February 2026- Q&A, Virtual Currency

Q&A with virtual currency

Q1: I receive virtual currency as a bona fide gift. Do I have income?
A1: No. If you receive virtual currency as a bona fide gift, you will not recognize income until you sell, exchange, or otherwise dispose of that virtual currency. For more information about gifts, see Publication 559, Survivors, Executors, and Administrators.

Q2: How do I determine my basis in virtual currency that I received as a bona fide gift?
A2: Your basis in virtual currency received as a bona fide gift differs depending on whether you will have a gain or a loss when you sell or dispose of it. For purposes of determining whether you have a gain, your basis is equal to the donor’s basis, plus any gift tax the donor paid on the gift. For purposes of determining whether you have a loss, your basis is equal to the lesser of the donor’s basis or the fair market value of the virtual currency at the time you received the gift. If you do not have any documentation to substantiate the donor’s basis, then your basis is zero. For more information on basis of property received as a gift, see Publication 551, Basis of Assets.

Q3: What is my holding period for virtual currency that I receive as a gift?
A3: Your holding period in virtual currency received as a gift includes the time that the virtual currency was held by the person from whom you received the gift. However, if you do not have documentation substantiating that person’s holding period, then your holding period begins the day after you receive the gift. For more information on holding periods, see Publication 544, Sales and Other Dispositions of Assets.

This newsletter contains general information for taxpayers and should not be relied upon as the only source of authority.  Taxpayers should seek professional tax advice for their specific tax situation and for more information.