Investors who purchased NFTs that are currently practically worthless may now get tax write-offs thanks to a new business called Unsellable NFT, which offers relief to those who would otherwise be unable to recover their losses.
Unsellable NFT helps people write off the losses on their taxes
Skyler Hallgren and Zach Miller, the two investors who established Unsellable NFT, bought non-fungible tokens for a small portion of their initial cost. The important thing is that they give sellers a receipt to use as proof of their losses for tax purposes.
“While harvesting our tax losses from stocks in December of 2021, we realized that our NFTs presented a problem. While every investment class has its losers, many of the NFTs we invested in were not only down big; they were now totally worthless… illiquid… unsellable,” Unsellable says on their website.
Unsellable NFT asserts that it will acquire any NFT that has been paid for more than one penny on the Ethereum blockchain. Unsellable buys the NFT for one cent in Ethereum, regardless of its rarity or quality, and then gives investors a receipt so they may deduct the difference between the purchase price and the sale price from their taxes.
The website advises investors to consult with a “crypto-competent CPA” to appropriately write off their NFT losses rather than offering tax advice itself. Investors have the option to execute multiple transactions on the platform and sell up to 500 NFTs at once. An NFT, however, cannot be sold back once it has been sold to Unsellable. They state on their website that:
“We can’t guarantee that you will be able to buy your NFT back after selling, because that would prevent your sale from counting as a tax deduction. We do this to ensure that your sale is legitimately a true ‘arm’s length transaction,’ and to avoid any conflict of interest that would come from providing future economic benefit to the seller.”
According to The Guardian, Unsellable has purchased 5,000 NFTs and expects to have 15,000 by the end of this month. Hallgren stated that:
“We realized there was a practical problem that was locking up a lot of resources and we could create a lot of value for people by offering to buy up their worthless NFTs and allow them to harvest the losses.”
“For some folks, the amount they paid for NFTs is quite high and were buying them for a penny so the write-off they can take is quite high.”
Unsellable NFT is debuting just as crypto and NFTs reach a historic low point, fueled in part by dwindling interest in the industry, rising suspicion of scams, and the collapse of cryptocurrency exchange FTX.
A year ago, Bitcoin was valued around one-fourth of what it is now. Investors who believed Bitcoin would be immune to inflation were shocked when the Federal Reserve’s interest rate increases had an impact on both it and NFTs. The “crypto winter” that has affected the value of assets in the sector has lasted for the majority of 2022.
Unsellable NFT appears to want to take advantage of the slump, but it’s unclear how or if they plan to make money. According to Hallgren, the NFTs are “likely to continue to be worthless.” On their website, Unsellable states that they want to produce “the ultimate artifact of the early days of web3.”
Only time will tell if this Unsellable NFT venture is going to pan out for the owners and the users of the service. If you enjoyed the article, why not check out some more, such as Stock images and missing tokens: Why Trump’s NFT collection crashed, or why are major companies spending big money on NFTs.
