An ICO is a token sale used to raise funds for a project. Buying into one is a purchase of property; the SEC has treated many ICOs as unregistered securities offerings.
For the buyer, the purchase price is basis, and later sale or swap is a taxable disposal. For the issuer, proceeds may be income or capital depending on structure, and the securities analysis under Howey usually decides the legal exposure.
A token bought in an ICO that later failed may support a capital loss on disposal, or a theft loss if the offering was fraudulent. Howey test and rug pull.
IRS crypto audits and letters, unreported years, theft loss opinions, and returns that survive an audit.
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Definitions are general information, not legal advice, and may not reflect the most recent changes in law.
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