Inherited crypto: basis is generally the value at death
According to IRS Publication 551, the basis of inherited property is generally its fair market value at the date of the individual’s death, or on the alternate valuation date if the personal representative of the estate chooses to use it. This is often called a step-up in basis.
The publication lists an exception: appreciated property you or your spouse gave the decedent within one year before death keeps the decedent’s adjusted basis.
So the key record is not the decedent’s purchase price but the holdings and their value on the valuation date, with the price source documented.
Gifted crypto: the donor’s basis carries over
- For a gain. The IRS virtual currency FAQs say your basis is the donor’s basis, plus any gift tax the donor paid on the gift.
- For a loss. Your basis is the lesser of the donor’s basis or the fair market value when you received the gift. Publication 551 adds that if the sale price falls between those two figures, there is neither a gain nor a loss.
- Without the donor’s records. The FAQs say that if you have no documentation of the donor’s basis, your basis for figuring a gain is zero.
- Holding period. It includes the time the donor held the crypto; without documentation of that period, it starts the day after you received the gift.
- On receipt. The FAQs say you do not recognize income when you receive a bona fide gift of virtual currency.
For gifts, the donor’s purchase records are the evidence. Ask for them while the donor can still find the exports.
Crypto transferred in a divorce
A transfer between spouses or incident to divorce is a different case. IRS Publication 504 says there is generally no recognized gain or loss, the receiving spouse generally takes the transferring spouse’s adjusted basis, and the transferring spouse must give records to determine that basis and holding period. See crypto records for divorce and estates.
Demo: the same 0.5 BTC, inherited or gifted
Fictional records · No tax calculation.
- Original purchase $8,000
- 0.5 BTC bought years earlier, with the exchange export kept.
- Value at death $30,000
- If inherited: generally the basis, from the valuation-date price record.
- Donor’s basis $8,000
- If gifted: the starting point for a gain, supported by the donor’s export.
The coins are the same; the basis depends on how they changed hands, and each answer rests on a different record.
Records to collect
- For an estate: a list of the decedent’s exchange accounts and wallets, statements or exports showing holdings on the valuation date, the price source and time used, and any estate valuation documents.
- For a gift: the donor’s purchase records for the gifted units, the date of the gift, the value on that date, and any gift tax paid.
- For both: the transfer into your own account with its transaction ID, and every later movement until you sell.
The work uses exports, statements, and public addresses. I never ask for seed phrases, private keys, or wallet signatures. Which date or rule applies is a decision for the executor, your attorney, or your CPA.
Inherited and gifted crypto FAQ
What is the cost basis of inherited crypto?
IRS Publication 551 says the basis of inherited property is generally its fair market value at the date of death, or on the alternate valuation date if the estate’s representative chooses it.
What is the cost basis of gifted crypto?
For a gain, it is generally the donor’s basis plus any gift tax the donor paid. For a loss, it is the lesser of the donor’s basis or the value when you received the gift.
What if the donor has no purchase records?
The IRS FAQs say that without documentation of the donor’s basis, your basis for figuring a gain is zero, so the donor’s exports are worth collecting early.
Do I owe tax when I receive crypto as a gift?
The IRS FAQs say you do not recognize income on receiving a bona fide gift of virtual currency. Tax questions about the later sale are for your preparer.
When a records review can help
If an estate holds crypto across several accounts, or a gift arrived without the donor’s history, Elena’s divorce and estate record package documents the accounts, holdings at the agreed date, the transfer trail, and the basis records, within an agreed scope. Legal, tax, and valuation advice are not included.
For your first inquiry, describe the accounts, the date that matters, and who will review the records.
Sources
Related recordkeeping guides