A system that supplies external data, such as market prices, to smart contracts that cannot directly retrieve it themselves.
Oracles matter for tax because they set the prices protocols use to liquidate collateral and value positions. When an oracle triggers a liquidation, the sale price it used is the proceeds you report, even if the market price elsewhere differed.
The price at which the protocol actually disposed of your collateral, from the transaction record. It is the real proceeds of a real disposal.
Source: IRC 1001; IRS Notice 2014-21
Last reviewed September 18, 2026. Tax rules change; confirm current law before acting.
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