Internal Revenue Bulletin 2024-31 (PDF rendition): IRS Revenue Procedures

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Bulletin No. 2024–31
July 29, 2024
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
ADMINISTRATIVE
REG-120137-19, page 336.
These proposed regulations would remove the prohibition
in the current regulation under section 6311(d)(2) that pre-
vents the IRS from paying a fee under a contract that allows
the receipt of credit card or debit card payments from a
taxpayer. The proposed regulations would also remove the
prohibition on charging the taxpayer a fee for paying taxes
by credit or debit card. The proposed regulations reflect
amendments to section 6311 made in the Taxpayer First
Act. The proposed regulation would not require the IRS to
change its current procedure of using third parties to pro-
cess credit and debit card tax payments.
Rev. Proc. 2024-27, page 300.
This revenue procedure provides specifications for the private
printing of red-ink substitutes for the 2024 Forms W-2 and
W-3. This revenue procedure will be produced as the next revi-
sion of Publication 1141. Rev. Proc. 2023-25 is superseded.
ADMINISTRATIVE, INCOME TAX
T.D. 10000, page 185.
The regulations require information reporting by brokers
for certain digital asset sales and exchanges. They apply
to brokers who take possession of the assets involved in
these sales and exchanges, including custodial digital asset
exchanges, certain hosted wallet providers, certain proces-
sors of digital asset payments, and digital asset kiosks,
which are sometimes known as digital asset ATM machines.
Brokers covered by these final regulations will be required
to file new Form 1099-DA and furnish payee statements
reporting the gross proceeds of transactions occurring on
or after January 1, 2025. Certain brokers will be required to
report basis on Forms 1099-DA for transactions occurring
on or after January 1, 2026. Basis reporting is required
only if the customer acquired the digital asset being sold
or exchanged from the same broker on or after January
1, 2026. Real estate reporting persons, who were already
required to file information returns under the existing sec-
tion 6045 regulations, will now also be required to report
dispositions of digital assets as all or part of the purchase
price of real property, beginning with transactions occur-
ring on or after January 1, 2026. In addition to the broker
reporting rules, these regulations also establish rules for
calculating the value and basis of digital assets.
EMPLOYMENT TAX
REG-109032-23, page 332.
These proposed regulations under sections 3111, 3131,
3132, 3134 and 3221 of the Internal Revenue Code autho-
rize the assessment and collection of any overpayment
interest paid to a taxpayer on an erroneous refund of the
employment tax credits provided under the Families First
Coronavirus Response Act, the Coronavirus Aid, Relief, and
Economic Security Act, and the American Rescue Plan Act
of 2021. This allows the IRS to efficiently recover any over-
payment interest on erroneous refunds while preserving
administrative protections for taxpayers.
INCOME TAX
Rev. Proc. 2024-28, page 326.
Subject to certain requirements, this Revenue Procedure gen-
erally permits taxpayers to rely on any reasonable allocation
of units unattached basis to a digital asset wallet or account
that holds the same number of remaining digital asset units
based on the taxpayer’s records of such unattached basis
and remaining units. The allocation must be a reasonable
allocation as defined in section 5.02 of this Revenue Proce-
dure and must be made as of January 1, 2025. However,
the taxpayer may identify the method of allocation and may
comply with the requirements set forth in section 4.02 of this
Revenue Procedure at a later date to the extent permitted by
section 5.02(4) or 5.02(5) of this Revenue Procedure.
Finding Lists begin on page ii.

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and
enforce the law with integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing offi-
cial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of inter-
nal management are not published; however, statements of
internal practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service
on the application of the law to the pivotal facts stated in
the revenue ruling. In those based on positions taken in rul-
ings to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature are
deleted to prevent unwarranted invasions of privacy and to
comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
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against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
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To the extent practicable, pertinent cross references to these
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The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
July 29, 2024 Bulletin No. 2024–31

Part I
26 CFR 1.6045-1 Returns of information of brokers
and barter exchanges
T.D. 10000
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Parts 1, 31, and
301
Gross Proceeds and Basis
Reporting by Brokers and
Determination of Amount
Realized and Basis for
Digital Asset Transactions
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains
final regulations regarding information
reporting and the determination of amount
realized and basis for certain digital asset
sales and exchanges. The final regulations
require brokers to file information returns
and furnish payee statements reporting
gross proceeds and adjusted basis on
dispositions of digital assets effected for
customers in certain sale or exchange
transactions. These final regulations also
require real estate reporting persons to
file information returns and furnish payee
statements with respect to real estate pur-
chasers who use digital assets to acquire
real estate.
DATES: Effective date: These regulations
are effective on September 9, 2024.
Applicability dates: For dates of
applicability, see §§1.1001-7(c); 1.1012-
1(h)(5); 1.1012-1(j)(6); 1.6045-1(q);
1.6045-4(s); 1.6045B-1(j); 1.6050W-
1(j); 31.3406(b)(3)-2(c); 31.3406(g)-1(f);
31.3406(g)-2(h); 301.6721-1(j);
301.6722-1(g).
FOR FURTHER INFORMATION
CONTACT: Concerning the final reg-
ulations under sections 1001 and 1012,
Alexa Dubert or Kyle Walker of the Office
of the Associate Chief Counsel (Income
Tax and Accounting) at (202) 317-4718;
concerning the international sections of
the final regulations under sections 3406
and 6045, John Sweeney or Alan Williams
of the Office of the Associate Chief Coun-
sel (International) at (202) 317-6933;
and concerning the remainder of the final
regulations under sections 3406, 6045,
6045A, 6045B, 6050W, 6721, and 6722,
Roseann Cutrone of the Office of the
Associate Chief Counsel (Procedure and
Administration) at (202) 317-5436 (not
toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments
to the Regulations on Income Taxes (26
CFR part 1), the Regulations on Employ-
ment Tax and Collection of Income Tax at
the Source (26 CFR part 31), and the Reg-
ulations on Procedure and Administration
(26 CFR part 301) pursuant to amend-
ments made to the Internal Revenue Code
(Code) by section 80603 of the Infra-
structure Investment and Jobs Act, Public
Law 117-58, 135 Stat. 429, 1339 (2021)
(Infrastructure Act) relating to informa-
tion reporting by brokers under section
6045 of the Code. Specifically, the Infra-
structure Act clarified the rules regard-
ing how certain digital asset transactions
should be reported by brokers, expanded
the categories of assets for which basis
reporting is required to include all digital
assets, and provided a definition for the
term digital assets. Additionally, the Infra-
structure Act clarified that transfer state-
ment reporting under section 6045A(a) of
the Code applies to covered securities that
are digital assets and added a new infor-
mation reporting provision under section
6045A(d) to require brokers to report on
transfers of digital assets that are covered
securities, provided the transfer is not a
sale and is not to an account maintained by
a person, as defined in section 7701(a)(1)
of the Code, that the broker knows or has
reason to know is also a broker. Finally,
the Infrastructure Act provided that these
amendments apply to returns required to
be filed, and statements required to be
furnished, after December 31, 2023, and
provided a rule of construction stating that
these statutory amendments shall not be
construed to create any inference for any
period prior to the effective date of the
amendments with respect to whether any
person is a broker under section 6045(c)
(1) or whether any digital asset is property
which is a specified security under section
6045(g)(3)(B).
On August 29, 2023, the Treasury
Department and the IRS published in the
Federal Register (88 FR 59576) pro-
posed regulations (REG-122793-19) (pro-
posed regulations) relating to information
reporting under section 6045 by brokers,
including real estate reporting persons
and certain third party settlement organi-
zations under section 6050W of the Code.
