A loan that must be repaid, with any required fee, within the same blockchain transaction or the transaction reverses.
The loan itself is not income or a sale. What matters is what happens inside the transaction: arbitrage, liquidation, or collateral swaps executed with the borrowed funds are disposals, and the net profit is gain. The fee is a cost of the trade.
The borrowing is not. The trades executed with it are, and the profit is taxable in the year of the transaction.
Source: IRC 1001; IRS Notice 2014-21
Last reviewed September 18, 2026. Tax rules change; confirm current law before acting.
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