Administrative, Procedural, and Miscellaneous

Part III

Administrative, Procedural, and Miscellaneous

26 CFR 1.1012: GUIDANCE FOR TAXPAYERS TO ALLOCATE BASIS IN DIGITAL

ASSETS TO WALLETS OR ACCOUNTS AS OF JANUARY 1, 2025

(Also: Part I, §§ 1012, 6045, 1.1012-1, 1.6045-1)

Rev. Proc. 2024-28

SECTION 1. PURPOSE

This revenue procedure provides a safe harbor under § 1012(c)(1) of the Internal

Revenue Code (Code) 1 on which taxpayers may rely to allocate unused basis of digital

assets to digital assets held within each wallet or account of the taxpayer as of January

1, 2025.

SECTION 2. BACKGROUND

On October 9, 2019, the Internal Revenue Service (IRS) posted Virtual Currency

FAQs (“FAQs”) on https://www.irs.gov 2 explaining how existing tax principles apply to

virtual currency, including cryptocurrency, held by taxpayers as capital assets. FAQs 39-

Unless otherwise specified, all “section” or “§” references are to sections of the Internal Revenue Code

or the Income Tax Regulations (26 CFR part 1).

2

Since October 9, 2019, the FAQs have been revised and renumbered. References to FAQ numbers in

this revenue procedure are to the numbering in the version of the FAQs as of June 6, 2024.

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40 explain that a taxpayer may choose the units of virtual currency deemed to be sold,

exchanged, or otherwise disposed of if the taxpayer can specifically identify which unit

or units are involved in the transaction and is able to substantiate the basis of those

units either by documenting the specific unit’s unique identifier or by records of the units

held within a single account, wallet, or address showing:

(1) the date and time each unit was acquired;

(2) the taxpayer’s basis and the fair market value of each unit at the time it was

acquired;

(3) the date and time each unit was sold, exchanged, or otherwise disposed of;

and

(4) the fair market value of each unit when it was sold, exchanged, or disposed

of, and the amount of money or the value of property received for each unit.

FAQ 41 further explains that if a taxpayer does not identify specific units of virtual

currency as the units sold, exchanged, or otherwise disposed of, then the units are

deemed to have been sold in chronological order beginning with the earliest unit the

taxpayer purchased or acquired; that is, on a first in, first out (FIFO) basis.

Section 1012(c)(1) requires that in the case of the sale, exchange, or other

disposition of a specified security on or after the applicable date for that security, the

conventions prescribed by the regulations must be applied on an account-by-account

basis. Section 1012(c)(3) defines, for purposes of this section, the terms “specified

security” and “applicable date” by incorporating the definitions for these terms in

section 6045(g)(3). Section 80603 of the Infrastructure Investment and Jobs Act, Pub. L.

No. 117-58, 135 Stat. 429, 1339 (2021) expanded the definition of a specified security to

include digital assets with an applicable date of January 1, 2023.

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Section 6045(g)(3)(D) generally defines a digital asset, for purposes of information

reporting by brokers, as any digital representation of value which is recorded on a

cryptographically secured distributed ledger or any similar technology as specified by

the Secretary.

On August 29, 2023, the Department of the Treasury and the IRS published in the

Federal Register (88 FR 59576) proposed regulations (REG-122793-19) (2023

proposed regulations) under sections 6045, 1001, and 1012, among others. The 2023

proposed regulations, in part, clarified the statutory requirements for determining and

identifying the cost basis of digital assets. Consistent with section 1012(c)(2), the

proposed regulations would have required basis determination on an account-byaccount basis.

For units left in the custody of a broker, proposed § 1.1012-1(j)(3)(ii) provided that

the taxpayer can make an adequate identification of the units sold, disposed of, or

transferred, if the taxpayer specifies to the broker, no later than the date and time of

such disposition, the particular units of the digital asset to be disposed of by reference

to any identifier (such as purchase date and time or purchase price paid for the units)

that the broker designates as sufficiently specific to allow it to determine the basis and

holding period of those units. For units left in the custody of a broker for which the

taxpayer does not specifically identify the units to be sold, disposed of, or transferred,

proposed § 1.1012-1(j)(3)(i) provided that the determination of which units are disposed

of for purposes of determining the basis and holding period of such units is made in

order of time from the earliest units of that same digital asset acquired in the taxpayer’s

account with the broker.