Additionally, the proposed regulations
included specific rules under section 1001
of the Code for determining the amount
realized in a sale, exchange, or other dis-
position of digital assets and under section
1012 of the Code for calculating the basis
of digital assets. The proposed regulations
stated that written or electronic comments
provided in response to the proposed reg-
ulations must be received by October 30,
2023.
The Treasury Department and the IRS
received over 44,000 written comments
in response to the proposed regulations.
Although https://www.regulations.gov
indicated that over 125,000 comments
were received, this larger number reflects
the number of “submissions” that each
submitted comment indicated were
included in the posted comment, whether
or not the comment actually included such
separate submissions. All posted com-
ments were considered and are available
at https://www.regulations.gov or upon
request. A public hearing was held on
November 13, 2023.
Several comments requested an
extension of the time to file comments
in response to the proposed regulations.
These requests for extension ranged from
a few weeks to several years, but most
comments requested a 60-day extension.
In response to these comments, the due
date for the comments was extended until
November 13, 2023. The comment period
Bulletin No. 2024–31 185 July 29, 2024

was not extended further for several rea-
sons. First, information reporting rules are
necessary to make digital asset investors
aware of their taxable transactions and to
make those transactions more transpar-
ent to the IRS to reduce the tax gap. It is,
therefore, a priority that the publication
of these regulations is not delayed more
than is necessary. Second, although the
Infrastructure Act amended section 6045
in November 2021 to broadly apply the
information reporting rules for digital
asset transactions to a wide variety of bro-
kers, the broker reporting regulations for
digital assets were added to the Treasury
Priority Guidance Plan in late 2019. Bro-
kers, therefore, have long been on notice
that there would be proposed regulations
on which to comment. Third, as discussed
in Part VI. of this Summary of Comments
and Explanation of Revisions, the Trea-
sury Department and the IRS understand
that brokers need time after these final reg-
ulations are published to develop systems
to comply with the final reporting require-
ments. Without further delaying the appli-
cability date of these much-needed regu-
lations, therefore, extending the comment
period would necessarily reduce the time
brokers would have to develop these sys-
tems. Fourth, a 60-day comment period
is not inherently short or inadequate.
Executive Order (E.O.) 12866 provides
that generally a comment period should
be no less than 60 days, and courts have
uniformly upheld comment periods of
even shorter comment periods. See, e.g.,
Connecticut Light & Power Co. v. NRC,
673 F.2d 525, 534 (D.C.Cir. 1982), cert.
denied, 459 U.S. 835, 103 S.Ct. 79, 74
L.Ed.2d 76 (1982) (denying petitioner’s
claim that a 30 day comment period was
unreasonable, notwithstanding petition-
er’s complaint that the rule was a novel
proposition); North American Van Lines v.
ICC, 666 F.2d 1087, 1092 (7th Cir. 1981)
(claim that 45 day comment period was
insufficient rejected as “without merit”).
Indeed, over 44,000 comments were
received before the conclusion of the
comment period ending on November 13,
2023, which demonstrates that this com-
ment period was sufficient for interested
parties to submit comments. Fifth, it has
been a longstanding policy of the Trea-
sury Department and the IRS to consider
comments submitted after the published
due date, provided consideration of those
comments does not delay the process-
ing of the final regulation. IRS Policy
Statement 1-31, Internal Revenue Man-
ual 1.2.1.15.4(6) (September 3, 1987).
In fact, all comments received through
the requested 60-day extension period
were considered in promulgating these
final regulations. Moreover, the Treasury
Department and the IRS accepted late
comments through noon eastern time on
April 5, 2024.
The Summary of Comments and Expla-
nation of Revisions of the final regulations
summarizes the provisions of the proposed
regulations, which are explained in greater
detail in the preamble to the proposed reg-
ulations. After considering the comments
to the proposed regulations, the proposed
regulations are adopted as amended by
this Treasury decision in response to such
comments as described in the Summary of
Comments and Explanation of Revisions.
These final regulations concern Fed-
eral tax laws under the Internal Revenue
Code only. No inference is intended with
respect to any other legal regime, includ-
ing the Federal securities laws and the
Commodity Exchange Act, which are out-
side the scope of these regulations.
Summary of Comments and
Explanation of Revisions
I. Final §1.6045-1
A. Definition of digital assets subject to
reporting
The proposed regulations required
reporting under section 6045 for cer-
tain dispositions of digital assets that
are made in exchange for cash, different
digital assets, stored-value cards, broker
services, or property subject to reporting
under existing section 6045 regulations
or any other property in a payment trans-
action processed by a digital asset pay-
ment processor (referred to in these final
regulations as a processor of digital asset
payments or PDAP). The proposed regu-
lations defined a digital asset as a digital
representation of value that is recorded
on a cryptographically secured distrib-
uted ledger (or any similar technology),
without regard to whether each individual
transaction involving that digital asset is
actually recorded on the cryptographically
secured distributed ledger. Additionally,
the proposed regulations provided that a
digital asset does not include cash in dig-
ital form.
While some comments expressed
support for the definition of digital asset
in the proposed regulations, other com-
ments raised concerns that the definition
of digital asset goes beyond the statutory
definition found in amended section 6045.
For example, one comment recommended
applying the definition only to assets held
for investment and excluding any assets
that are used for other functions, which
include, in their view, nonfungible tokens
(NFTs), stablecoins, tokenized real estate,
and tokenized commodities. Another
comment recommended narrowing the
definition of digital asset to apply only
to blockchain “native” digital assets and
exempting all NFTs and other tokenized
versions of traditional asset classes, such
as tokenized securities, and other digital
assets that don’t function as a medium
of exchange, unit of account, or store of
value. Another comment recommended
that the definition of digital asset distin-
guish between digital representations of
what the comment referred to as “hard
assets,” such as gold, where the digital
asset is merely a proxy for the underly-
ing asset versus digital assets that are not
backed by hard assets. Another comment
recommended that the definition of digital
asset not include tokenized assets, includ-
ing financial instruments that have been
tokenized. The final regulations do not
adopt these comments. As discussed more
fully in Parts I.A.1. and A.2. of this Sum-
mary of Comments and Explanation of
Revisions, neither the statutory language
nor the legislative history to the Infra-
structure Act suggest Congress intended
such a narrow interpretation of the term.
The Infrastructure Act made changes to
the third party information reporting rules
under section 6045. Third party infor-
mation reporting generally contributes
to lowering the income tax gap, which
is the difference between taxes legally
owed and taxes actually paid. GAO, Tax
Gap: Multiple Strategies Are Needed to
Reduce Noncompliance, GAO-19-558T at
6 (Washington, D.C.: May 9, 2019). It is
anticipated that broker information report-
ing on digital asset transactions will lead
July 29, 2024 186 Bulletin No. 2024–31

Bulletin No. 2024–31 187 July 29, 2024
to higher levels of taxpayer compliance
because brokers will provide the infor-
mation necessary for taxpayers to pre-
pare their Federal income tax returns and
reduce the number of inadvertent errors
or intentional omissions or misstatements
shown on those returns. Because digital
assets can easily be held and transferred,
including to offshore destinations, directly
by a taxpayer rather than by an interme-
diary, digital asset transactions raise tax
compliance concerns that are specific to
digital assets in addition to the more gen-
eral tax compliance concerns relevant to
securities, commodities, and other assets
that are reportable under section 6045
and to cash payments reportable under
other reporting provisions. The Treasury
Department and the IRS have conse-
quently concluded that the definition of
digital assets in section 6045(g)(3)(D)
provides the appropriate scope for digi-
tal assets subject to broker reporting. To
the extent sales of digital assets includ-
ing NFTs, tokenized securities, and other
digital assets that may not function as a
medium of exchange, unit of account, or
store of value, give rise to taxable gains
and losses, these assets should be included
in the definition of digital assets. See,
however, Part I.D.3. of this Summary of
Comments and Explanation of Revisions
for a description of an optional reporting
rule for many NFTs that would eliminate
reporting on those NFTs when certain
conditions are met, and Part I.A.4.a. of
this Summary of Comments and Explana-
tion of Revisions for a description of a spe-
cial rule providing that assets that are both
securities and digital assets are reportable
as securities rather than as digital assets
when specified conditions are met.
