A private key is the secret that controls a wallet; a seed phrase is the human-readable backup that regenerates it. Whoever holds them owns the assets, which is why loss and theft of keys are tax events in their own right.
Losing keys does not by itself create a deductible loss; the IRS requires an identifiable event and no reasonable prospect of recovery, and lost-key losses are personal casualty losses that are generally not deductible after 2018. Keys stolen in a scam or hack fall under theft loss rules.
Documentation of custody and control is what an examiner asks for when a taxpayer claims assets were lost or stolen. Crypto theft loss.
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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