You don't remain the owner of the coins which you loan

a) You remain the owner of the coins which you loan

If you remain the owner of the coins, you can enter a loan as a transfer to the loan place or person: withdrawal from your account, deposit to the other address, entering the name of it into the exchange field. This allows you to keep the cost base and holding period of your loaned coins.

When the loan is repaid, enter a transfer back. Loan interests should always be entered as income.

For this method your coins will stay legally yours, will remain in the FIFO sequence of your purchase pool and thus retain their original cost base.

b) You don't remain the owner of the coins which you loan

If you treat the loan as not owning the coins anymore, please enter the loaning out as Spend.

This will trigger a capital gains calculation for the difference in value between the purchase of the coin and the spend and the coins will be taken out of your purchase pool. When you get the repayment, enter it as Income.

The repaid coins will have a new cost base from the day you received them back and appear in your income report.

2) You receiving a loan

To initiate the process, select "Send Collateral".

When you receive a loan from the platform, ensure to document this transaction as "Receive Loan," clearly marking the acquisition of funds. If at any point you decide to repay the borrowed amount, you should select "Repay Loan" to reflect this action within the system.

In scenarios where your loan balance exceeds the critical margin and enters liquidation, the appropriate response is to choose "Liquidation”. Finally, don't overlook recording the fees as "Borrowing Fee," ensuring all financial activities related to the loan are meticulously tracked and accounted for.

Example: A loan of USDT with ETH collateral

1) Receiving the loan:

a) Send the collateral for the loan