Some comments asserted that the
statutory definition of digital assets is or
should be limited to assets that are finan-
cial instruments. These comments are dis-
cussed in Part I.A.2. of this Summary of
Comments and Explanation of Revisions.
Other comments raised a concern that
the definition of digital assets is ambigu-
ous and recommended adding examples
that clarify the types of property that are
and are not digital assets. For reasons dis-
cussed more fully in Parts I.A.1., A.2., and
A.3. of this Summary of Comments and
Explanation of Revisions, the final regula-
tions include several additional examples
that illustrate and further clarify certain
types of digital assets that are included
in the definition, such as qualifying sta-
blecoins, specified nonfungible tokens
(specified NFTs), and other fungible dig-
ital assets.
One comment suggested that the term
cryptographically secured distributed led-
ger be defined in the final regulations as
a type of data storage and transmission
file which uses cryptography to allow for
a decentralized system of verifying trans-
actions. This comment also stated that
the definition should state that the stored
information is an immutable database and
includes an embedded system of oper-
ation, and that a blockchain is a type of
distributed ledger. The final regulations do
not adopt this recommendation because
clarification of the term is not necessary
and because the recommended changes
are potentially unduly restrictive to the
extent they operate to restrict future bro-
ker reporting obligations should advance-
ments be made in how distributed ledgers
are cryptographically secured.
One comment suggested that the
proposed definition of a digital asset is
overly broad because it includes transac-
tions recorded in the broker’s books and
records (commonly referred to as “off-
chain” transactions) and not directly on
a distributed ledger. Another comment
specifically supported the decision to not
limit the definition to only those digital
representations for which each transac-
tion is actually recorded or secured on a
cryptographically secured distributed led-
ger. The Treasury Department and the IRS
have determined that the definition of dig-
ital asset is not overly broad in this regard
because eliminating digital assets that are
traded in off-chain transactions from the
definition would fail to provide informa-
tion reporting on the significant amount
of trading that occurs off-chain on the
internal ledgers of custodial digital asset
trading platforms. Moreover, since the
mechanics of how an asset sale is recorded
does not impact whether there has been a
taxable disposition of that asset, those
mechanics should not impact whether the
underlying asset is or is not a digital asset.
A comment suggested that the defi-
nition of a digital asset should eliminate
the phrase “or any similar technology”
because the scope of that phrase is unclear
and could negatively impact future tech-
nology improvements, such as priva-
cy-preserving technology, cryptography,
distributed database systems, distributed
network systems, or other evolving tech-
nology. Another comment requested that
the definition of any similar technology be
limited to instances in which the IRS iden-
tifies such future similar technologies in
published guidance. The final regulations
do not adopt this comment. Using the
phrase “any similar technology” is con-
sistent with the Infrastructure Act’s use of
the same term in its definition of digital
assets in section 6045(g)(3)(D). Further,
including any similar technology along
with cryptographically secured ledgers is
necessary to ensure that brokers continue
to report on transactions involving these
assets without regard to advancements in
or changes to the techniques, methods,
and technology, on which these assets are
based. The Treasury Department and the
IRS are not currently aware of any exist-
ing technology that would fit within this
“or any similar technology” standard, but
if brokers or other interested parties iden-
tify new technological developments and
are uncertain whether they fit within the
definition, they can make the Treasury
Department and the IRS aware of the new
technology and request guidance at that
time.
1. Stablecoins
As explained in the preamble to the
proposed regulations, the definition of
digital assets was intended to apply to all
types of digital assets, including so-called
stablecoins that are designed to have a sta-
ble value relative to another asset or assets.
The preamble to the proposed regulations
noted that such stablecoins can take mul-
tiple forms, may be backed by several dif-
ferent types of assets that are not limited
to currencies, may not be fully collateral-
ized or supported fully by reserves by the
underlying asset, do not necessarily have a
constant value, are frequently used in con-
nection with transactions involving other
types of digital assets, and are held and
transferred in the same manner as other
digital assets. In addition to fiat currency,
other assets to which so-called stable-
coins can be pegged include commodities
or other financial instruments (including

July 29, 2024 188 Bulletin No. 2024–31
other digital assets). No comments were
received that specifically advocated for
the exclusion of a so-called stablecoin that
has a fixed exchange rate with (that is, is
pegged to) a commodity, another financial
instrument, or any other asset other than
a specific convertible currency issued by
a government or a central bank (includ-
ing the U.S. dollar) (sometimes referred
to in this preamble as fiat currency). The
Treasury Department and the IRS have
determined that it would be inappropriate
to exclude stablecoins that are pegged to
such assets from the definition of digital
assets. Accordingly, this preamble uses the
term stablecoin to refer only to the subset
of so-called stablecoins referred to in the
proposed regulations that are pegged to a
fiat currency.
Numerous comments received specifi-
cally advocated for the exclusion from the
definition of digital assets stablecoins that
are pegged to a fiat currency. Numerous
comments stated that failure to exclude
stablecoins from the definition of digital
assets would hinder the adoption of these
stablecoins in the marketplace, deter their
integration into commercial payment sys-
tems, and undermine Congressional efforts
to establish a regulatory framework for
stablecoins that can be used to make pay-
ments. Additional comments raised con-
cerns about privacy, drew an analogy to
the exemption in the existing regulations
for reporting on shares of money market
funds, or recommended that reporting
on stablecoins be deferred until after the
substantive tax treatment of stablecoins
is clarified with guidance issued by the
Treasury Department and the IRS or until
a legislative framework is established by
Congress. Several other comments rec-
ommended that reporting on stablecoins
be required, noting that stablecoins can be
volatile in value and regularly vary from
a one-to-one parity with the fiat currency
they are pegged to, and therefore may give
rise to gain or loss on disposition.
After consideration of the comments,
the final regulations do not exclude stable-
coins from the definition of digital assets.
Stablecoins unambiguously fall within
the statutory definition of digital assets
as they are digital representations of the
value of fiat currency that are recorded
on cryptographically secured distributed
ledgers. Moreover, because stablecoins
are integral to the digital asset ecosystem,
excluding stablecoins from the definition
of digital assets would eliminate a source
of information about digital asset trans-
actions that the IRS can use in order to
ensure compliance with taxpayers’ report-
ing obligations.
The Treasury Department and the IRS
are aware that legislation has been pro-
posed that would regulate the issuance
and terms of stablecoins. If legislation is
enacted regulating stablecoins, the Trea-
sury Department and the IRS intend to
take that legislation into account in con-
sidering whether to revise the rules for
reporting on stablecoins provided in these
final regulations.
Notwithstanding that the final regula-
tions include stablecoins in the definition
of digital assets, the Secretary has broad
authority under section 6045 to determine
the extent of reporting required by brokers
on transactions involving digital assets. In
response to the request for comments in
the preamble to the proposed regulations
on whether stablecoins, or other coins
whose value is pegged to a specified asset,
should be excluded from reporting under
the final regulations, numerous comments
largely focused on stablecoins, rather than
coins that track a commodity price or the
price of another digital asset. Many of
these comments requested that sales of sta-
blecoins be exempted from broker report-
ing in whole or in part because reporting
on all transactions involving stablecoins
would result in a very large number of
reports on transactions involving little to
no gain or loss, on the grounds that these
reports would be burdensome for brokers
to provide, potentially confusing to tax-
payers and of minimal utility to the IRS.
