Bridging between two blockchains (like Solana and Hyperliquid or Ethereum and Arbitrum etc...) is not specifically clarified by the IRS, so you can take multiple stances on how you want it to be taxed.
By default, Awaken makes bridging transactions taxable events. We'll walkthrough the two different approaches below.
Bridging as a taxable event
Out of the box, Awaken will attempt to match transactions for you that are bridging, and will treat it as a taxable event.
Example: if you transfer ETH from Ethereum to Arbitrum, Awaken will treat it as selling ETH on Ethereum (realizings gains/loss) and then receiving new ETH (with a reset cost basis) on Arbitrum.
Because of this, you'll notice gains/loss showing up on transactions in Awaken's website for bridging transactions (like the below).
Bridging as non-taxable
A lot of people in crypto believe that bridging between chains is not selling and re-acquiring an asset, but instead transferring the same asset (akin to a wallet transfer).
If you want to take this approach, you can do this on our "Settings" page under the "Advanced Tax Features" (see below image for details).
Example: let's say you bought 1 Solana at $50, and you wait until the price of SOL is $200 and bridge it to Hyperliquid. Under our standard treatment, this would realize a $150 gain and mint you SOL on the other side of the bridge. If you select to have bridging be non-taxable though, there will be no sale of Solana (no $150 gain) and your cost basis for SOL on Hyperliquid will be $50. So when you later sell the SOL on Hyperliquid, that is when the gain/loss will be realized.
These transactions won't have a gain or loss associated with them (besides the transaction fee as paying a transaction fee in crypto is a sale). So it will look something like this:
Manually marking transactions as bridging
If you have two transactions and you want to make sure they are marked as bridging (and Awaken did not automatically tag them), the below steps will help you.
Select both transactions by clicking the checkboxes on the left
Click the "Bridge" button on the widget in Awaken
This will link the transactions together, and then respect your settings from above (whether they were taxable or non-taxable).
Video walkthrough
Here is a little video walkthrough showing you how it works inside of Awaken, and how to adjust it if you'd like:
And that is it! As always, it is important to talk to a tax professional to understand the risks of treating bridging as non-taxable. And if you have any other non-tax related questions, you can email team@awaken.tax and we'd be happy to help.