A new service is providing tax write-offs for people who bought non-fungible tokens (NFTs) that are now essentially worthless, providing relief to investors who would have otherwise been unable to recoup their losses.
Unsellable, a new company started by investors and entrepreneurs Skyler Hallgren and Zach Miller, buys NFTs for a fraction of the original price. The key is that they provide sellers with a receipt to prove 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's website says.
Unsellable claims that it will buy any NFT purchased on the Ethereum blockchain for more than one cent. Unsellable purchases the NFT, regardless of the quality or rarity, for one cent in Ethereum, then provides investors with a receipt, which allows them to write off the difference between the purchase price and the sale price on their taxes.
The site does not provide tax advice, but recommends investors work with a “crypto-competent CPA” to properly write off their NFT losses. Investors can sell up to 500 NFTs in a single transaction and can complete multiple transactions on the platform. However, once an NFT is sold to Unsellable, it may not sell it back.
“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,” the website says.
The Guardian reports that Unsellable has acquired 5,000 NFTs and anticipates it will have 15,000 by the end of this month.
"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,” Hallgren told the Guardian.
“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.”
Hallgren and Miller previously co-founded and then sold an emergency preparedness kit company.
Unsellable is launching as crypto and NFTs enter a historic low point, driven in part by waning interest in the space, growing skepticism of scams, and the implosion of cryptocurrency exchange FTX.
Bitcoin is worth roughly a fourth of what it was a year ago. Both it and NFTs were affected by the Federal Reserve’s interest rate hikes, shocking investors who thought Bitcoin would be resistant to inflation. The downturn of assets in the space has been called a “crypto winter” and has carried on for the better part of 2022.
Unsellable seems to want to capitalize on the downturn, though it's not clear how or if they intend to turn a profit. Hallgren told the Guardian they expect the NFTs are “likely to continue to be worthless." Unsellable's website says they're hoping to create "the ultimate artifact of the early days of web3."
Twitter users are skeptical about the business venture.
“So basically money laundering, and Ponzi,” one user wrote.
“Methinks the higher ups at @IRSnews might pass this on to somebody,” another said. “Me also thinks that these people need to seek legal counsel.”
Unsellable did not respond to a request for comment sent Thursday afternoon.
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