These comments asserted that most trans-
actions involved little or no gain or loss
because, in their view, stablecoins closely
track the value of the fiat currency to
which they are pegged. Some comments
recommended that certain types of stable-
coin transactions be reportable, including
requiring reporting of dispositions of sta-
blecoins for cash or where there is active
trading in the stablecoin that is intended to
give rise to gain (or loss).
The Treasury Department and the
IRS agree that transaction-by-transaction
reporting for stablecoins would result in a
high volume of reports. Indeed, according
to a report by Chainalysis on the “Geog-
raphy of Cryptocurrency” analyzing pub-
lic blockchain transactions (commonly
referred to as “on-chain” transactions),
stablecoins are the most widely used type
of digital asset, making up more than half
of all on-chain transactions to or from
centralized services between July 2022
and March 2023. Chainalysis, The 2023
Geography of Cryptocurrency Report, p.
14 (October 2023). Given the popular-
ity of stablecoins and the number of sta-
blecoin sales that are unlikely to reflect
significant gains or losses, the Treasury
Department and the IRS have determined
that it is appropriate to provide an alter-
native reporting method for certain stable-
coin transactions to alleviate unnecessary
and burdensome reporting. Accordingly,
the final regulations have added a new
optional alternative reporting method for
sales of certain stablecoins to allow for
aggregate reporting instead of transac-
tional reporting, with a de minimis annual
threshold below which no reporting is
required. See Part I.D.2. of this Summary
of Comments and Explanation of Revi-
sions. Consistent with the proposed regu-
lations, brokers that do not use this alter-
native reporting method must report sales
of stablecoins under the same rules as for
other digital assets. See Part I.D.2. of this
Summary of Comments and Explanation
of Revisions for the discussion of alterna-
tive reporting rules for certain stablecoins.
2. Nonfungible Tokens
As with stablecoins, the definition
of digital assets in the proposed regula-
tions includes NFTs without regard to
the nature of the underlying asset, if any,
referenced by the NFT. Although some
comments expressed agreement that the
definition of digital asset in the statute is
broad enough to include all NFTs, other
comments raised concerns that the Secre-
tary did not have the authority to include
NFTs in broker reporting. That is, the com-
ments argued that while NFTs have value,
they do not constitute “representations of
value” as required by the statutory defini-
tion in section 6045(g)(3)(D). Classifying
an NFT as a “representation of value”
merely because it has value, these com-
ments asserted, would fail to give effect
to the word “representation” in the statute.

Bulletin No. 2024–31 189 July 29, 2024
As support for this view, one comment
cited to Senator Portman’s floor collo-
quy reference to the intended application
of the reporting rule to “cryptocurrency.”
167 Cong. Rec. S6095-6 (daily ed. August
9, 2021). Ultimately, these comments rec-
ommended excluding sales of NFTs from
the definition of digital assets. The final
regulations do not adopt these comments.
Although NFTs may reference assets with
value, this does not prevent them from
also “representing value.” Moreover, that
interpretation would lead to a result that
would contravene the statutory changes
to the broker reporting rules by the Infra-
structure Act. Excluding all NFTs from the
definition of digital assets merely because
NFTs may reference assets with value
rather than “represent value” would result
in the exclusion of NFTs that reference
traditional financial assets. These assets
have been subject to reporting under sec-
tion 6045 for nearly 40 years, and there
is no reason to exclude them from report-
ing now based only on the circumstance
of their trades through NFTs, rather than
through other traditional means.
Numerous comments asserted that the
statutory reference to any “representation
of value” should limit the definition of
digital assets to only those digital assets
that reference financial instruments or
otherwise could be used to deliver value
(such as a method of payment). Numer-
ous comments expressed that many NFTs,
such as, digital art and collectibles, are
unique digital assets that are bought and
sold for personal enjoyment rather than
financial gain and therefore should not
be subject to reporting. Similarly, other
comments raised the series-qualifier
canon of statutory construction, which
provides that when a statute contains a
list of closely related, parallel, or over-
lapping terms followed by a modifier,
that modifier should be applied to all the
terms in the list. Therefore, according to
the comments, because “any digital asset”
is included in the section 6045(g)(3)(B)
list of assets defining specified security
and because that list concludes with “any
other financial instrument,” these com-
ments argue that the definition of “digital
asset” must be limited to assets that are,
or are akin to, “financial instruments.” As
additional support for this suggestion, one
comment cited the rule of last anteced-
ent, which is another canon of statutory
construction and provides that a limiting
clause or phrase should ordinarily be read
as modifying only the noun or phrase that
it immediately follows. That is, because
the “other financial instrument” clause
directly follows “any digital asset” in the
list, the definition of any digital asset must
be limited to only those digital assets that
constitute financial instruments.
The final regulations do not adopt these
comments. The plain language of the dig-
ital asset definition in section 6045(g)(3)
(D) reflects only two specific limitations
on the definition: “[e]xcept as otherwise
provided by the Secretary” and “recorded
on a cryptographically secured distributed
ledger or similar technology as specified
by the Secretary.” The legislative history
to the Infrastructure Act does not support
the conclusion that Congress intended
the “representation of value” phrase to
limit the definition of digital assets to
only those digital assets that are financial
instruments. To the contrary, a report by
the Joint Committee on Taxation pub-
lished in the Congressional Record prior
to the enactment of the Infrastructure Act
cited to and relied on the Notice 2014-21,
2014-16 I.R.B. 938 (April 14, 2014) defi-
nition of virtual currency, which first used
the phrase “representation of value.” 167
Cong. Rec. S5702, 5703 (daily ed. August
3, 2021) (Joint Committee on Taxation,
Technical Explanation of Section 80603
of the Infrastructure Act). That virtual
currency definition specifically limited
the “representation of value” phrase to
those assets that function “as a medium
of exchange, unit of account, and/or store
of value.” This limitation would not have
been necessary had the “representation of
value” phrase been limited to assets that
function as financial instruments. More-
over, Congress’ use of the term “digital
asset” instead of “digital currency” also
supports the broader interpretation of the
term.
The final regulations also do not adopt
the interpretation of the referenced canons
of statutory construction presented by the
comments because those canons should
not be used to limit the definition of digital
assets in a statute that includes an explicit
and unambiguous definition of that term.
Moreover, the referenced canons do not
lead to the result asserted by the com-
ments. The series-qualifier canon is not
applicable here because not all the items
in the list at section 6045(g)(3)(B) are
consistent with the “financial instrument”
language following the list. For example,
section 6045(g)(3)(B)(iii) references any
commodity, which under §1.6045-1(a)(5)
of the final regulations effective before the
effective date of these final regulations
1

and these final regulations, specifically
includes physical assets, such as lead,
palm oil, rapeseed, tea, and tin, which are
not financial instruments. The term com-
modity also includes any type of personal
property that is traded through regulated
futures contracts approved by the U.S.
Commodity Futures Trading Commission
(CFTC), which include live cattle, natural
gas, and wheat. See §1.6045-1(a)(5) of the
pre-2024 final regulations. (These final
regulations also add to the definition of
commodity personal property that is traded
through regulated futures contracts certi-
fied to the CFTC.) These assets also are
not financial instruments. Consequently,
the term “any other financial instrument”
in section 6045(g)(3)(B)(v) should not be
read to limit the meaning of the items in
the list that came before it. For similar rea-
sons, the rule of last antecedent also does
not limit the meaning of digital assets.
