Tax planning and compliance for cryptocurrency traders, investors, and DeFi participants, covering capital-gains strategy, entity selection, and the record-keeping exchanges rarely provide, so the IRS reporting stays clean.
A bitcoin futures contract on the CME is marked to market at year end and taxed sixty percent long-term, forty percent short-term, whatever the holding period. The coin it tracks is property under IRS Notice 2014-21, every swap of it is a realization event, and a lot held a year or less is taxed at ordinary rates. One price, two instruments, two returns.
Since 2025 custodial brokers report gross proceeds on Form 1099-DA, with basis following for units acquired from 2026, but coins moved between exchanges or through a self-custody wallet arrive on forms that reconcile with nothing. Basis is now tracked wallet by wallet under Revenue Procedure 2024-28, and specific identification must be made no later than the sale, not reconstructed after it. The default is first in, first out, the most expensive answer in a rising market.
We have advised on digital assets since 2014 and have represented clients in matters before the IRS. The work is less tax planning than ledger building: one record of every lot, its date and its basis, assembled before the return is due, not after the notice.
Lot-level planning for an active book: which units to identify at each sale, when a long-term holding period is worth waiting for, and when exposure is better taken through a section 1256 contract taxed sixty-forty than through the spot coin it tracks.
Speak to this team →Capital gains and losses tracked and reported with care, with different rates applying by holding period and overall tax situation, and loss positions managed so they offset gains where the rules allow.
Speak to this team →Structuring the transaction before it happens. A swap into a stablecoin is a sale, a transfer between your own wallets is not, and borrowing against collateral is not a disposition at all, so the form a position exits in decides what the return reports.
Speak to this team →Documentation systems that capture dates, amounts, basis, and fair-market values across every exchange and wallet, because exchanges rarely provide complete tax reporting and the burden falls on the trader.
Speak to this team →Accurate reporting of cryptocurrency trading to the IRS, with ongoing compliance monitoring that keeps pace with changing requirements for digital assets, and representation in matters before the IRS.
Speak to this team →Entity selection and structuring for professional cryptocurrency trading operations, chosen for the tax treatment, liability protection, and operational flexibility the activity calls for.
Speak to this team →Staking, yield farming, liquidity provision, and governance-token rewards create tax questions of their own that often lack clear guidance; we analyze them carefully and take conservative, defensible positions.
Speak to this team →Harvesting realized losses and timing them against gains, a core technique for managing the tax cost of an active trading year, applied within the bounds of current IRS rules.
Speak to this team →Trading one token for another is a disposition of the first at fair market value, as is spending a coin on a purchase or paying a gas fee in it. Moving units between wallets you control is not. Staking rewards are ordinary income when you gain dominion and control over them, under Revenue Ruling 2023-14.
A lot held more than one year gets long-term rates; a year or less is ordinary income, plus the net investment income tax at higher incomes. An NFT may be a collectible taxed at up to 28 percent under Notice 2023-27, and net capital losses offset ordinary income up to $3,000 a year.
From 2025 custodial brokers report gross proceeds on Form 1099-DA, and basis only for units acquired from 2026. Coins deposited from a self-custody wallet arrive with no basis, DeFi front ends report nothing after Congress repealed the DeFi broker rule in 2025, and the IRS matches the gross figure against your return regardless.
Section 1091 disallows a loss on stock or securities repurchased within 30 days. Digital assets are property, so a loss harvested and the position rebought the next day has been respected where a stock's would not. Proposals to close the gap recur, so each harvest is checked against the Code in force that day.
Trader tax status turns on frequency, continuity and short holding periods; it moves expenses onto a business schedule but does not change the character of gains. The section 475(f) mark-to-market election is due by the unextended due date of the prior year's return, and whether spot crypto qualifies for it is unsettled.
The IRS has ruled on staking rewards and on airdrops after a hard fork, both ordinary income on receipt. It has not ruled on depositing tokens into a liquidity pool for an LP token, which looks like a taxable exchange, or on wrapping a coin, which may not be. Each position is papered before filing.
The broader IRS framework for digital assets, with reporting for trading, mining, and staking, transaction structuring, and representation in matters before the IRS.
Cryptocurrency & the IRS →Tax-efficient transfer of digital-asset wealth, covering succession, trust structures, and the key and wallet protocols that keep holdings recoverable for beneficiaries.
Estate Planning & Digital Assets →Entity formation, governance, and multi-jurisdictional planning for digital-asset businesses, which is the structure behind a professional trading operation.
Corporate Structure in the Crypto Space →The full digital-asset practice, from regulatory strategy and token offerings to SEC and CFTC matters, IP, AML/KYC, and tax, across Chicago, London & Dubai.
Back to Digital Assets →We pull every exchange export, wallet address, and on-chain history into one ledger, assigning cost basis and acquisition dates to each lot and flagging the transfers, forks, and bridge hops the exchanges never reconciled.
Each transaction is sorted into its tax character: disposal, swap, staking reward, liquidity-pool entry or exit, or airdrop. Property treatment means a token-for-token trade is a realization event, so we mark holding periods, and where guidance runs out we paper a conservative position.
The structuring is done before year-end: entity selection for professional trading activity, harvesting of loss lots against realized gains, and timing of remaining dispositions, coordinated with the trader's other investment income.
The return goes in with the workpapers behind it, lot-level schedules, fair-market-value sourcing, and position memos, so if the IRS asks, the response is already written. Where a matter goes further, we represent the trader in matters before the IRS.
The exchange reports a fragment and the IRS taxes the whole, so we keep the whole.
Reviewed by Jonathan D. Herpy, Sr., Senior Partner · Last updated October 2026 · Educational overview · Not legal advice
One partner is accountable for the whole matter, and you have that partner's direct line. Chicago, London, and Dubai work to the same standard.