Did you invest in a Republic offering in the last year or before? Curious as to how your investment may impact your taxes? While Republic cannot give you tax advice, we will provide you with some general information and resources. We hope you find these guidelines helpful.
Tax liability is largely determined by what type of entity you invested in:
The first step is to determine whether you have invested in a C corporation or an LLC. You can find this information on each company's Form C, which is attached to the deal page offering.
What if I invested in a C-corporation?
In general, U.S. investors investing in C-corporations on Republic will only need to report income when they realize a gain or loss for tax purposes and no K-1 is due to you. In other words,
- When obtaining liquidity such as through selling a position,
- When earning interest, or
- When receiving and then selling a digital asset (token).
In these cases, the company you invested in (or its 3rd party transfer agent) will provide you with the necessary documents. Republic won’t be sending any tax forms to you.
What if I invested in an LLC?
If you invested in an LLC and you currently hold a Crowd SAFE, Token DPA or other security, no K-1 is due to you. If your Crowd SAFE has been converted, you should reach out to the issuing company for a K-1. If your Token DPA was repaid in Tokens, you should consult with your own counsel to determine if you have any tax liabilities.
What if the company I invested in went bankrupt?
The company or its trustee is responsible for providing you tax documents to reflect the loss. Republic may assist these companies in distributing tax documents, but cannot create them or secure them until there is court approval of the winding up of the business.
What if I sold the security I acquired on Republic in a private transaction and realized a gain?
Once you sell a capital asset, such as Crowd SAFE, and realize a gain, the capital gain (i.e., [sales price] - [basis]) is taxable.
What if I sold the security I acquired on Republic in a private transaction and realized a loss?
Once you sell a capital asset, such as Crowd SAFE or a Token DPA, at a loss, the capital loss ([basis] - [sales price]) qualifies as a capital loss and can be used to offset capital gains (and in some cases, ordinary income).
For further information, you may consult the following resources:
- Crowd SAFE holders have no right to the income of the company while they hold the Crowd SAFE. There is no K-1 or tax documentation due to Crowd SAFE holders unless and until they are converted to another instrument.
- Information on tax relief for individual investors in seed and growth development stages.
- This article on accounting for crypto-assets.
- This article for information on tax implications of debt loans; this article and this one for information on tax information pertaining to capital gains and losses.
- This article on taxes and loans.
- This article on accounting for crypto-assets.