Bitcoin: Irish Tax on Mt.Gox Rehabilitation Payment

The Mt.Gox bitcoin exchange went bust in 2014, with lots of the users' bitcoin stolen or lost. There's been a lengthy recovery process in Japan since then, and the rehabilitation trustee has begun distributing the recovered funds to creditors recently.

There's not a lot of information online about how to handle this from a Revenue reporting point of view in Ireland.

For creditors who chose cash repayment, around 20% of their bitcoin that was held on the exchange when it went bust in Feb 2014 is being repaid, after being sold for USD. According to the claims portal, the trustee has now sold this portion. The exact date of sale (over the last few months) is not provided, but the cost at time of sale (in USD) is given.

Starting to think about how to handle this with Revenue.
Assumption right now is that it's CGT. Some complications:

- dates of acquisition are not available to me now (poor bookkeeping yes in retrospect, but at the time there were no tax requirements on crypto sales in 2013. Revenue issued guidance on crypto sales for the first time in 2018)
- exact date of sale has not been provided
- as most of the bitcoin was stolen, can this be reported as a loss to offset the gains?

Is anyone else here currently looking into the correct way to pay tax on this, or is there anything else special in this Mt. Gox case I should know about before paying CGT?

There was also a small payment made to creditors in 2024 which should be declared, but this was less obviously CGT as it was essentially a flat amount for every creditor and it's not easily connectable with any sale of crypto.

shrinn said:

as most of the bitcoin was stolen, can this be reported as a loss to offset the gains?

Click to expand...

No. You bought bitcoin c2013. You receive the proceeds of the sale of recovered bitcoin in 2025. The CGT calculation is based on the proceeds and the purchase cost

shrinn said:

There was also a small payment made to creditors in 2024 which should be declared,

Click to expand...

This wasn't paid to all creditors

I am in the exact same boat. I put in €4k in 2013, and recently recieved ~€20k as a transfer. I have some random emails but nothing concrete like a receipt, however I can probably get the bank statement showing the original transfer. One further complication is that I was living abroad for several years in 2013 onwards but am in Ireland now.

I think much depends on exactly how the Mt Gox insolvency unfolded, and how the current current payment is characterised.

Suppose it went like this:

You had 20 bitcoin in the exchange. When the dust settled the trustee said "You still have 15 bitcoin. Plus, we'll do what we can to recover something in respect of the 5 bitcoin that you have lost. We'll let you know."

The position there, obviously, is that, if and when you dispose of any of your 15 remaning bitcoin, CGT is calculated in the usual way. If you bought bitcoin at different times, the usual FIFO rules apply to determine which of them you are disposing of, and so what the acquisition cost is.

You haven't disposed of the 5 bitcoin until the trustee comes back and says (a) sorry, that's it, not a shilling, or (b) we've recovered X euro for you; here you go; but that's all; there'll be nothing more. If the message is (a), then you can treat this as a disposal of the 5 bitcoin for nil proceeds, and calculate your capital loss in the usual way. If it's (b) and they give you some money, then it's a disposal for whatever they gave you, and you calculate your loss or gain in the usual way.

I'm not sure what the position is if you get an interim payment, followed by a final payment (which is what seems to have happened here). You have disposed of the 5 bitcoin for disposal proceeds equal to the sum of the two payments, but what I'm uncertain about is how you account for this. Is the first payment treated as a part-disposal which should be reported in the year that payment is received, or do you wait until the trustee makes a final payment, and only then account for a gain/loss? I suspect the former but I don't know.

shrinn said:

- dates of acquisition are not available to me now (poor bookkeeping yes in retrospect, but at the time there were no tax requirements on crypto sales in 2013. Revenue issued guidance on crypto sales for the first time in 2018)

Click to expand...

On this point, the Revenue will not be hugely sympathetic. There have never been any special rules in the legislation for crypto; why would there be? Revenue may not have issued specific guidance until 2018 but at any time before that, the view that crypto acquisitions and disposals would not have attracted the usual CGT treatment would have been absurdly wishful thinking. There was no good reason not to keep proper records.

shrinn said:

- exact date of sale has not been provided
- as most of the bitcoin was stolen, can this be reported as a loss to offset the gains?

Click to expand...

Yes, basically. And I think the date of disposal as far as you are concerned is that date on which you got whatever you got, and the Trustee confirmed that you would see nothing more. The date on which the trustee sold whatever assets he had been able to get his hands on is neither here nor there. Think of it this way; when the exchange was put into liquidation/receivership/insolvency/bankruptcy/whatever your right to 5 crypto was magically turned into a claim in the insolvency. The claim is an asset, treated as having been acquired on that date, and at the cost, taht you acquired the 5 crypto, treated as being disposed of when you get your payment out of the insolvency.