Scenario: I have 100 of altcoins on Bl0ckFi. Every month, Bl0ckFi credits 1 additional altcoin in the form of interest. After a year I have 112 altcoins. Then the tax season comes. I pay dollars to IRS because I earned those 12 altcoins. Let’s say I paid $5 to IRS.
Then surprise surprise, this altcoin goes to ZERO (and 99% of them probably will). Then, I can write off the original 100 altcoins I purchased as capital loss, however, I CANNOT write off the 12 altcoins as capital loss, since I did NOT purchase them. Instead, they were “earned” as interest. Will the IRS reimburse the $5 I paid them?