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For units not held in the custody of a broker, such as in an unhosted wallet,

proposed § 1.1012-1(j)(1) provided that if a taxpayer sells, disposes of, or transfers less

than all the units of the same digital asset held within a single wallet or account, the

determination of which units are disposed of for purposes of determining basis and

holding period is made by a specific identification of the units of the particular digital

asset in the wallet or account that the taxpayer intends to sell, dispose of, or transfer.

Proposed § 1.1012-1(j)(2) provided that a specific identification of the units of a digital

asset sold, disposed of, or transferred is made if, no later than the date and time of sale,

disposition, or transfer, the taxpayer identifies on its books and records the particular

units to be disposed of by reference to any identifier, such as purchase date and time or

the purchase price for the unit, that is sufficient to identify the basis and holding period

of the units sold, disposed of, or transferred. A specific identification could be made only

if adequate records are maintained for all units of a specific digital asset held in a single

wallet or account to establish that a unit is removed from the wallet or account for

purposes of subsequent transactions. For units not held in the custody of a broker and

for which a taxpayer does not specifically identify the units to be sold, disposed of, or

transferred, the determination of which units in the wallet or account are disposed of is

made in order of time from the earliest purchase date of the units of that same digital

asset.

In response to the 2023 proposed regulations, some comments addressed the need

for transitional guidance, stating that many taxpayers have interpreted FAQs 39-41 as

permitting, or at least not prohibiting, specific identification of units or application of the

FIFO rule based on a so-called universal or multi-wallet approach because the FAQs do

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not explicitly limit the specific identification or FIFO rule to units held within a single

account, wallet, or address, and noting that the rules of proposed § 1.1012-1(j) would

apply differently from the basis identification rules adopted by those taxpayers based on

their reading of FAQs 39-41. The comments expressed the view that transitioning from

the universal or multi-wallet approach to the single wallet or account-based rules in the

2023 proposed regulations, if adopted in the final regulations, could lead to ongoing

discrepancies between a taxpayer’s basis records and the basis reported to the

taxpayer by brokers on Forms 1099-DA, Digital Asset Proceeds From Broker

Transactions, and that these discrepancies could be further exacerbated by the

limitations of current basis-tracking software.

On June 28, 2024, final regulations (T.D. 10000) were filed with the Federal Register

(XX FR XXXXX) (2024 final regulations). The 2024 final regulations adopted the 2023

proposed regulations with certain modifications in response to comments and public

hearing testimony. Section 1.1012-1(h) and (j) of the 2024 final regulations will apply to

all acquisitions and dispositions of digital assets on or after January 1, 2025. This

revenue procedure is being issued contemporaneously with the 2024 final regulations to

assist taxpayers who may have specifically identified units or applied the FIFO rule

based on a universal or multi-wallet approach in transitioning to the rules in § 1.10121(j) of the 2024 final regulations, which apply the specific identification or FIFO rules to

units held within a single wallet or account. Subject to the requirements set forth below,

this revenue procedure generally permits taxpayers to rely on any reasonable allocation

of units of unused basis to a wallet or account that holds the same number of remaining

digital asset units based on the taxpayer’s records of such unused basis and remaining

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units. The allocation must be a reasonable allocation within the meaning of section 5.02

of this revenue procedure and must be made as of January 1, 2025; however, the

taxpayer may identify the method of allocation and may comply with the requirements

set forth in section 4.02 of this revenue procedure at a later date to the extent permitted

by section 5.02(4) or 5.02(5)(b) of this revenue procedure.

SECTION 3. DEFINITIONS

Except as otherwise provided, the following definitions apply solely for purposes of

this revenue procedure:

.01 Digital asset. A “digital asset” has the meaning provided in § 1.6045-1(a)(19) of

the 2024 final regulations other than digital assets not required to be reported as digital

assets pursuant to § 1.6045-1(c)(8)(ii), (iii) and (iv) of the 2024 final regulations.

