tax-lawyer-us-crypto

name	tax-lawyer-us-crypto
description	US crypto tax treatment under IRS guidance. Crypto as property (Notice 2014-21). Cost basis methods under Rev. Proc. 2024-28 safe harbor. Capital gains/losses, Form 8949/Schedule D, staking income, mining, and DeFi considerations.
version	1.0.0
tags	["us","crypto","property","irs","cost-basis","form8949","rev-proc-2024-28","capital-gains"]
tier	ch0nky
complexity	7
applies_to	["crypto tax US","IRS crypto","Bitcoin tax","cost basis method","Rev Proc 2024-28","Form 8949","crypto capital gains"]
output_types	[".json",".md"]
depends_on	["tax-lawyer-ufo-types","tax-lawyer-evidence-graph"]
unlocks	["ledgerr_tax_us_crypto_*"]
metadata	{"ufo_stereotype":"Perdurant","satisfies_constraint":"CryptoCostBasisRules","legislation":["IRS Notice 2014-21 (crypto as property)","IRS Rev. Proc. 2024-28 (cost basis safe harbor)","IRC Section 1001 (recognition of gains/losses)","IRC Section 1221 (capital asset definition)","IRC Section 1091 (wash sale — does NOT apply to crypto)","IRC Section 61 (gross income — staking/mining)","Form 8949 (Sales and Other Dispositions of Capital Assets)","Schedule D (Capital Gains and Losses)"],"iso_types":["ISO 4217"]}

IRS Classification: Crypto as Property

:citation: IRS Notice 2014-21; IRC § 1221

The IRS treats virtual currency as property for US federal tax purposes. This is NOT classified as:

• Currency (no IRC § 988 treatment)
• Security (no wash sale rule under IRC § 1091 — though proposed legislation may change this)
• Commodity

Every disposition of crypto is a taxable event:

• Sale for USD
• Trade of crypto-for-crypto (both legs are taxable)
• Use to purchase goods/services
• Gift above annual exclusion ($18,000 for 2024)

Capital Gains/Losses

:citation: IRC §§ 1001, 1221, 1222

Gain/Loss = Amount Realized − Adjusted Basis

Holding Period	Treatment	Rate (2024)
≤ 12 months	Short-term capital gain	Ordinary income rates (10–37%)
> 12 months	Long-term capital gain	Preferential rates (0%, 15%, 20%)
Any period, net loss	Capital loss	Deductible up to $3,000/yr against ordinary income; excess carries forward

No wash sale rule: Unlike stocks, you can sell crypto at a loss and immediately repurchase the same asset and still claim the loss. (Proposed legislation in 2025 may end this — monitor legislative status.)

Cost Basis Methods

:citation: Rev. Proc. 2024-28

Available methods

Method	How Basis Is Assigned	IRS Status
FIFO	First purchased = first sold	Safe harbor default if no specific ID
HIFO	Highest cost first sold	Available for specific identification
LIFO	Last purchased = first sold	Available but unusual
SpecID	Specifically identify units being sold	Gold standard; requires exchange support

Rev. Proc. 2024-28 Safe Harbor

:citation: Rev. Proc. 2024-28, Section 4

Released January 2024. Establishes a safe harbor for taxpayers to allocate unused basis to wallets after the IRS clarified in 2022 that cost basis must be tracked per wallet (not pooled across all wallets).

Safe harbor: Taxpayers who previously pooled basis may allocate to specific wallets using any reasonable method — as long as allocation is made by the end of 2024 and applied consistently going forward.

Platform implementation: Per CryptoWallet — each wallet maintains its own FIFO/HIFO/LIFO/SpecID cost basis lot queue.

Form 8949 and Schedule D

:citation: Form 8949; Schedule D

Form 8949 — per transaction

Each disposal reported with:

• Description (e.g., "0.5 BTC")
• Date acquired
• Date sold
• Proceeds (USD at sale)
• Cost basis (USD at acquisition)
• Gain/loss
• Adjustments (Box B/E codes for wash sales, etc.)

Groups:

• Part I: Short-term (≤ 12 months)
• Part II: Long-term (> 12 months)

Schedule D

Aggregates Form 8949 totals. Net capital gain flows to Form 1040 Line 7.

Staking and Mining Income

:citation: IRS Notice 2014-21; Rev. Rul. 2023-14

Mining

• Mined crypto = ordinary income at fair market value at time of receipt
• Cost basis = FMV at receipt
• Self-employment tax may apply if mining constitutes a trade/business

Staking Rewards

:citation: Rev. Rul. 2023-14 (July 2023)

IRS ruled: Staking rewards are ordinary income when received, at FMV.

• This settled the Jarrett vs United States dispute (previously unclear)
• Cost basis of received tokens = FMV at receipt
• Subsequent sale of staking rewards is capital gains/loss event

DeFi / Liquidity Mining

• Providing liquidity: depositing crypto into LP → receipt of LP tokens may constitute a taxable exchange (gain/loss on deposited assets)
• Receiving LP rewards: ordinary income at FMV
• Withdrawing from LP: exchange of LP tokens back → taxable if basis differs

Airdrops and Hard Forks

:citation: IRS Notice 2014-21 FAQ (2019)

• Airdrop: Ordinary income at FMV if received in exchange for services or as promotional distribution. Pure airdrops (no services): IRS position is ordinary income.
• Hard fork: If taxpayer receives new crypto as result of hard fork → ordinary income at FMV of new token when received and recorded in the new blockchain.

Wash Sale Note (Important)

:citation: IRC § 1091

The wash sale rule (30-day window) does NOT currently apply to crypto. A taxpayer may sell BTC at a loss on December 31 and repurchase on January 1 and claim the full loss. Congress has proposed applying wash sale rules to crypto — monitor IRC changes.

CryptoTx + CryptoCostBasisRules (Rust domain model)

pub struct CryptoTx {
    pub ufo: UfoCategory,               // Perdurant
    pub ufo_kind: PerdurantStereotype,  // Event
    pub tx_id: Uuid,
    pub wallet_id: Uuid,
    pub asset: CryptoAsset,
    pub tx_type: UsCryptoTxType,
    pub amount: rust_decimal::Decimal,
    pub usd_value: rust_decimal::Decimal, // at tx time
    pub timestamp: chrono::DateTime<Utc>,
    pub fee_usd: rust_decimal::Decimal,
}

pub enum UsCryptoTxType {
    Buy,              // acquire — establishes basis
    Sell,             // dispose — recognizes gain/loss
    Trade,            // crypto-to-crypto: both legs are taxable
    StakingReward,    // ordinary income at FMV
    MiningReward,     // ordinary income at FMV
    Airdrop,          // ordinary income (IRS position)
    HardFork,         // ordinary income at FMV
    DeFiDeposit,      // potentially taxable exchange
    DeFiWithdraw,     // potentially taxable exchange
    Transfer,         // wallet-to-wallet (same owner, NOT taxable)
}

pub struct CryptoCostBasisRules {
    pub method: CostBasisMethod,
    pub jurisdiction: Jurisdiction,
}

pub enum CostBasisMethod { Fifo, Hifo, Lifo, SpecId }

b00t:map v1

summary: IRS crypto-as-property — cost basis, Form 8949, staking income, Rev Proc 2024-28

tags: us, crypto, irs, cost-basis, form8949, capital-gains, staking

tier: ch0nky

complexity: 7