After earning $3 million from NFT sales, Jonathan Mann watched it evaporate in a crash, and he has now turned his experience into a song about cryptocurrency taxes, poignantly honest.
The non-fungible token (NFT) artist Jonathan Mann, the musician behind the “Song A Day” project, has turned his tax ordeal with cryptocurrencies into a cautionary musical tale.
In a new song shared on X, Mann recounted how he made $3 million selling his entire catalog as NFTs, only to see it disappear when the market collapsed during the Terra ecosystem crash.
“This is the story of how I made three million dollars and lost it,” Mann sings. “And how I owed the IRS more money than I made in the previous 10 years.”
Musician owed $1.1 million in taxes from NFT sales.
Mann said it all began on January 1, 2022, when he sold 3,700 songs for $800 each, earning about $3 million, all in $ETH .
Excited but unprepared, Mann and his wife decided to hold onto the cryptocurrencies, hoping that ETH prices would rise. “We didn’t have a plan,” Mann admitted in the song.
Things changed when the value of ETH decreased in January 2022, and the couple didn’t know how much to sell or when. To make matters worse, the U.S. Internal Revenue Service (IRS) came knocking at their door.
As Mann explained in the song, his earnings from selling NFTs are taxed as income. This means that the tax is based on the value of ETH when it was received, regardless of whether the crypto asset later loses value. Because of this, even though his $3 million in ETH decreased in price, his tax bill remained the same.
To avoid selling their cryptocurrencies at a loss, Mann said they took out a loan through the Aave lending protocol, using part of the ETH as collateral. But disaster struck when the market began to collapse, driven by the Terra collapse.
The incident triggered a cascade of liquidations in the ecosystem, including Mann's loan. In an instant, 300 ETH disappeared. “A lifetime of work erased in a moment,” he lamented.
Desperate to find a way out, Mann spent months reviewing transactions with his accountant to determine how much they owed, discovering it was $1,095,171.79.
