Rev. Proc. 2024-28 changes how digital-asset basis must be tracked for any taxpayer with units acquired in more than one wallet, exchange account, or custodial location. Starting January 1, 2025, basis is tracked wallet-by-wallet, not pooled across the taxpayer’s total holdings of an asset. The transition election that controls how pre-2025 basis is allocated to specific wallets must be made by the original due date of the 2025 return, including extensions under IRC §6081. The election is irrevocable (Rev. Proc. 2024-28 §3.04).
What follows is the new structure: what the procedure changes, who must do what by when, and which prior practices are no longer permissible.
What the old rule allowed
Before Rev. Proc. 2024-28, the IRS had issued no procedure addressing how a taxpayer must allocate basis among digital-asset units held across multiple wallets, exchange accounts, custodial platforms, or self-custodied addresses. Notice 2014-21 established that virtual currency is treated as property for federal income tax purposes and that general property principles apply. Rev. Rul. 2019-24 addressed hard forks and airdrops. Rev. Rul. 2023-14 addressed staking rewards. None of these directly addressed multi-wallet basis allocation.
In the absence of specific guidance, two practices were common. The first was universal-pool basis: tracking a single basis-per-unit figure for each digital asset across all of a taxpayer’s holdings, with FIFO, specific identification, or other ordering applied at the pool level. The second was per-account basis: tracking basis separately at each exchange or wallet, often because exchange-side tax reports already segregated cost basis that way. Both approaches were defensible under general property principles. They produced materially different results when units moved between wallets or when only a portion of a holding was disposed of.
Rev. Proc. 2024-28 resolves the ambiguity, prospectively. It does not retroactively reclassify prior-year reporting. It establishes the rule going forward and offers a one-time transition mechanism to align pre-2025 inventory with the new structure.
What Rev. Proc. 2024-28 requires
Under Rev. Proc. 2024-28 §3.01, starting January 1, 2025, a taxpayer must track basis for digital assets on a wallet-by-wallet, account-by-account basis. The taxpayer must apply specific identification under Treas. Reg. §1.1012-1(c) (or, by default, FIFO) within each wallet or account separately. Units in one wallet cannot be paired with basis from a different wallet for purposes of computing gain or loss on a disposition from the first wallet.
The practical implication is significant. Consider a hypothetical taxpayer holding identical-quantity positions of the same asset across two wallets, with a substantial basis disparity between the two, a low-basis self-custodied position and a higher-basis exchange position. Under the pre-2025 universal-pool approach, a disposition from the exchange could be identified against the lowest-cost lots across all holdings, producing a higher reportable gain but reflecting the taxpayer’s overall economic position. Under Rev. Proc. 2024-28, the same disposition is identified only against the exchange-side basis. The self-custodied lot remains untouched, and the gain calculation reflects only the wallet from which the disposition originated.
This restriction is most consequential for taxpayers who actively move units between wallets, who use multiple custodians, or who have meaningful basis disparities across wallets holding the same asset. It is least consequential for taxpayers whose holdings are concentrated in one account.
The transition election
For digital-asset units held as of January 1, 2025, the taxpayer must elect how the pre-2025 basis pool is allocated across the wallets that held those units on that date. Rev. Proc. 2024-28 §4 provides a safe-harbor election with two general methods.
The first is the specific unit allocation method (Rev. Proc. 2024-28 §4.01). The taxpayer designates which specific units from the pre-2025 basis pool are assigned to each wallet. This requires unit-level historical tracking, a record of how many units were in which wallet at the relevant historical points, and is the more administratively burdensome path. It is the right answer for taxpayers who have maintained detailed wallet-by-wallet records throughout their history and who want maximum control over post-2025 specific-identification options.
The second is the global allocation method (Rev. Proc. 2024-28 §4.02). The taxpayer applies a specified ordering rule (typically FIFO across the pool) to allocate the pre-2025 basis pool to the wallets in proportion to the units they held on January 1, 2025. This method is administratively simpler and is the default for taxpayers who cannot reconstruct detailed wallet history.
The transition election is made by attaching the prescribed election statement to the federal income tax return for the first taxable year ending after December 31, 2024 (Rev. Proc. 2024-28 §5). For most calendar-year individual taxpayers, that is the 2025 return, due April 15, 2026, or October 15, 2026 with an extension under IRC §6081. The election is irrevocable (Rev. Proc. 2024-28 §3.04). Failure to make the election affirmatively defaults to the global allocation method.
What practitioners need that did not exist before
A wallet-level basis regime requires practitioner workflows that did not exist under universal-pool tracking. Four specifically.
A per-wallet ledger. Every wallet, exchange account, custodial account, and self-custodied address used by the taxpayer must have its own basis ledger. Units acquired, transferred in, transferred out, and disposed of are tracked at that wallet level. Inter-wallet transfers (which are not taxable events under Notice 2014-21 because no disposition occurs) become bookkeeping entries: basis follows the units, but the source and destination ledgers must both be updated.
Per-wallet specific identification standing instructions. Specific identification under Treas. Reg. §1.1012-1(c) requires that the taxpayer can adequately identify the lots being sold. For digital assets, Rev. Proc. 2024-28 requires that the specific-identification be effective at the wallet level. Practitioners should establish, in writing, the taxpayer’s standing specific-identification instructions before any disposition occurs in 2025, typically last-in-first-out (LIFO) for loss harvesting or highest-in-first-out (HIFO) for gain minimization, with FIFO as the procedural default.
