Wallet-by-Wallet Cost Basis and Rev. Proc. 2024-28: The 2025 Transition Explained

On December 31, 2024, a lot of crypto investors went to bed with one big pile of basis. On January 1, 2025, the rules said that pile had to be split up, wallet by wallet. Most people did not notice. Their software noticed even less.

The change comes from the final broker regulations, T.D. 10000, which added identification rules in Treas. Reg. 1.1012-1(j) that apply to all acquisitions and dispositions of digital assets on or after January 1, 2025. Alongside them, the IRS issued Rev. Proc. 2024-28, a safe harbor for moving from the old approach to the new one. If you held crypto at the end of 2024, this is your transition rule. Here is how it works.

The problem the revenue procedure solves

Rev. Proc. 2024-28 describes the history candidly. The IRS virtual currency FAQs allowed specific identification or FIFO but did not expressly limit either to units in a single account, wallet or address. Many taxpayers read that as permission for a universal or multi-wallet approach: one pool of basis across everything they owned.

The final regulations do not allow that for 2025 and later. Units in a broker account are matched within that account. Units in an unhosted wallet are matched within that wallet. Section 1012(c)(1) of the Code already required account-by-account conventions for specified securities, and digital assets became specified securities with an applicable date of January 1, 2023, under the Infrastructure Investment and Jobs Act.

So a person who had been tracking one pool needed a way to assign that pool's leftover basis to the wallets that actually held the coins. That assignment is what the revenue procedure governs.

Key terms in plain English

• Remaining digital asset units: units you acquired before January 1, 2025, and still held in a wallet or account as of that date.
• Unused basis: the original per-unit basis of your units, other than basis you already used on a sale or transfer before 2025. Every unit of basis you held as of January 1, 2025, is treated as unused basis, even if you could factually trace it.
• Previously identified and used basis: basis you already attached to a unit you sold or transferred before 2025. You cannot reuse it.
• As of January 1, 2025: immediately after the close of your day on December 31, 2024.

The procedure also keeps acquisition dates attached to basis. A unit of unused basis carries the acquisition date of the unit it originally came from, which preserves your holding period.

The safe harbor

Section 5.01 of Rev. Proc. 2024-28 lets you make any reasonable allocation, as of January 1, 2025, of your units of unused basis to wallets or accounts that hold the same number of remaining units. You can do this separately for each type of asset. Bitcoin is one type. Ether is another.

To use the safe harbor, section 4.02 requires that each remaining unit and each unit of unused basis relate to a capital asset, that the basis and the units be the same type of asset, and that you identify and keep records showing the number of units in each wallet and the number, cost and acquisition date of your units of unused basis. The allocation is irrevocable.

The safe harbor does not apply to assets acquired on or after January 1, 2025. It also does not apply to basis whose amount or availability was already under consideration in a court, in IRS Appeals, or in an IRS examination where the IRS first contacted you before January 1, 2025, unless a final determination was reached in time.

One more limit is important. Section 5.04 says the safe harbor does not determine the amount of your basis. You still have to substantiate the basis itself under section 6001. The procedure lets you move basis between wallets. It does not create basis you cannot prove.

Two ways to allocate

The revenue procedure allows a specific unit allocation or a global allocation.

A specific unit allocation assigns identified units of unused basis, by characteristics such as cost and acquisition date, to the pool of units in each wallet. It is complete when your books first record which basis went to which wallet.

A global allocation is a rule. You describe an ordering method, for example highest basis first and then earliest acquisition date, and a prescribed sequence of wallets to fill. The rule cannot leave you discretion to decide after January 1, 2025. And there is a hard condition: the method had to be described in your books and records before January 1, 2025.

The deadlines

For a specific unit allocation, section 5.02(4) requires you to finish before the earlier of two dates: the date and time of your first sale, disposition or transfer of that type of asset on or after January 1, 2025, or the due date, including extensions, of your 2025 federal income tax return.

For a global allocation, the rule had to be written down before January 1, 2025. The allocation itself must be completed by the later of those two dates. Until the global allocation is complete, a sale of remaining units can be specifically identified only by a standing order recorded with the broker or in your books.

The revenue procedure's own examples show the stakes. In Example 4, a taxpayer with a valid global rule sold units before finishing the allocation and tried to pick specific lots without a standing order. The identification failed, and FIFO applied within that wallet, pushing the lowest-basis 2019 units out first.

If you missed the window

Plenty of people sold some crypto in early 2025 without having allocated anything. For them, the specific unit allocation deadline for that asset passed at the moment of that first sale. Missing the safe harbor does not mean you lose your basis. It means you cannot rely on the safe harbor's flexibility to assign it wherever you choose.

Without the safe harbor, basis follows the units that actually carry it. If your records show which units sat in which wallet and what each cost, the default rules apply to those facts: specific identification where you made one, FIFO by acquisition date where you did not. The work becomes a reconstruction exercise rather than an allocation exercise, and the result may be less favorable, but it is still your actual basis.

Section 5.03 also warns that if you make an allocation but fail the record requirements in section 4.02, you cannot rely on the safe harbor, which can lead to additional tax, penalties and interest. Records are what make this work in either direction. See the record-keeping guide.

A simple illustration

The revenue procedure's Example 2 is a good model. A taxpayer held 10 units bought at $1 in one wallet and 20 units bought at $5 in another. Before 2025, the taxpayer sold 6 units from the first wallet but identified basis from the second wallet's $5 lots. Going into 2025, the taxpayer had 24 remaining units (4 in the first wallet, 20 in the second) and 24 units of unused basis (ten at $1 and fourteen at $5).

The safe harbor lets that taxpayer allocate the 24 units of unused basis across the two wallets in any reasonable way, as long as each wallet receives basis for exactly the number of units it holds and the deadlines are met. That flexibility is the value of the safe harbor, and it is why acting before the first 2025 sale mattered.

What to do now

• Inventory every wallet and account and the units each held at the end of December 31, 2024.
• Build a basis ledger for those units: cost, acquisition date and any basis already used on pre-2025 sales.
• If you have not yet sold or transferred a given asset in 2025 or later, and your 2025 return due date has not passed, a specific unit allocation may still be available for that asset. Record it before the next transaction.
• If the window has closed, reconstruct basis by wallet from the actual history and apply the default rules.
• Going forward, record standing orders and track each wallet separately. See specific identification and standing orders.

Moving coins between your own wallets is not a sale, but it moves basis with the coins. The wallet transfer guide explains how to keep that trail intact.

Frequently asked questions