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Opinion of a Tax Accountant on Thor borrowing --------------------------------------------------- (this is from a big law tax attorney, who requests anonymity. Do not use this as "fred advice". Do your own research) "I think the Thorchain question you raise on a loan is important, and there are two ways of looking at this." "Generally, the IRS will ask if there is an intent to pay to see if there is a bona fide loan (as opposed to, e.g., a cash advance that should be taxed). They look at various things and nothing is determinative. You might argue the lack of interest and a term is key, and they are in certain cases — think of a 0% loan with no term and no collateral. " "That’s a cash advance and should be taxed. But the Thorchain stuff is different — not only do we have collateral, this is 2x collateral! I am definitely coming back for that. I absolutely intend to pay. Then another flavor of that comes from the law on recourse loans for stock, where the IRS wants to know is a note to purchase stock should be respected (for long term capital gains) or if it is an option in disguise (and should be taxed on exercise as more punitive compensation tax)." "The IRS wants to know: do I have ‘substantial risk’? If the only collateral is the stock itself, that’s an option b/c when it tanks, I walk away, i.e., no substantial risk. On the other hand, if I make the note 50% recourse, meaning if the stock tanks, you can sue me personally for 50% based on the value of my house, etc., now I have substantial risk and it’s not an option but a bona fide loan." "In this area, a lot of people have said, okay, I don’t want to put my house up here but I’ll secure the note w/ additional shares. The IRS has never ruled on how much stock you need to put in to have substantial risk, but to me, putting up 2x (like with the Thorchain example) is sufficient, and I’ve seen multiple big law firms and major accounting firms go with this approach." "Thanks for highlighting this important issue, and to be clear, people should do their own research. But I can tell you I’m happily using their product. The risks are real, but to me, the risk is on Rune, not the tax side of the house."