Personally, now that maturity is not disbursed until the time of dissolve, if I leave it “automatically staked” my tax advisor/ attorney suggested that now with the new maturity modulation I do not have to report the maturity until the time it is disbursed. Then the moment I do receive the fully dissolved neuron and all of the maturity all I need to do is calculate the cost basis for how much I paid for the original ICP and then the cost basis for the maturity.
For example, if I have 700 icp staked and over 20 years it gathers about 2300 ICP (these are made up numbers for time sake). Then say I paid say $4 for all 700 icp then in 20 years the price rose to say $5 (for time sake not real prediction) I would report the increase as normal. And then I would report 2300 icp as a “reward” essentially saying I paid $0 for 2300 ICP at $5 per icp.
I would report the increase in capital gain on my already purchased icp that was sold at $5 ($700 gain). And the 2300 icp at 5 for a gain of $11,500 (again fake numbers). So, according to my tax consultant, the maturity modulation DFINITY pushed through actually “saved” people in the USA from having to report maturity until the day it is actually disbursed and minted. Then you report that cost basis.
Admittedly, on the surface, this looks like a questionable tax dodge. However, personally, I think this allowed USA investors to continue investing/ staking at their leisure, and still be able to hold the same principles of crypto (not being taxed on staked rewards/ until you sell)
Prior to the modulation, you would directly be given the ICP and it would go right into your stake you would have to do the math each time you added the rewards to your stake to tell the cost basis of what you received. This would mean all USA users including say data centers and node providers couldn’t merge their maturity safely. They would have to keep selling (at least a portion) to get an accurate cost basis (if they were using a lower-risk profile) or they would have to wait.
WITH the modulation adjustment and living in a highly regulated state. I am now able to merge automatically AND not report any gains until I fully dissolve my neuron. So, now, you can actually buy stake, merge automatically, and not report anything (unless you do sell of course) until you dissolve and have all rewards. I personally, will not be reporting anything until the moment of dissolve and sell. You could reasonably leave it going for a full 20 years and not have to report anything now.
I will say the one thing that might be nice for making reporting easier is an Avg. ICP price in the NNS or maybe if the Neuron could read the cost basis of the stake (at the time of staking) and then display the average cost or avg. ICP price for each neuron. This would allow multiple exchanges to send ICP and stake and still keep a more accurate Avg. price.
Right now, if you only purchase on a CEX like Coinbase for example, you do get an avg. share price yes, but then say someone uses Kucoin or Binance or a on chain DEX. The Avg. price won’t stay the same. It will display on the exchanges where you bought and then you calculate the avg price yourself, yes. however, I feel if they have an avg. price display feature on the neruon itself, then over time you won’t need to keep a heavily detailed account. It would just be done for you and then when you do sell, you can report the true cost basis and gains.
If over 20 years someone just gets sloppy or has user apathy they could have trouble trying to figure out the neuron’s cost basis when they do dissolve and sell. This could cause a serious headache for the community when several early adopters and long-time neuron holders go to sell all at once.
Overall, despite the new modulation being seen as a “sketchy tax dodge” I think it is going to open the door for stakers in heavily regulated areas. Making it a more inclusive environment. If anyone does live in a highly regulated state and still has to report their maturity I would love to hear why, at this point they are concerned with it. This would allow me to consider more options. However, I am now confident that I won’t be taxed and I wont need to even report any rewards until the point of sale and the tokens are truly minted and given to me.
I hope this feedback was helpful @Kyle_Langham might have been slightly off topic, however, I hope anyone newer in these areas looking to limit their risk profile reads it and it makes sense to them. So, their anxiety over reporting may decrease over time.
-Thanks
