Realize Crypto Gains, Without Triggering Taxable Events

Disclaimer: In most tax jurisdictions, selling crypto assets for another asset such as cash (fiat currencies) or a different crypto, is considered a taxable event. If the seller had unrealized-gains on the crypto that was sold, it is likely that the seller will be subject to capital gains tax. On the other hand, borrowing crypto is not considered to be a taxable event, just like taking a loan out from a bank is not. At a technical level, the user of Tax Heaven is submitting collateral to the protocol and taking out a crypto loan. The loan has to be paid back for the user to retrieve their collateral. Tax Heaven is not providing any tax or financial advice and the content on this website should not be considered as such. Consult your tax, financial or legal advisor before using Tax Heaven.

TVL

Selling crypto is a taxable-event, borrowing is not

Lend your ETH or favorite ERC20 token and borrow the same token.
Any ERC20 token is accepted!

All loans are interest free and the collateral factor always stays constant.

Take out 99.5% of the value you put up as collateral.

Only 0.5% fee to use the Tax Heaven protocol!

Do whatever you want with the borrowed tokens

Do you want to trade ETH for Bitcoin but don’t want to trigger a taxable-event? Then use the Tax Heaven protocol to borrow ETH against your ETH collateral. The borrowed ETH can be used to buy Bitcoin!

So if the collateral factor always stays constant, and the loans are interest free, does one have to pay back the loan??? (Ask no further!)

Stake the Tax token and receive dividends in various tokens

“TAX” is Tax Heaven’s native token.
The 0.5% fee that is charged when using the Tax Heaven protocol is distributed to people staking the TAX token.

The TAX token is distributed to depositors of “whitelisted tokens”.

The amount of TAX tokens that the depositors receive is based on the value of the token (determined using Chainlink price feeds) that is being deposited to the protocol.

Terms of Loan

  • Loans are open-ended with no fixed repayment schedules.
  • Loans are subject to an origination fee equal to 0.5% of the loan balance. Loan origination fee is fully earned and will be deducted from the loan proceeds at the inception of the loan.
  • The current interest rate is 0% per annum on the outstanding principal amount of the loan.
  • The loan collateral factor is set at 100%. Exceeding the collateral factor will result in netting of the collateral and loan at the protocol level.
  • For valuable consideration, borrower pledges, assigns, transfers and delivers a continuing and unconditional security interest in all of the borrower’s present and future rights, title and interest in the loan collateral as security for the payment and performance of the loan. The security interest in the collateral shall remain in effect for so long as any loans remain outstanding.
  • Borrower agrees that if the loan amount and any accrued interest thereon is not repaid in full, the loan collateral may be liquidated in whole or in part.

Accounting

Accounting Entries by the Borrower (Illustrative Example)

When depositing 10 ETH collateral to the protocol and paying 0.05 ETH (0.5%) in fees

Debit Account Debit Amount Credit Account Credit Amount
Deposit (Asset) 9.95 ETH ETH (Asset) 10 ETH
Fee (Expense) 0.05 ETH

There should also be a journal entry to account for the TAX token that is distributed to the user when assets are deposited to the protocol. This should be a taxable event in most jurisdictions.

When borrowing 9.95 ETH from the protocol and paying 0.05 ETH in fees

Debit Account Debit Amount Credit Account Credit Amount
ETH (Asset) 9.95 ETH Loan (Liability) 9.95 ETH

When selling the borrowed 9.95 ETH for 0.3 BTC

Debit Account Debit Amount Credit Account Credit Amount
BTC (Asset) 0.3 BTC ETH (Asset) 9.95 ETH

Note: If the price of ETH in fiat terms increases between the time the loan is taken out and when ETH is sold for BTC, this could lead to a taxable event resulting in capital gain taxes.

When repaying the borrowed 9.95 ETH and retrieving collateral

Debit Account Debit Amount Credit Account Credit Amount
Loan (Liability) 9.95 ETH ETH (Asset) 9.95 ETH
ETH (Asset) 9.95 ETH Deposit (Asset) 9.95 ETH
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