.02 Basis. “Basis” has the meaning provided in section 1012.

.03 Original basis. “Original basis” means the taxpayer’s cost of the digital asset unit

as provided in section 1012 as adjusted by section 1016; if the digital asset unit is

substituted basis property within the meaning of section 7701(a)(42), the taxpayer’s

substituted basis, as defined in section 1016(b); if the digital asset is acquired by gift,

the basis determined under section 1015; or, if the digital asset is acquired from a

decedent, the fair market value of the digital asset at the date of death, unless the

alternative valuation date is elected within the meaning of section 1014. When a

taxpayer receives digital asset units that constitute gross income under section 61, the

taxpayer’s basis in the digital asset units received is generally determined by reference

to the amount includable in gross income. See generally § 1.61-2(d)(2)(i). The

acquisition date of a digital asset unit must remain with the original basis of that unit.

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.04 Acquisition date. The “acquisition date” of a digital asset unit is the date on which

the taxpayer acquires, including by purchase, gift, reward, or airdrop, or from a

decedent, the unit of the digital asset. If the acquisition is the result of a gift or the death

of a decedent, the “acquisition date” is determined under section 1223. The acquisition

date of a unit of unused basis is the acquisition date of the digital asset unit to which the

unit of unused basis was originally attached.

.05 Pre-2025 transaction. A “pre-2025 transaction” means the sale, disposition, or

transfer by the taxpayer of a digital asset unit in a transaction completed before January

1, 2025.

.06 Unhosted wallet. An “unhosted wallet” has the same meaning as in § 1.60451(a)(25)(iii) of the 2024 final regulations.

.07 Remaining digital asset units. A “remaining digital asset unit” refers to a digital

asset unit that a taxpayer:

(1) acquires or receives in a transfer before January 1, 2025, and

(2) holds in the taxpayer’s wallet or account as of January 1, 2025.

.08 Previously identified and used basis. “Previously identified and used basis”

means the original basis (along with the associated acquisition date) of a digital asset

unit that was identified and attached to a digital asset unit that was sold, disposed of, or

transferred by the taxpayer in a pre-2025 transaction. Thus, for example, previously

identified and used basis is reflected in both (1) a digital asset unit purchased for $10 on

January 1, 2024, and then sold by the taxpayer before January 1, 2025, treating $10 as

the unit’s basis and January 1, 2024, as its acquisition date, and (2) a digital asset unit

purchased for $15 on January 30, 2024, and then sold by the taxpayer before January

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1, 2025, treating $10 (from another unit) as the unit’s basis and January 1, 2024 (from

the other unit), as its acquisition date. In both of these cases, the $10 basis is previously

identified and used basis.

.09 Unit of unused basis. “Unit of unused basis” refers to the original, per unit basis

of a digital asset unit other than any unit of previously identified and used basis.

Accordingly, all units of digital asset basis held by the taxpayer as of January 1, 2025,

are treated as units of unused basis for purposes of this revenue procedure, even if the

taxpayer is able to factually attribute some units of basis to specific units of digital

assets.

.10 As of January 1, 2025. “As of January 1, 2025” means immediately after the

close of the taxpayer’s day on December 31, 2024.

.11 Transfer. “Transfer ” means the conveyance, other than a sale or disposition, of

digital asset units by one taxpayer to another taxpayer, including a completed gift,

donation, contribution, or distribution of digital asset units.

.12 Taxpayer. “Taxpayer” means any person described in section 7701(a)(1) but

does not include an entity disregarded as an entity separate from its owner under

§ 301.7701-3. Any remaining digital assets or units of unused basis held by a

disregarded entity are treated as held by its owner.

SECTION 4. SCOPE

.01 In General.

(1) The safe harbor described in section 5.01 of this revenue procedure is

available only to a taxpayer who holds remaining digital asset units and has

units of unused basis as of January 1, 2025.

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(2) The taxpayer may not apply the safe harbor described in this revenue

procedure to any digital assets acquired by or transferred to the taxpayer on

or after January 1, 2025. Section 1.1012-1(j) of the 2024 final regulations

generally applies to digital assets acquired by or transferred to a taxpayer on

or after January 1, 2025.

