If losses exceed gains, investors can deduct up to $3,000 against their taxable income. Losses beyond $3,000 can be carried forward every year until death to offset gains in future years.
But that’s not the case for customers at FTX or any other crypto exchange that blows up. The tax code specifies that if you want to take a capital loss, you must sell or exchange that asset. Losing access to it because the exchange shuts down is different and would most likely be insufficient in court, said Matt Metras, an accountant in Rochester, New York, who represents taxpayers before the IRS.
Another provision in the code allows for a deduction if a security is worthless. No luck there, though — the IRS has said digital currency is considered property, not a security, like a stock. Plus, the asset has to be worthless, as…