1099-DA reconciliation procedure. Beginning with calendar year 2025, brokers required to report under IRC §6045 will issue Form 1099-DA to taxpayers and to the IRS. The 1099-DA reports gross proceeds and, for covered transactions, cost basis. The basis the broker reports may not match the basis the taxpayer’s wallet-level ledger reports, most commonly because the broker’s basis reflects only the units acquired through that broker, while the taxpayer’s ledger captures the units’ full economic history including pre-broker acquisitions. A documented reconciliation procedure prevents the 1099-DA from controlling reporting by default.
Pre-2025 reconstruction for the transition election. A taxpayer who cannot adequately substantiate wallet-level basis as of January 1, 2025, falls into the global allocation default. For taxpayers whose pre-2025 records are thin, the question is whether to invest now in reconstructing wallet history (often via blockchain forensics) or to accept the global allocation result. The choice depends on the dollar value of the basis pool, the distribution of basis across wallets, and the likelihood of future dispositions that would benefit from precision identification.
What 1099-DA recipient-side reconciliation looks like
For 2025 transactions, taxpayers will receive a Form 1099-DA from each broker who effected reportable digital-asset dispositions. The 1099-DA contains the broker’s report of gross proceeds, cost basis (for covered transactions), date acquired, date sold, and a category indicating short-term or long-term. The recipient-side reconciliation works in four steps.
First, confirm the 1099-DA gross-proceeds total against the taxpayer’s wallet-level ledger for that broker’s account. Discrepancies typically reflect timing differences (a disposition late in 2025 reported in the following year), netting issues (the broker reports gross while the ledger may net), or non-cash dispositions that the broker classifies differently than the ledger.
Second, confirm the 1099-DA cost basis figure. For units the broker classifies as “covered”, generally units acquired through that broker on or after the effective date of the broker’s reporting obligation, the broker is required to track basis. For units the broker classifies as “noncovered”, generally units acquired before the effective date or transferred into the broker from elsewhere, basis is reported as $0 or omitted, and the taxpayer’s ledger controls.
Third, identify any discrepancies that require Form 8949 adjustment codes. A broker-reported basis that differs from the taxpayer’s documented basis is reconciled using the appropriate adjustment code on Form 8949, with the taxpayer’s documented basis controlling the gain or loss reported. The 1099-DA does not control the return, it informs it.
Fourth, archive the reconciliation. Specific identification under Treas. Reg. §1.1012-1(c) requires contemporaneous documentation. A reconciliation memo prepared at filing time, citing the 1099-DA and the taxpayer’s wallet ledger, satisfies the contemporaneity requirement going forward.
Downside exposure if the regime is ignored
The downside of failing to comply with Rev. Proc. 2024-28 is not theoretical. Three exposure points are concrete.
Accuracy-related penalty under IRC §6662. A return that uses pre-2025 universal-pool basis after January 1, 2025, may understate gain (or overstate loss) on dispositions. Under IRC §6662(a) and §6662(b)(2), an understatement of income tax that exceeds the greater of 10% of the tax required to be shown or $5,000 (the §6662(d) “substantial understatement” threshold) triggers a 20% accuracy-related penalty. Defending the position requires substantial authority under IRC §6662(d)(2)(B)(i), and a contrary published procedure that the taxpayer chose to ignore is not substantial authority.
Specific identification failure under Treas. Reg. §1.1012-1(c). Specific identification requires that the taxpayer adequately identify the lots being sold. Rev. Proc. 2024-28 §3.02 requires that specific identification be effective at the wallet level. Identification that does not match the wallet-by-wallet structure may be disregarded by the IRS, defaulting the disposition to FIFO within the wallet, typically producing a different gain calculation than the taxpayer reported.
1099-DA mismatch on examination. Beginning with 2025 transactions, the IRS will receive Form 1099-DA from brokers and will match those returns against taxpayer-reported Schedule D / Form 8949. A taxpayer whose reported basis cannot be reconciled to a documented wallet-level ledger has limited defense to a CP2000 notice or examination adjustment.
What this changes for 2025 prep
The 2026 filing season for tax year 2025 is the first cycle operating under the new rule. Three actions are timing-sensitive:
- Establish per-wallet ledgers now, not in March 2026. Every taxpayer with digital-asset holdings as of January 1, 2025, needs a wallet-level inventory snapshot for that date. Reconstructing this in retrospect during filing season is materially harder than capturing it concurrently.
- Document the transition election method choice in advance of filing. The election is irrevocable under Rev. Proc. 2024-28 §3.04. The choice between specific unit allocation and global allocation should be made with full visibility into the taxpayer’s reconstruction capacity and the post-2025 disposition strategy.
- Reconcile Form 1099-DA carefully when it arrives. The first year of broker reporting will surface discrepancies between broker records and taxpayer ledgers. The reconciliation process described above is the procedural defense.
The regime change does not alter what is taxable. It alters how basis is tracked and how reporting reconciles with broker information returns. The practical effect is that the digital-asset return for 2025 requires more documentation discipline than the 2024 return required, and the documentation must exist before filing season begins.
Authority: Rev. Proc. 2024-28 (esp. §3.01, §3.02, §3.04, §4.01, §4.02, §5); Notice 2014-21; Rev. Rul. 2019-24; Rev. Rul. 2023-14; IRC §1012; IRC §6045; IRC §6081; IRC §6662(a), §6662(b)(2), §6662(d); Treas. Reg. §1.1012-1(c); Form 1099-DA; Form 8949; Form 1040 (digital-asset question)