Hey guys, I’m curious about the tax implications of “burning” NFTs. Last year, I accumulated from different collections of profile pictures on the Ethereum blockchain. All of my transactions were through Coinbase or their Wallet, and I subscribe to CoinTracker to keep all this organized.
Now it’s after the New Year and I wanted to organize my junk drawer. I heard about the possibility of “burning NFTs” through Opensea’s Burn-Wallets. So I sorted through my favorites and sent the extras to 0x000000000000000000000000000000000000dead. This is where people typically ditch unwanted NFTs. I had to pay (ETH gas) worth roughly $50 to transfer my NFTs to the dead address.
Now I do not own them. They are in another wallet where I do not know the seed phrase. I know it’s dangerous to assume, but I did assume that this would be considered selling these NFTs. My motivation was to take capital losses in the short term and carry them through 2023. Did that happen? Does the IRS consider this action selling? Also - how should I report this to the IRS in 2023? Will the tax reports through Coinbase and CoinTracker be sufficient to share or is there more that I need to do? Really excited to hear your thoughts here. Cheers.