Prior to the changes made to section 6045
by the Infrastructure Act, the financial
instruments language followed the com-
modities clause. As such, when enacted
the financial instruments phrase could
1
Numerous Treasury decisions have been published under §1.6045-1. See T.D. 7873, 48 FR 10302 (Mar. 11, 1983); T.D. 7880, 48 FR 12940 (Mar 28, 1983); T.D. 7932, 48 FR 57485 (Dec.
30, 1983); T.D. 7960, 49 FR 22281 (May 29, 1984); T.D. 8445, 57 FR 53031 (Nov. 6, 1992); T.D. 8452, 57 FR 58983 (Dec. 14, 1992); T.D. 8683, 61 FR 53058 (Oct. 10, 1996); T.D. 8734,
62 FR 53387 (Oct. 14, 1997); T.D. 8772, 63 FR 35517 (Jun. 30, 1998); T.D. 8804, 63 FR 72183 (Dec. 31, 1998); T.D. 8856, 64 FR 73408 (Dec. 30, 1999); T.D. 8881, 65 FR 32152 (May 22,
2000), corrected 66 FR 18187 (April 6, 2001); T.D. 8895, 65 FR 50405 (Aug. 18, 2000); T.D. 9010, 67 FR 48754 (Jul. 26, 2002); T.D. 9241, 71 FR 4002 (Jan. 24, 2006);T.D. 9504, 75 FR
64072 (Oct. 18, 2010); T.D. 9616, 78 FR 23116 (April 18, 2013); T.D. 9658, 79 FR 12726 (Mar. 6, 2014); T.D. 9713, 80 FR 13233 (Mar. 13, 2015); T.D. 9750, 81 FR 8149 (Feb. 18, 2016),
corrected 81 FR 24702 (Apr. 27, 2016); T.D. 9774, 81 FR 44508 (Jul. 8, 2016); T.D. 9808, 82 FR 2046 (Jan. 6, 2017), corrected 82 FR 29719 (Jun. 30, 2017); T.D. 9984, 88 FR 87696 (Dec.
19, 2023). The regulations effective before the effective date of these final regulations will collectively be referred to as the pre-2024 final regulations.

July 29, 2024 190 Bulletin No. 2024–31
not have been intended to limit the item
in the list (commodity) that immediately
preceded it. Accordingly, the Treasury
Department and the IRS understand the
inclusion of other financial instruments
as potential specified securities as a grant
of authority to expand the list of specified
securities, not as a provision limiting the
meaning of the other asset types listed as
specified securities.
One comment suggested that the final
regulations should limit the definition of
a digital asset to exclude NFTs not used
as payment or investment instruments to
align the section 6045 reporting rules with
other rules and regulatory frameworks.
One comment recommended limiting the
definition to only digital assets that can
be converted to U.S. dollars, another fiat
currency, or an asset with market value.
Several comments suggested that includ-
ing all NFTs in the definition of digital
assets would be inconsistent with the
intended guidance announced in Notice
2023-27, Treatment of Certain Nonfungi-
ble Tokens as Collectibles, 2023-15 I.R.B.
634 (April 10, 2023), which indicated that
the IRS intends to determine whether an
NFT constitutes a collectible under sec-
tion 408(m) of the Code by using a look-
through analysis that looks to the NFT’s
associated right or asset. Other comments
recommended that the final regulations
limit the definition of digital assets to
exclude NFTs not used as payment or
investment instruments to align the sec-
tion 6045 reporting rules with the report-
ing rules for digital assets by foreign gov-
ernments, such as the Council directive
(EU) 2023/2266 of 17 October amending
Directive 2011/16/EU on administrative
cooperation in the field of taxation, which
is popularly known as DAC8. Yet other
comments recommended that the final
regulations conform to guidelines from
the Financial Action Task Force (FATF),
an inter-governmental body that sets
international standards that aim to prevent
money laundering and terrorism financ-
ing. FATF guidelines distinguish between
those NFTs that are used “as collectibles”
from those used “as payment or invest-
ment instruments.” Finally, one comment
urged the Treasury Department and the
IRS to follow the Financial Accounting
Standards Board (FASB) standards, which
completely exclude NFTs from their defi-
nition of digital assets due to their nonfun-
gible nature. FASB, Accounting Standards
Update, Intangibles – Goodwill and Other
– Crypto Assets (Subtopic 350-60), No.
2023-08, December 2023.
These final regulations do not adopt
these comments because they would make
the definition of digital assets unduly
restrictive. The goal behind information
reporting by brokers is to close or signifi-
cantly reduce the income tax gap from
unreported income and to provide infor-
mation that assists taxpayers. Informa-
tion reporting generally can achieve that
objective when brokers report to the IRS
and to their customers the information
necessary for customers to report their
income. The considerations relevant to
a U.S. third party information reporting
regime are not the same as the consider-
ations that are relevant to the definition of
collectibles under section 408(m), which
applies in order to determine assets that
have adverse tax consequences if acquired
by certain retirement accounts and that are
subject to special tax rates. While non-
tax policies relating to combating money
laundering and terrorism financing or
guidelines for generally accepted account-
ing standards may have some relevance,
they are not determinative for Federal
tax purposes under the Code. Finally, the
Treasury Department and the IRS under-
stand that DAC8 is intended to apply in the
same manner as a closely related OECD
standard, discussed in the next para-
graph. Moreover, NFTs that are actively
traded on trading platforms appear to be
used for investment purposes in addition
to any other purposes. Publicly available
information reports that trading in some
NFT collections has been in the billions
of dollars over time and that 24-hour trad-
ing volume in NFTs in 2024 has ranged
from $60-410 million. This trading activ-
ity suggests that at least some NFT collec-
tions have sufficient volume and liquidity
to facilitate their use as investments rather
than as traditional collectibles.
Another comment suggested that the
final regulations should limit the defini-
tion of digital assets to exclude NFTs to
align the section 6045 definition of digi-
tal assets with the definition of “Relevant
Crypto-Asset” under the Crypto-Asset
Reporting Framework (CARF), a frame-
work for the automatic exchange of
information between countries on cryp-
to-assets developed by the Organisation
for Economic Co-operation and Devel-
opment (OECD) and to which the United
States is a party. As discussed in Part
I.G.2. of this Summary of Comments and
Explanation of Revisions, once the United
States implements the CARF, U.S. digital
asset brokers will need to file information
returns under both these final regulations
with respect to their U.S. customers, and,
under separate final regulations imple-
menting the CARF reporting require-
ments, with respect to their non-U.S. cus-
tomers that are resident in jurisdictions
implementing the CARF. These final reg-
ulations generally attempt to align defini-
tions with those used in the CARF to the
extent possible. In this case, however, the
final regulations do not adopt this com-
ment because the CARF’s definition of
Relevant Crypto-Assets is already con-
sistent with a definition of digital assets
that includes NFTs. As noted in paragraph
12 of the CARF’s Commentary on Sec-
tion IV: Defined terms, although NFTs are
often marketed as collectibles, this func-
tion does not prevent an NFT from being
able to be used for payment or invest-
ment purposes. “NFTs that are traded on
a marketplace can be used for payment or
investment purposes and are therefore to
be considered Relevant Crypto-Assets.”
See Part I.G.1. of this Summary of Com-
ments and Explanation of Revisions, for
a discussion of the United States’ imple-
mentation of the CARF.
Notwithstanding that the final regu-
lations include NFTs in the definition of
digital assets under section 6045(g)(3)(D),
the Treasury Department and the IRS have
determined that, pursuant to discretion
under section 6045(a), it is appropriate to
provide an alternative reporting method
for certain types of NFTs to alleviate bur-
densome reporting. As discussed in Part
I.D.3. of this Summary of Comments and
Explanation of Revisions, the final regu-
lations have added a new optional alter-
native reporting method for sales of cer-
tain NFTs to allow for aggregate reporting
instead of transactional reporting, with a
de minimis annual threshold below which
no reporting is required. The Treasury
Department and the IRS anticipate that the
de minimis annual threshold will eliminate
reporting on many low-value NFT trans-

Bulletin No. 2024–31 191 July 29, 2024
actions that are less likely to be used for
payment or investment purposes.
