Won, lost, or redeemed: taxing resolved prediction markets

The most common misconception in prediction-market taxes: that nothing happens until you withdraw. In reality, when a market resolves and your shares convert to proceeds, that conversion is a disposal — same as selling. You realized the gain (or loss) the moment resolution made the shares worth $1.00 or $0.00, whether or not you ever clicked redeem.

If your side won, each share redeems for exactly $1.00. Buy 500 shares at $0.62 and win: proceeds are $500 against a $310 basis — a $190 gain. If you held under a year (almost always, on Polymarket), it's short-term.

A won position still sitting unredeemed is economically a realized gain at $1.00. Bitfork Tax treats redeemable winners-at-$1.00 as realized so the report matches economic reality — you can redeem any time, the value won't change.

If your side lost, the shares are worth $0.00 — and that loss is a deduction, but only if it's tracked and reported. The disposal realizes zero proceeds against your full basis: buy 200 shares at $0.45, lose, and you have a $90 capital loss to report.

This is where manual record-keeping usually fails. Nobody saves records of their losing bets — they're not in any exchange export the way trades are — yet they're often thousands of dollars of deductible losses in a busy year. The tax engine reads resolved-against-you positions from the public data and realizes them as losses automatically.

Merging a complementary Yes/No pair returns $1.00 per pair — a disposal of both shares at once, with each side's own basis. NegRisk conversions (when an event's answer set changes) move basis between pools; Bitfork Tax counts them and discloses the simplification rather than guessing.