How is DeFi income from yield farming and liquidity pools taxed for my foreign-owned LLC?
My LLC provides liquidity to Uniswap and Aave pools and earns yield. I also do some yield farming on Curve Finance. The income comes in the form of various tokens — LP fees, governance token rewards, etc.
How does the IRS treat this income? Is providing liquidity to a DeFi protocol a taxable event? What about impermanent loss — can I deduct that? And since this is all on-chain with no centralized broker, does anyone even report this to the IRS?
I'm based in the UK and own the LLC through a disregarded entity structure.
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