3. Closed Loop Assets
The preamble to the proposed regula-
tions stated that the definition of a dig-
ital asset was not intended to apply to
the types of virtual assets that exist only
in a closed system and cannot be sold
or exchanged outside that system for fiat
currency. The preamble also stated that
the definition of digital assets was not
intended to cover uses of distributed led-
ger technology for ordinary commercial
purposes, such as tracking inventory or
processing orders for purchase and sale
transactions, that do not create transfer-
able assets and are therefore not likely
to give rise to sales as defined for pur-
poses of the regulations. Several com-
ments requested that the final regula-
tions be revised to provide an exception
for closed loop uses in the regulatory
text and to add examples illustrating
that these types of virtual assets are not
included in the definition of a digital
asset. Another comment recommended
that the final regulations expressly limit
the definition of digital assets to only
those digital assets that function as cur-
rency as described in Notice 2014-21 or
that have the capability of being pur-
chased, sold, or exchanged. The Trea-
sury Department and the IRS agree that
the text of the final regulations should
make clear that transactions involving
digital assets in the above-described
closed loop environments should not
be subject to reporting. The final regu-
lations do not limit the definition of a
digital asset as requested to accommo-
date these comments, however, because
it is not clear how the definition could
narrowly carve out only these closed
loop digital assets without also carving
out other assets for which reporting is
appropriate. Instead, to address these
comments, the final regulations add
transactions involving these closed loop
digital assets to the list of excepted sales
that are not subject to reporting under
§1.6045-1(c)(3)(ii). See Part I.C. of this
Summary of Comments and Explana-
tion of Revisions, for a discussion of the
closed loop transactions added to the list
of excepted sales at §1.6045-1(c)(3)(ii).
4. Coordination with Reporting Rules for
Securities, Commodities, and Real Estate
The preamble to the proposed regula-
tions noted that the Treasury Department
and the IRS are aware that many provi-
sions of the Code incorporate references
to the terms security or commodity, and
that questions exist as to whether, and if
so, when, a digital asset may be treated as
a security or a commodity for purposes of
those Code sections. Apart from the rules
under sections 1001 and 1012 discussed in
Part II. of this Summary of Comments and
Explanation of Revisions, these final reg-
ulations are information reporting regula-
tions, and are therefore not the appropriate
vehicle for answering those questions.
Accordingly, the treatment of an asset
as reportable as a security, commodity,
digital asset, or otherwise in these rules
applies for purposes of sections 3406,
6045, 6045A, 6045B, 6050W, 6721, and
6722 of the Code, and for certain purposes
of sections 1001 and 1012, and should not
be construed to apply for any other pur-
pose of the Code, including but not lim-
ited to determining whether a digital asset
should be classified as a security, com-
modity, option, securities futures contract,
regulated futures contract, or forward con-
tract.
One comment expressed concern that
promulgation of final regulations requir-
ing brokers to report on digital asset
transactions could be cited by other gov-
ernment agencies to support treating dig-
ital assets as securities for purpose of the
securities statutes, rules, and regulations.
This comment requested that these regu-
lations not take any position on whether
digital assets are securities for these other
purposes. The Treasury Department and
the IRS agree with this comment. The
potential characterization of digital assets
as securities, commodities, or derivatives
for purposes of any other legal regime,
such as the Federal securities laws and the
Commodity Exchange Act, is outside the
scope of these final regulations.
a. Special coordination rules for dual
classification assets
Because §1.6045-1(a)(9) of the pre-
2024 final regulations (redesignated in the
proposed and final regulations as §1.6045-
1(a)(9)(i)) require reporting with respect
to sales for cash of securities as defined
in §1.6045-1(a)(3) and certain commod-
ities as defined in §1.6045-1(a)(5), the
proposed regulations included coordi-
nation rules to provide certainty to bro-
kers with respect to whether a particular
transaction involving securities or certain
commodities is reportable as a securi-
ties or commodities sale under proposed
§1.6045-1(a)(9)(i) (sale of securities or
commodities) or as a digital assets sale
under proposed §1.6045-1(a)(9)(ii) (sale
of digital assets) and to avoid duplicate
reporting obligations. Specifically, for
transactions involving the sale of a digi-
tal asset that also constitutes the sale of a
commodity or security (other than options
that constitute contracts covered by sec-
tion 1256(b) of the Code) (dual classifica-
tion assets), the proposed regulations pro-
vided that the broker would report the sale
only as a sale of a digital asset and not as a
sale of a security or commodity.
Numerous comments raised the con-
cern that requiring brokers that have been
historically reporting sales of securities
and commodities on Form 1099-B, Pro-
ceeds from Broker and Barter Exchange
Transactions to report these transactions
as sales of digital assets on Form 1099-
DA, Digital Asset Proceeds From Broker
Transactions would force these brokers to
overhaul their existing reporting systems
and potentially cause confusion for tax-
payers who are not even aware that their
securities and commodities have been
tokenized. To address this concern, some
comments recommended that the digi-
tal asset definition be revised to exclude
some or all securities and commodities.
Other comments recommended revising
the coordination rule so that the reporting
rules for sales of securities and commod-
ities apply to digital assets that are also
securities or commodities. One comment
suggested applying the reporting rules for
sales of securities and commodities to any
digital asset that represents a fund subject
to the Investment Company Act of 1940,
15 U.S.C. 80a-1 et seq. (1940 Act Fund),
or another highly regulated product out-
side of 1940 Act Funds.
The final regulations do not adopt the
comments recommending that sales of
dual classification assets generally be
reported as sales of securities or commod-

July 29, 2024 192 Bulletin No. 2024–31
ities. One of the benefits of treating dual
classification assets as digital assets is that
it avoids forcing brokers to make determi-
nations about whether the dual classifica-
tion asset is properly classified as a secu-
rity or a commodity under current law. For
example, a rule that treats all dual classi-
fication assets as securities and commod-
ities would require brokers to determine
whether a digital asset that represents a
governance token is properly classified
as a security under final §1.6045-1(a)
(3) to determine how to report sales of
that digital asset. Moreover, such a rule
would affect reporting on digital assets
commonly referred to as cryptocurrencies
that fit within the definition of a commod-
ity under final §1.6045-1(a)(5)(i) because
the trading of regulated futures contracts
in that digital asset has been certified to
the CFTC. It would be inappropriate for
brokers to report these assets as sales of
commodities rather than as sales of digital
assets because, as is discussed in Part I.F.
of this Summary of Comments and Expla-
nation of Revisions, it is important that
brokers report basis for these sales.