(3) The safe harbor described in this revenue procedure does not apply to any

allocation of units of unused basis the amount or the availability of which is

under consideration before any court of the United States; before the IRS

Independent Office of Appeals; or subject to an examination by the IRS, about

which the IRS first contacts the taxpayer prior to January 1, 2025; unless, in

each case, a final determination has been made with respect to the amount or

the availability of such basis before the date the specific unit allocation or

global allocation must be completed pursuant to section 5.02(4) or 5.02(5)(b)

of this revenue procedure, respectively.

(4) The taxpayer may apply the safe harbor described in this revenue procedure

to one or more types of digital assets held by the taxpayer prior to January 1,

2025, separately with respect to each such type of digital asset. For example,

Bitcoin is one type of digital asset, and Ether is another type of digital asset.

(5) The safe harbor described in section 5.01 of this revenue procedure is

available only to a taxpayer who satisfies the requirements of section 4.02 of

this revenue procedure. The failure to meet all the requirements with respect

to one type of digital asset, however, does not impact the taxpayer’s ability to

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apply the safe harbor with respect to any other type of digital asset for which

the taxpayer is able to satisfy the requirements.

.02 Requirements.

(1) Each remaining digital asset unit must be a capital asset in the hands of the

taxpayer. See section 1221.

(2) Each unit of unused basis must have been originally attached to a digital

asset unit that was a capital asset in the hands of a taxpayer.

(3) The digital asset unit from which the unused basis is derived and the

remaining digital asset unit must be the same type of digital asset.

(4) The taxpayer must be able to identify and maintain records sufficient to show

the total number of remaining digital asset units in each of the wallets or

accounts held by the taxpayer.

(5) The taxpayer must be able to identify and maintain records sufficient to show

the number of units of unused basis, the original cost basis of each such unit

of unused basis, and the acquisition date of the digital asset unit to which the

unused basis was originally attached.

(6) A taxpayer must treat any allocation under this revenue procedure as

irrevocable for all purposes of section 1012.

SECTION 5. SNAPSHOT AS OF JANUARY 1, 2025, AND SAFE HARBOR SCOPE

.01 Safe harbor. The taxpayer may make any reasonable allocation as of January 1,

2025, of units of unused basis to a wallet or account that holds the same number of

remaining digital asset units with respect to any type of digital asset for which the

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taxpayer is relying on this revenue procedure, provided the taxpayer satisfies the

requirements of section 4.02 of this revenue procedure.

.02 Reasonable Allocation. To make a reasonable allocation within the meaning of

section 5.01 of this revenue procedure, the taxpayer must comply with the requirements

set forth in sections 5.02(1) through 5.02(7) of this revenue procedure.

(1) The taxpayer must identify the remaining digital asset units and maintain

records sufficient to show the units of unused basis within the meaning of

sections 4.02(4) and 4.02(5) of this revenue procedure, respectively, by the

applicable date set forth in section 5.02(4) or 5.02(5) of this revenue

procedure.

(2) The taxpayer must complete the allocations of all units of unused basis to the

same number of remaining digital asset units within all wallets or accounts

held by the taxpayer by the applicable date set forth in section 5.02(4) or

5.02(5) of this revenue procedure. A taxpayer may make such allocations on

a specific unit basis or on a global basis.

(a) Specific unit allocation. A taxpayer may make an allocation of specifically

identified units of unused basis (specific unit allocation), by reference to

characteristics that distinguish those units from other units of unused

basis, to either a pool of remaining digital assets units within each wallet

or account or, if the taxpayer is able to identify each remaining digital

asset within each wallet or account, to the specific units of remaining

digital assets within each wallet or account. A specific unit allocation is

complete on the date that the taxpayer’s books and records first record the

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specific characteristics of the units of unused basis allocated to each pool

of digital assets in the taxpayer’s wallets or accounts on a wallet-by-wallet

or account-by-account basis, or, if the taxpayer is able to identify each

remaining digital asset within each wallet or account, to the specific units

of remaining digital assets within each wallet or account.

