Glossary

Worthless crypto

A digital asset that has lost all value is not deductible merely because it is worthless; a loss generally requires a completed disposal, such as a sale for a nominal amount or an affirmative abandonment.

How it works

A digital asset that has lost nearly all its value is not deductible merely because it is worthless; a loss requires a completed disposal, such as a sale for a nominal amount or an affirmative abandonment. IRS Chief Counsel Advice 202302011 concluded that a token that dropped to a fraction of a cent but still traded was neither worthless nor abandoned. Selling it, even for pennies, fixes the loss in that year.

Why it matters

Investors holding dead tokens have unrealized losses they could realize with a sale before year end.

Related: tax loss harvesting. Read more: claiming losses on worthless crypto.

Guides that cover worthless crypto

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Where this comes up in our work

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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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