Jonathan Mann, a non-fungible token (NFT) artist, has spun his taxing experience with cryptocurrency into a song. This follows a $3 million loss he suffered due to a market crash.
What Happened: Mann, who is recognized for his “Song A Day” project, recently released a track that narrates his financial misfortune. In a post on X, Mann shared that he made a whopping $3 million by selling his entire song catalog as NFTs. However, he lost it all during the collapse of the Terra ecosystem.
According to his post, on Jan. 1, 2022, Mann embarked on his crypto journey, selling 3,700 songs at $800 each. This earned him approximately $3 million in Ether (ETH). However, the value of ETH plummeted, leaving Mann and his wife uncertain about the right time to sell or the amount to sell. Adding to their woes, the US Internal Revenue Service (IRS) came knocking.
Mann clarified that the earnings from his NFT sales are taxed as income, based on the ETH value at the time of receipt. This holds true even if the crypto asset’s value crashes later.
Also Read: Bitcoin Thief Who Stole Nearly $5 Million And Was Photographed In Cash-Filled Bathtub Gets 4 Years In Prison
Consequently, despite the decrease in their $3 million worth of ETH, their tax bill remained unchanged.
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In an attempt to avoid selling their crypto at a loss, Mann took out a loan through the Aave lending protocol, using some of the ETH as collateral. However, the market crash triggered a series of liquidations across the ecosystem, which included Mann’s loan, erasing 300 ETH.
After months of collaboration with his accountant, Mann found out that they owed $1,095,171.79 in taxes. To pay off the IRS bill, Mann sold a rare Autoglyph NFT for $1.1 million. Despite this financial blow, Mann continues his daily songwriting and selling them as NFTs.
Why It Matters: Mann’s experience underscores the volatility of the crypto market and the potential tax implications of trading in digital assets.
It also highlights the risks associated with crypto-backed loans, particularly during market downturns.
Despite his financial setback, Mann’s continued commitment to his craft and the NFT space demonstrates the resilience and adaptability of artists in the face of adversity.
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