How it works
Before 2025, many taxpayers and most software tools used a universal method that treated all holdings as one pool, so a sale on one exchange could draw basis from units held elsewhere. Revenue Procedure 2024-28 ended that practice. Each wallet and exchange account now carries its own lots, and a sale can only use basis from units actually in that account. The safe harbor allowed a one-time allocation of pre-2025 basis to specific wallets, documented before January 1, 2025.
Why it matters
Brokers issuing Form 1099-DA report per account, so wallet-level records are what the IRS can check. Software still running the universal method produces numbers that will not reconcile, and taxpayers who never documented an allocation need a defensible position on where their basis lives.
Example
You hold 1 ETH bought at 1,000 dollars on Exchange A and 1 ETH bought at 3,000 dollars on Exchange B. You sell the ETH on Exchange B for 3,500 dollars. Under wallet-by-wallet accounting the gain is 500 dollars. Under the old universal method with FIFO, software would have reported a 2,500 dollar gain using the Exchange A lot.
Related: Revenue Procedure 2024-28 safe harbor, universal accounting. Read more: the new cost basis rules.