(b) Global allocation. A taxpayer may, alternatively, make an allocation based

on a rule prescribing the manner by which units of unused basis will be

ordered and then allocated to a pool of remaining digital assets units

within each wallet or account (global allocation). A global allocation must

identify and order all units of unused basis by reference to characteristics

that distinguish those units from all other units of unused basis and must

allocate those ordered identified units to a pool of remaining digital asset

units in each of the taxpayer’s wallets or accounts on a prescribed basis

set forth in the rule. For example, a global allocation might identify those

units of unused basis that have the earliest or latest acquisition dates and,

for each of those dates, the highest or lowest amounts of unused basis,

and allocate such units successively to wallet A, wallet B, and wallet C. An

allocation that permits the taxpayer to exercise discretion on or after

January 1, 2025, with respect to how units of unused basis are allocated

to remaining digital asset units or to the taxpayer’s wallets or accounts is

not a global allocation within the meaning of this revenue procedure. A

global allocation is complete on the date that the taxpayer’s books and

records first record the specific characteristics of the units of unused basis

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allocated to each pool of digital assets in the taxpayer’s wallets or

accounts on a wallet-by-wallet or account-by-account basis.

(3) Until such time as the taxpayer has completed the allocations as set forth in

section 5.02(4) or 5.02(5)(b) of this revenue procedure, the taxpayer must

separately account for any acquisitions or transfers to the taxpayer of digital

asset units on or after January 1, 2025, held within the same wallet or

account as remaining digital asset units and units of unused basis.

(4) A taxpayer making a specific unit allocation must satisfy the requirements set

forth in section 5.02(1) of this revenue procedure and complete the specific

unit allocations described in section 5.02(2)(a) of this revenue procedure

before the earlier of:

(a) The date and time of the first sale, disposition, or transfer by the taxpayer

of the same type of digital asset completed on or after January 1, 2025, or

(b) Either:

(i) The due date (including by extension) of the taxpayer’s Federal income

tax return or Form 1065, U.S. Return of Partnership Income, for the

taxable year that includes January 1, 2025 (the 2025 return); or

(ii) If the taxpayer is not otherwise required to file a 2025 return, the last

date for filing the 2025 return (without extensions) of the type of return

that would be applicable to the taxpayer if the taxpayer were required

to file a 2025 return.

(5) A taxpayer making a global allocation described in section 5.02(2)(b) of this

revenue procedure:

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(a) Must describe the global allocation method in the taxpayer’s books and

records before January 1, 2025;

(b) Must satisfy the requirements set forth in sections 5.02(1) of this revenue

procedure and complete the allocations of all units of unused basis to the

pools of remaining digital asset units within each of the taxpayer’s wallets

or accounts before the later of the dates set forth in section 5.02(4)(a) and

(b) of this revenue procedure, as applicable; and

(c) Must comply with the following rules with respect to sales, dispositions or

transfers of any remaining digital assets units on or after January 1, 2025.

If such sale, disposition or transfer occurs after the taxpayer has

completed the global allocation, the taxpayer is permitted to identify the

units sold, disposed of, or transferred under § 1.1012-1(j)(2) of the 2024

final regulations (specific identification of digital asset units held in an

unhosted wallet) or § 1.1012-1(j)(3)(ii) of the 2024 final regulations

(adequate identification of units held in the custody of a broker). If such

sale, disposition or transfer occurs before the taxpayer has completed the

global allocation, the taxpayer may make a specific identification (or

adequate identification) of any remaining digital asset units that are sold,

disposed of, or transferred only by using a standing order or instruction

communicated to the taxpayer’s broker or a standing instruction recorded

in the taxpayer’s books and records. This standing order must be applied

to select any remaining digital asset units sold, disposed of, or transferred

after the global allocation is complete. Any other type of specific

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identification by the taxpayer will not be treated as sufficient to identify any

remaining digital asset units sold, disposed of, or transferred under §

1.1012-1(j)(2) of the 2024 final regulations (specific identification of digital

asset units held in an unhosted wallet) or § 1.1012-1(j)(3)(ii) of the 2024

final regulations (adequate identification of units held in the custody of a

broker) before the date that the taxpayer has completed the allocation of

units of unused basis to the pools of remaining digital asset units within

each of the taxpayer’s wallets or accounts.

