NFT artist relives ‘crypto tax nightmare’ in new track

Non-fungible token (NFT) artist Jonathan Mann, the musician behind the “Tune A Day” challenge, has turned his crypto tax ordeal right into a cautionary musical story. 

In a brand new observe shared on X, Mann recounted how he made $3 million promoting his complete again catalog as NFTs, solely to see it vanish because the market crashed throughout the Terra ecosystem collapse.

“That is the story of how I made three million {dollars} and misplaced it,” Mann sings. “And the way I owed the IRS extra money than I made in 10 earlier years.” 

Musician owed $1.1 million in taxes on NFT gross sales

Mann stated all of it started on Jan. 1, 2022, when he bought 3,700 songs at $800 every, netting him roughly $3 million — all in Ether (ETH). 

Excited however unprepared, Mann and his spouse determined to carry onto the crypto, hoping ETH costs would enhance. “We didn’t have a plan,” Mann admitted within the track. 

Issues took a flip when ETH’s worth declined in January 2022, and the couple was uncertain about how a lot to promote or when. So as to add to their woes, the US Inner Income Service (IRS) got here knocking at their door. 

As Mann defined within the track, his earnings from promoting NFTs are taxed as revenue. Because of this tax is predicated on the worth of the ETH when acquired, no matter whether or not the crypto asset later crashes in worth. Due to this, though their $3 million in ETH went down in worth, their tax invoice remained the identical.  

To keep away from promoting their crypto at a loss, Mann stated they took out a mortgage by the lending protocol Aave, utilizing a few of the ETH as collateral. However catastrophe struck because the market began to crash, pushed by the Terra collapse. 

The incident triggered a cascade of liquidations throughout the ecosystem, which included Mann’s mortgage. In a flash, 300 ETH disappeared. “A lifetime of labor erased in a second,” he lamented. 

Scrambling to discover a means out, Mann spent months combing by transactions along with his accountant to find out how a lot they owed — they discovered it was $1,095,171.79. 

Associated: NFTs can be securities, but SEC Wells notice to OpenSea ‘not productive’ — Lawyer

Uncommon Autoglyph NFT saves the day

With the specter of potential liens on their residence and dangers of shedding his spouse’s retirement account, Mann turned to 1 final possibility: promoting a uncommon Autoglyph NFT he bought again in crypto’s early days. 

The musician stated he tried to promote the NFT by X however didn’t get a superb reception. Nonetheless, he discovered a dealer with a consumer who provided $1.1 million for the NFT. Mann stated that he accepted the deal to pay for the IRS taxes. 

Due to the losses incurred within the Aave mortgage, Mann didn’t owe capital beneficial properties taxes on the Autoglyph sale. “It felt so bittersweet to be achieved,” he sings on the finish.

Regardless of the ordeal, Mann continues writing each day songs and promoting them as NFTs, nonetheless hopeful he’ll someday earn one other $3 million.