Tax Implications of the Celsius Platform and Terra Protocol Failures

So, what is a person who has crypto locked inside Celsius to do? The short answer is to wait and see. Once bankruptcy proceedings are finalized, some or all of the funds owed by Celsius to its customers may be paid back. But until we know for certain how much, if any, will be returned to customers there is no allowable tax loss. The entire tax code revolves around realization events – the consummation of transactions that have an economic effect – which trigger recognition of income, deductions, gains and losses. In this situation, there has been no realization event yet. In short, nothing has happened from a tax perspective.