(6) The determination of whether a taxpayer’s allocations to wallets or accounts

is reasonable with respect to one type of digital asset held by the taxpayer

prior to January 1, 2025, does not impact whether the taxpayer’s allocations

to other wallets or accounts is reasonable with respect to another type of

digital asset held by the taxpayer prior to January 1, 2025.

(7) Any allocation of previously identified and used basis to digital assets held by

the taxpayer as of January 1, 2025, does not constitute a reasonable

allocation.

.03 Failure to Comply. If a taxpayer makes a reasonable allocation described in

section 5.02 of this revenue procedure but fails to comply with the requirements of

section 4.02 of this revenue procedure, the taxpayer cannot rely on the safe harbor set

forth in this revenue procedure, and such failure may result in the assessment of

additional tax, penalties, and interest.

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.04 Not applicable to determining amount of basis. This safe harbor does not apply

to the taxpayer’s calculation of the amount of unused basis, which must be

substantiated separately by the taxpayer pursuant to section 6001.

SECTION 6. EXAMPLES

The following examples illustrate the application of this revenue procedure to a

single type of digital asset (referred to as digital asset DE). For purposes of these

examples, no transaction fees are paid or incurred to effect the purchase or sale of any

of the digital asset units, and neither the number of remaining digital asset units nor the

units of unused basis is under consideration before any court of the United States or the

IRS Independent Office of Appeals, or subject to an examination by the IRS.

.01 Example 1.

(1) Facts. B, an individual and calendar year taxpayer, holds in B’s unhosted

wallet (“XYZ Wallet”) 10 units of digital asset DE that B acquired for $1 per

unit on July 1, 2019. B holds in a second unhosted wallet (“GHI Wallet”) 20

units of digital asset DE acquired on September 1, 2020, for $5 per unit. On

December 1, 2024, B sells all 30 units of digital asset DE in a transaction

completed before January 1, 2025.

(2) Analysis. Neither the 10 units of digital asset DE acquired on July 1, 2019, nor

the 20 units of digital asset DE acquired on September 1, 2020, are remaining

digital asset units within the meaning of section 3.07 of this revenue

procedure, because B does not hold any digital asset units of DE as of

January 1, 2025. Accordingly, B may not make allocations described in

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section 5.02 of this revenue procedure to determine the basis of the units

from either lot.

.02 Example 2.

(1) Facts. The facts are the same as in Example 1 except that B sells only six

units from B’s XYZ Wallet on December 1, 2024, and B maintain records

sufficient to show that B specifically identified and attached the original basis

of six units from the 20 units acquired on September 1, 2020, in B’s GHI

Wallet as the six units sold. As of January 1, 2025, B has 24 remaining digital

asset units and 24 units of unused basis.

(2) Analysis.

(a) B’s sale of six units from B’s XYZ wallet on December 1, 2024, is a pre2025 transaction with previously identified and used basis of $30 (6 units

each with a per unit basis of $5). As of January 1, 2025, B has 24 units of

unused basis (consisting of 10 units of unused basis in the amount of $1

per unit with an acquisition date of July 1, 2019, originally from B’s XYZ

Wallet, and 14 units of unused basis in the amount of $5 per unit with an

acquisition date of September 1, 2020, originally from B’s GHI Wallet). B

also has 24 remaining digital asset units (consisting of four DE remaining

digital asset units in B’s XYZ Wallet and 20 remaining digital asset units in

B’s GHI Wallet).

(b) B may use the safe harbor described in section 5.02 of this revenue

procedure to make a reasonable allocation of B’s 24 units of unused basis

to the pool of remaining digital asset units in B’s XYZ and GHI Wallets as

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of January 1, 2025, provided that B maintains records sufficient to show

the units of unused basis and completes the allocations by the dates set

forth in sections 5.02(4) (specific unit allocation) or 5.02(5)(b) (global

allocation) of this revenue procedure, as applicable.