Other comments offered recommen-
dations designed to limit reporting of
dual classification assets under the rules
governing sales of securities and com-
modities. For example, one comment
recommended that the reporting rules for
sales of securities and commodities apply
to any digital asset representing readily
ascertainable securities or commodities
and not purely blockchain-based digital
assets, such as cryptocurrencies or gov-
ernance tokens, for which treatment as
securities or commodities may be uncer-
tain. Another comment recommended
that the reporting rules for sales of secu-
rities and commodities apply to any dig-
ital asset that represents a non-digital
asset security or commodity otherwise
reportable on Form 1099-B under the
reporting rules for sales of securities and
commodities or is otherwise backed by
collateral that represents such non-digital
asset. One comment suggested applying
the reporting rules for sales of securities
and commodities to any digital asset, the
blockchain ledger entry for which solely
serves as a record of legal ownership of an
underlying security or commodity that is
not itself a digital asset. Another comment
recommended applying the reporting rules
for sales of securities and commodities to
dual classification assets that are digitally
native to a blockchain that is used sim-
ply to record ownership changes. Recog-
nizing that identifying digital assets that
represent securities and commodities that
are not themselves digital assets could be
burdensome, one comment recommended
that when information is not available
for brokers to make these determinations
about dual classification assets, the broker
should report the transaction as a sale of a
digital asset. Another comment requested
that the final regulations include a safe
harbor rule providing that no penalties
will be imposed on a broker who consis-
tently and accurately reports the sale of
dual classification assets under either the
reporting rules for sales of securities and
commodities (on Form 1099-B) or for
sales of digital assets (on Form 1099-DA)
based on the broker’s reasonable determi-
nation that the chosen reporting method is
correct because it may be administratively
difficult for brokers to examine every dual
classification asset to make a determina-
tion based on the nature of the asset.
Numerous comments also focused on
the circumstances that may give rise to
securities and commodities being treated
as digital assets. For example, one com-
ment indicated that the proposed coordi-
nation rule would inadvertently capture
transactions involving securities and com-
modities for which brokers use distrib-
uted ledger technology, shared ledgers,
or similar technology merely to facilitate
the processing, clearing, or settlement of
orders between well-regulated brokers
and other financial institutions. To address
this concern, several comments recom-
mended that the reporting rules for sales
of securities and commodities apply only
to digital assets that are more appropri-
ately categorized within a traditional asset
class (for example, as a security with an
effective registration statement filed under
the Securities Act of 1933) and that are
issued, stored, or transferred through a
distributed ledger that is a regulated clear-
ing agency system in compliance with all
applicable Federal and State securities
laws. Another comment recommended
addressing this problem by making the
information required to be reported for
digital asset sales (on Form 1099-DA)
not more burdensome than that for secu-
rities and commodities (on Form 1099-
B). Another comment requested that, if
brokers are required to report these dual
classification assets on the Form 1099-
DA, the final regulations allow brokers to
optionally make appropriate basis adjust-
ments for dual classification assets that
are securities. This comment also recom-
mended revising the rules in §1.6045-1(d)
(2)(iv)(B) of the pre-2024 final regula-
tions to permit (but not require) brokers to
take into account information about a cov-
ered security other than what is furnished
on a transfer statement or issuer statement
and to provide penalty relief under certain
circumstances to brokers that take such
information into account. Finally, one
comment recommended providing written
clarity that even though wash sale adjust-
ment rules do not apply to digital assets,
they still apply to tokenized securities
such as, for example, 1940 Act Funds.
The Treasury Department and the IRS
have concluded that it is generally not
appropriate to permit optional approaches
to reporting dual classification assets
because the underlying reporting require-
ments for securities and commodities are
significantly different from those for dig-
ital assets due, in large part, to industry
differences and the timing of when the
reporting rules were first implemented.
Although the proposed requirement for
brokers to report transaction identifica-
tion numbers and digital asset addresses
has been removed in these final regula-
tions (see Part I.D. of this Summary of
Comments and Explanation of Revisions),
there are several remaining differences in
the basis reporting requirements for secu-
rities and commodities as compared to
digital assets. For example, unlike brokers
effecting sales of digital assets, brokers
effecting sales of commodities are not
required to report the customer’s adjusted
basis for those commodities because com-
modities are not included in the definition
of covered securities. Additionally, bro-
kers effecting sales of stock, other than
stock for which the average basis method
is available under §1.1012-1(e), must gen-
erally report the adjusted basis of these
shares to the extent they were acquired
for cash in an account on or after Janu-
ary 1, 2011, and generally must report the
adjusted basis on shares of stock for which
the average basis method is available to

Bulletin No. 2024–31 193 July 29, 2024
the extent those shares were acquired for
cash in an account on or after January 1,
2012. These brokers of stock that are cov-
ered securities under final §1.6045-1(a)
(15)(i)(A) or (B) must also send transfer
statements to other brokers under section
6045A when their customers move that
stock to another broker.
In contrast, as discussed in Part I.F. of
this Summary of Comments and Expla-
nation of Revisions, under the final regu-
lations, brokers effecting sales of digital
assets that are covered securities under
final §1.6045-1(a)(15)(i)(J) are required
to report the adjusted basis of those digital
assets only if they were acquired for cash,
stored-value cards, different digital assets,
or certain other property or services in the
customer’s account by such brokers pro-
viding custodial services for such digital
assets on or after January 1, 2026. Addi-
tionally, these brokers are not currently
required to send transfer statements to
other brokers under section 6045A when
their customers transfer digital assets that
are specified securities to another broker.
Indeed, the details of how section 6045A
reporting will apply to brokers of digital
assets will not be addressed until a future
notice of proposed rulemaking. Accord-
ingly, whether the sale of a dual classifica-
tion asset is treated as a sale of a security
or commodity under final §1.6045-1(a)
(9)(i) or as a sale of a digital asset under
final §1.6045-1(a)(9)(ii) has consequences
beyond the particular form that the broker
must use when filing returns with respect
to those sales.
Given these different basis reporting
requirements and transfer statement obli-
gations under section 6045A, the Trea-
sury Department and the IRS have deter-
mined that, except in the case of certain
exceptions described in the next several
paragraphs, it is not appropriate to treat
dual classification assets as subject only
to the pre-2024 final regulations (that
is, required to report the transactions
under final §1.6045-1(d)(2)(i)(A) as sales
described in final §1.6045-1(a)(9)(i)) for
securities and commodities if those assets
can be traded on public blockchains and
custodied by customers. Accordingly,
final §1.6045-1(c)(8)(i) provides that
brokers must generally treat sales of dual
classification assets only as a sale of a dig-
ital asset under final §1.6045-1(a)(9)(ii)
and only as a sale of a specified security
that is a digital asset under final §1.6045-
1(a)(14)(v) or (vi). As such, the broker
must apply the digital asset reporting rules
for the information required to be reported
for such sale and file the return on Form
1099-DA. Further, as discussed in Part
IV. of this Summary of Comments and
Explanation of Revisions, brokers are not
required to send transfer statements under
final §1.6045A-1(a)(1)(vi) with respect
to the transfer of these dual classification
assets that are reportable as digital assets.
Additionally, final §1.6045-1(d)(2)(iv)
(B) does not permit brokers to take into
account any other information, including
information received from a customer or
third party, with respect to covered securi-
ties that are digital assets, although brokers
may take customer-provided acquisition
information into account for purposes of
identifying which units are sold, disposed
of, or transferred under final §1.6045-1(d)
(2)(ii)(A).
However, to accommodate the com-
ments relating to the application of the
various basis adjustment rules, includ-
ing the wash sale adjustment rules, and
other important information applicable
to dual classification assets that represent
an interest in a traditional security, final
§1.6045-1(c)(8)(i)(D) requires the broker
to report certain additional information
with respect to any dual classification
asset that is a tokenized security. For this
purpose, any dual classification asset that
provides the holder with an interest in
another asset that is a security under final
§1.6045-1(a)(3), other than a security
that is also a digital asset, is a tokenized
security. This description is intended to
apply when the digital asset represents an
interest in a separate, traditional, financial
asset that is reportable as a security. For
example, a digital asset that represents an
ownership interest in a traditional share of
stock in a 1940 Act Fund or another cor-
poration would be a tokenized security. A
dual classification asset that is an interest
in a trust or partnership that holds assets
that are securities under final §1.6045-
1(a)(3), other than securities that are also
digital assets, also would be a tokenized
security.
