Navigating Tax Issues with Abandoned Cryptocurrencies

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Can Taxpayers Deduct Losses on Abandoned or Worthless Cryptocurrency?

Written by Daniel Krolikowski, Partner at Withum

Since their creation in 2009, cryptocurrencies have been polarizing, especially when it comes to taxes, bringing both opportunities and challenges. While you must pay income taxes on income and gains made from cryptocurrency investments, the question of whether you can deduct losses from abandoned or worthless cryptocurrencies is still a hot topic.

Understanding Abandoned and Worthless Cryptocurrency

Abandonment or worthlessness happens when you give up ownership and control over a cryptocurrency because it lost value, it turned out to be a scam, a project failed, etc. According to the IRS, abandonment is proven through an evaluation of surrounding facts and circumstances, which must show an intention to abandon the property, along with an affirmative act of abandonment. Once a cryptocurrency is abandoned, it is considered ...

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