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Uniswap Airdrop and Taxes

UNISWAP Airdrop Taxes

This literal unicorn has amazed the DeFi-community with the airdrop of its Uniswap Token. But how exactly is the Uniswap Airdrop taxed? And how do I import Uniswap into the Cryptotax tool?

Uniswap has conquered the hearts of the DeFi community with the Airdrop of its Uniswap token. Everyone who traded on Uniswap until September 1, 2020, was rewarded with at least 400 Uniswap tokens. The 400 UNI tokens were already worth more than $2,000 on September 18th, so the enthusiasm of the community is understandable. However, many of the happy UNI holders rightly suspect that sooner or later they will have to share their UNI cake with the IRS. So how is Uniswap Airdrop taxed? When are the taxes due and how much will they ultimately be?
Cryptotax users do not have to worry about this, because the Cryptotax application automatically tracks the income from the Airdrop and the tax consequences are taken into account according to the certified tax framework. In the following, we outline how to import Uniswap into Cryptotax and the tax implications of the Uniswap Airdrop and other activities on the Uniswap platform.

How do I Import Uniswap?

The Ethereum API Import of Cryptotax automatically tracks all token movements on an imported ETH address. Since you interact with Uniswap via your own ETH wallet, all Uniswap transactions are also considered when importing ETH wallets. If you have not yet imported your Ethereum wallet, you can do so by entering the ETH address in the Ethereum API Import and will see all transactions in the Cryptotax dashboard within a short time.
To ensure full tax compliance, you only need to mark the inflow of the UNI token as an Airdrop. Cryptotax takes care of the tax treatment and you can see the result immediately by generating a tax report.

Tax Treatment of the Uniswap Airdrop

According to the IRS the income from airdrops is to be taxed as ordinary income. The basis for the valuation is the fair market value on the day the airdrop was received. However, this might lead to a very unfavorable tax situation for the Uniswap holders. If the Uniswap price drops, the tax due is based on the higher UNI price it held on the day of the Airdrop, even though the current value of the Uniswap holdings could be much less. Even worse, the taxes due from the Airdrop may exceed the value of the UNI holdings, which could lead to tax liquidity issues. This is why it is particularly important to track the tax implications when trading the UNI token to mitigate the risk of an unfavorable tax burden.

Tax Treatment of Trading and Liquidity Pools on Uniswap

Trading or swapping on Uniswap is to be treated for tax purposes in the same way as trading on centralized exchanges. You can find detailed information about the tax treatment of trading with cryptocurrencies in this article. Please be careful with your trading, as even crypto to crypto (or token to token) transactions are taxable. As more and more regulations are coming into force it is getting more and more important to always keep an eye on your tax liquidity. Cryptotax offers a great solution to anyone who wants to spend less time worrying about taxes and more time on trading crypto! Head over to Cryptotax to find out more about our Cryptotax Tool.

But how exactly are Liquidity Pools and LP Tokens on Uniswap taxed? We will address this topic in a separate DeFi article, so stay tuned!

Uniswap Token Data

Token Contract Address:
Cryptotax Ticker: UNI5 – easily recognized by the unicorn icon

Disclaimer: The information provided in this blog post is for general information purposes only. The information was completed to the best of our knowledge and does not claim either correctness or accuracy. For detailed information on crypto regulations, we recommend contacting a certified legal advisor in the respective country. If any questions occur, feel free to contact us on our social media channels.