Thanks for the detail below but i think i am still confused as to how to exactly do this
And then create a "new exchange" as original poster stated - such as "anchor" and "Celsius"
i am not even sure where are the options to select "Expense". "Non Taxable". as shown in the FAQ
Hello. I'm looking for help understanding how to properly code a loan (to myself using collateral) such that the cost basis is coming up correctly in the US-based tax report. I thought I was doing it correctly, but after running the tax report...it's basically giving me 0 starting cost basis on proceeds I used the loan for, which obviously is significantly increasing my taxable income more than it should.
I can't find an FAQ article on this (apologies if there is one), so hopefully someone can help.
What I did was first create a new "exchange" for the place where the loan originates (we'll call this Anchor). Say the loan was $1000.
Transfer $1000 from Anchor to Wallet. This would create a balance of:
-$1000 in Anchor (negative $1000) and a positive $1000 balance in Wallet. As the negative cancels out the positive, this creates a net of $0. To me, this works because I want the liability (the loan amount) to be counter to my assets. Assets - Liabilities = Owner's Equity.
Then, when interest accrues on the loan, I debit Anchor with Interest, increasing the negative (amount I owe back).
Finally, when I want to pay the loan + accumulated interest back, I do the reverse transfer back to Anchor from my wallet, to cancel out the loan.
This does what I want it to in Cointracking but my tax reports are completely screwed up because of it.
How do I code this properly so I don't screw up my tax basis on the "income" I get from the loan (which isn't actually income)?
Thank you in advance.
Edit: Just found this post...apparently I was/am missing the non-taxable income and expense lines. Hopefully if I add these things will be sorted correctly.
https://cointracking.freshdesk.com/en/support/solutions/articles/29000033408-loans-and-their-repaymentsEdit 2: per the article...since I'm entering in numbers as positive (from the loan), this is going to count the loan amount as an asset and not a liability (meaning my net worth will be incorrect). Is there any way for me to "flip the signs" so that the loan amount is counter to the assets so my net worth is correct?