.03 Example 3.

(1) Facts. The facts are the same as in Example 2. In addition, on March 1, 2025,

B sells two units from B’s XYZ Wallet. Before B’s sale of those two units from

B’s XYZ Wallet on March 1, 2025, B identifies and maintains records sufficient

to show that B has four remaining digital asset units in B’s XYZ Wallet and 20

remaining digital asset units in B’s GHI Wallet. B’s records also show that B

has 10 units of unused basis in the amount of $1 per unit with an acquisition

date of July 1, 2019, and 14 units of unused basis in the amount of $5 per unit

with an acquisition date of September 1, 2020. Also, before B’s sale of the

two units from B’s XYZ wallet, B makes a specific unit allocation, of two units

of unused basis in the amount of $1 per unit and an acquisition date of July 1,

2019, and two units of unused basis in the amount of $5 per unit and an

acquisition date of September 1, 2020, to the pool of four remaining digital

asset units held in B’s XYZ Wallet. B allocates the remainder of the eight units

of unused basis (in the amount of $1 per unit and an acquisition date of July

1, 2019), and the 12 units of unused basis (in the amount of $5 per unit and

an acquisition date of September 1, 2020) to the pool of 20 remaining digital

asset units held in B’s GHI Wallet. Prior to B’s sale of the two units from B’s

XYZ Wallet, B specifically identifies in B’s books and records that one of the

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units sold was from one unit of unused basis in the amount of $1 per unit with

an acquisition date of July 1, 2019, and the other unit sold was from one unit

of unused basis in the amount of $5 per unit with an acquisition date of

September 1, 2020.

(2) Analysis.

(a) B made a specific unit allocation as described in section 5.02(2)(a) of this

revenue procedure.

(b) B’s specific unit allocation is reasonable within the meaning of section

5.02 of this revenue procedure for the following reasons:

(i) B identified and maintained records sufficient to show the number of

remaining digital asset units in B’s XYZ and GHI Wallets as required by

section 5.02(1) of this revenue procedure.

(ii) B identified and maintained records sufficient to show the number of

units of unused basis, the amount of each such unit, and the

acquisition date of the digital asset unit to which the unit of unused

basis was originally attached as required by section 5.02(1) of this

revenue procedure.

(iii) B’s allocation of units of unused basis to the XYZ and GHI Wallets was

made by reference to the original, per unit basis and acquisition date of

the digital asset unit to which the unit of unused basis was originally

attached. This reference is to characteristics that distinguish those

units of unused basis from B’s other units of unused basis. B’s specific

unit allocations were completed before March 1, 2025, which is the

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date and time of the taxpayer’s first sale of the digital asset units

completed on or after January 1, 2025, as required by section

5.02(4)(a) of this revenue procedure.

(iv) B did not allocate any previously identified and used basis to the

remaining digital asset units.

(c) B’s identification of the two units sold on March 1, 2025, is a specific

identification under § 1.1012-1(j)(2) of the 2024 final regulations.

.04 Example 4.

(1) Facts. The facts are the same as in Example 3, except B does not make a

specific unit allocation. Instead, before January 1, 2025, B describes an

ordering rule in B’s books and records, which identifies and orders the units of

unused basis in a manner that is based first on the highest basis units and

second (if there are multiple units with the same basis) on the units with the

earliest acquisition dates. B’s ordering rule also directs that these ordered

units of unused basis will be allocated first to the remaining digital asset units

in B’s XYZ Wallet and then to the remaining digital asset units in B’s GHI

Wallet. Additionally, B identifies and maintains records sufficient to show B’s

24 remaining digital asset units and B’s 24 units of unused basis as of

January 1, 2025, respectively, before April 15, 2026, which is the due date for

filing B’s Federal income tax return for B’s 2025 taxable year. B also

completes the allocations of units of unused basis to remaining digital assets

after March 1, 2025, but before April 15, 2026, such that B’s books and

records record the specific characteristics of the units of unused basis

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allocated to each pool of digital assets in B’s wallets or accounts on a walletby-wallet or account-by-account basis. Finally, instead of selling the two units

from B’s XYZ Wallet, B sells the two units from B’s GHI Wallet. Prior to B’s

sale of the two units from B’s GHI Wallet, B specifically identifies in B’s books

and records that one of the units sold was from one unit of unused basis in

the amount of $1 per unit with an acquisition date of July 1, 2019, and the

other unit sold was from one unit of unused basis in the amount of $5 per unit

with an acquisition date of September 1, 2020.

(2) Analysis.

(a) B’s ordering rule is a global allocation as described in section 5.02(2)(b) of

this revenue procedure. This global allocation when completed results in:

four of the 14 units of unused basis with the highest basis (the units with a

basis in the amount of $5 per unit) have been allocated to the pool of

remaining digital asset units held in B’s XYZ Wallet and 10 units of unused

basis (the units with a basis in the amount of $5 per unit) and 10 units of

unused basis (the units with basis in the amount of $1 per unit) have been

allocated to the pool of remaining digital asset units held in B’s GHI Wallet.

(b) B’s global allocation as described in section 5.02(2)(b) of this revenue

procedure is reasonable within the meaning of section 5.02 of this revenue

procedure for the following reasons:

(i) B identified and maintained records sufficient to show the number of

remaining digital asset units in B’s XYZ and GHI Wallets as required by

section 5.02(1) of this revenue procedure.

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(ii) B identified and maintained records sufficient to show the number of

units of unused basis, the amount of each such unit, and the

acquisition date of the digital asset unit to which the unused basis was

originally attached as required by section 5.02(1) of this revenue

procedure.

(iii) B’s global allocation applies a rule that identifies and orders the units

of unused basis by reference first to the highest basis units and second

to the units with the earliest acquisition dates. These characteristics

are sufficient to distinguish each of the units from the other units of

unused basis. B’s global allocation then allocates the ordered units of

unused basis to a pool of remaining digital asset units in each of B’s

XYZ and GHI Wallets on a prescribed basis. B’s global allocation does

not permit B to exercise discretion on or after January 1, 2025, with

respect to how the units of unused basis are allocated to B’s remaining

digital assets or to its XYZ and GHI Wallets.

(iv) B described the global allocation method in B’s books and records

before January 1, 2025.

(v) B did not allocate any previously identified and used basis to the

remaining digital asset units.

(c) Under section 5.02(5)(c) of this revenue procedure, a global allocation

must be completed before a taxpayer is permitted to make a specific

identification of units sold on or after January 1, 2025, other than by

reference to a standing order or instruction. B did not complete its global

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allocation prior to March 1, 2025. Additionally, B’s identification of the units

sold on March 1, 2025, was based on the amount (and acquisition date) of

specific units of unused basis before the global allocation was complete,

and the identification was not a standing instruction. Therefore, B’s

specific identification of the units sold on March 1, 2025, will not be treated

as sufficient to identify the units sold within the meaning of § 1.1012-1(j)(2)

of the 2024 final regulations. Instead, under § 1.1012-1(j)(1) of the 2024

final regulations, B must treat the units with the earliest acquisition dates

within B’s GHI Wallet as sold. Accordingly, the two units that B must treat

as sold are the two units with unused basis in the amount of $1 per unit

with acquisition dates of July 1, 2019.

.05 Example 5.

(1) Facts. The facts are the same as in Example 4, except instead of selling two

digital asset units on March 1, 2025, B transfers those two units to a family

member, C, as a completed gift.

(2) Analysis. The analysis set forth in Example 4 remains the same. Accordingly,

the 2 units transferred by B to C on March 1, 2025, are the two units with

unused basis in the amount of $1 per unit with acquisition dates of July 1,

2019.

SECTION 7. EFFECTIVE DATE

This revenue procedure is effective June 28, 2024, the date this revenue procedure

was released to the public.

SECTION 8. DRAFTING INFORMATION

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The principal author of this revenue procedure is the Office of Associate Chief

Counsel (Income Tax and Accounting). For further information regarding this revenue

procedure, contact the Office of the Associate Chief Counsel (Income Tax and

Accounting) at (202) 317-5436 (not a toll free number).

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