In addition, an asset the offer and
sale of which was registered with the
U.S. Securities and Exchange Commis-
sion (SEC) (other than an asset treated
as a security for securities law purposes
solely as an investment contract) is also
treated as a tokenized security. This part
of the description of tokenized securities
is intended to refer to a digital asset that is
also a security within the meaning of final
§1.6045-1(a)(3) but does not represent
an interest in a separate financial asset. A
bond that exists solely in tokenized form
would be an example of such a tokenized
security, if the bond was issued pursuant
to a registration statement approved by the
SEC. The reference to whether an asset’s
offer and sale was registered with the SEC,
other than solely as an investment con-
tract, is intended to limit the scope of the
term tokenized security to digital forms of
traditional financial assets, and not to cap-
ture assets native to the digital asset eco-
system. The reference to registration of an
asset’s offer and sale with the SEC is not
intended to imply that such assets are nec-
essarily securities for Federal income tax
purposes or for purposes of final §1.6045-
1(a)(3). Additionally, no inference is
intended as to how the Federal securities
laws apply to sales of digital assets within
the meaning of final §1.6045-1(a)(19), as
the interpretation or applicability of those
laws are outside the scope of these final
regulations.
For the avoidance of doubt, final
§1.6045-1(c)(8)(i)(D) provides that a
qualifying stablecoin is not treated as a
tokenized security for purposes of these
special rules. For sales of tokenized secu-
rities, final §1.6045-1(c)(8)(i)(D) provides
that the broker must report additional
information required by final §1.6045-
1(d)(2)(i)(B)(6), generally relating to
gross proceeds. Final §1.6045-1(d)(2)(i)
(B)(6) requires that the broker report the
Committee on Uniform Security Iden-
tification Procedures (CUSIP) number
of the security sold, any information
related to options required under final
§1.6045-1(m), any information related
to debt instruments under final §1.6045-
1(n), and any other information required
by the form or instructions. In addition,
final §1.6045-1(c)(8)(i)(D) provides that
the broker must report additional infor-
mation required by final §1.6045-1(d)(2)
(i)(D)(4) (relating to reporting for basis
and holding period) for sales of tokenized
securities, except that the broker is not

July 29, 2024 194 Bulletin No. 2024–31
required to report such information for
a tokenized security that is an interest in
another asset that is a security under final
§1.6045-1(a)(3), other than a security that
is also a digital asset, unless the tokenized
security is also a specified security under
final §1.6045-1(a)(14)(i), (ii), (iii), or (iv).
Accordingly, because a trust or partnership
interest is not a specified security within
the meaning of those paragraphs, a broker
is not required to report basis information
with respect to a tokenized security that
is an interest in a trust or partnership that
holds assets that are securities under final
§1.6045-1(a)(3), other than securities that
are also digital assets.
Final §1.6045-1(d)(2)(i)(D)(4) pro-
vides specific rules for reporting basis and
related information for tokenized securi-
ties. It cross-references the wash sale rules
in final §1.6045-1(d)(6)(iii)(A)(2) and (d)
(7)(ii)(A)(2), which rules have also been
revised to specifically apply to tokenized
securities. These wash sale reporting rules
apply only to assets treated as stock or
securities within the meaning of section
1091 of the Code. They apply regardless
of whether the taxpayer buys or sells a
tokenized security. For example, if a tax-
payer sells a tokenized security (or the
underlying traditional stock or security) at
a loss and buys the same tokenized secu-
rity (or the underlying traditional stock or
security) within the 30-day period before
or after the sale, and the other conditions
to the wash sale reporting rules are satis-
fied, the broker would be required to take
the wash sale reporting rules into account
in reporting the loss and the basis of the
newly acquired asset. Final §1.6045-1(d)
(2)(i)(D)(4) also cross-references the aver-
age basis rules in final §1.6045-1(d)(6)
(v), which have been revised to apply to
any stock that is also a tokenized security,
and the rules related to options and debt
instruments in final §1.6045-1(m) and (n).
Accordingly, the information reportable
for tokenized securities on Form 1099-
DA should be similar to the information
reportable for traditional securities on
Form 1099-B, except that under final
§1.6045A-1(a)(1)(vi), no transfer state-
ment is required with respect to the trans-
fer of tokenized securities, though penalty
relief is provided if the broker voluntarily
chooses to provide a transfer statement
with respect to tokenized securities. Addi-
tionally, until the Treasury Department
and the IRS determine which third party
information is sufficiently reliable, final
§1.6045-1(d)(2)(iv)(B) provides that bro-
kers are not permitted to take into account
information about covered securities that
are digital assets other than what is fur-
nished on a transfer statement or issuer
statement, although brokers may take cus-
tomer-provided acquisition information
into account for purposes of identifying
which units are sold, disposed of, or trans-
ferred under final §1.6045-1(d)(2)(ii)(A).
The Treasury Department and the IRS
intend to provide additional guidance on
how to report tokenized securities in the
instructions to Form 1099-DA.
Final §1.6045-1(d)(2)(i)(D)(3) requires
that, for purposes of determining the basis
and holding period information required
in final §1.6045-1(d)(2)(i)(D)(1) and
(2), the rules related to options in final
§1.6045-1(m) apply, both with respect to
the option and also with respect to any
asset delivered in settlement of an option.
Accordingly, an option that is itself a dig-
ital asset, on an asset that is also a digital
asset, is subject to the same reporting rules
as other options.
Additionally, in response to the com-
ments described above, the Treasury
Department and the IRS have determined
that the final regulations should include
three exceptions to the rules requiring
that dual classification assets be reported
as digital assets, for the reasons described
herein. Those exceptions apply to dual
classification assets cleared or settled on a
limited-access regulated network, to dual
classification assets that are section 1256
contracts, and to dual classification assets
that are shares in money market funds.
First, the Treasury Department and the
IRS agree that it is not appropriate to dis-
rupt reporting on dual classification assets
that are treated as digital assets solely
because distributed ledger technology is
used to facilitate the processing, clearing,
or settlement of orders between regulated
financial entities. Accordingly, in response
to the comments submitted, final §1.6045-
1(c)(8)(iii) adds a new exception to the
coordination rule for any sale of a dual
classification asset that is a digital asset
solely because the sale of such asset is
cleared or settled on a limited-access regu-
lated network. Under this exception, such
a sale will be treated as a sale described
in final §1.6045-1(a)(9)(i) (reportable on
the Form 1099-B) and not as a digital
asset sale described in final §1.6045-1(a)
(9)(ii) (reportable on the Form 1099-
DA). Additionally, such a sale must be
treated as a sale of a specified security
under final §1.6045-1(a)(14)(i), (ii), (iii),
or (iv) to the extent applicable, and not
as a sale of a specified security that is a
digital asset under final §1.6045-1(a)(14)
(v) or (vi). For all other purposes of this
section including transfers, a dual classi-
fication asset that is a digital asset solely
because it is cleared or settled on a limit-
ed-access regulated network is not treated
as a digital asset and is not reportable as
a digital asset. Accordingly, depending on
the type of the asset, the asset may be a
covered security under final §1.6045-1(a)
(15)(i)(A) through (G) (if purchased in
an account on or after January 1, 2011
through 2016, as applicable) rather than a
digital asset covered security under final
§1.6045-1(a)(15)(i)(H), (J) or (K) (if pur-
chased in an account on or after January
1, 2026). Thus, brokers are required under
section 6045A to provide transfer state-
ments with respect to transfers of these
dual classification assets, and the rules set
forth in final §1.6045-1(d)(2)(iv)(A) and
(B), regarding the broker’s obligation to
take into account the information reported
on those statements and certain other cus-
tomer provided information also apply.
Final §1.6045-1(c)(8)(iii)(B) sets
forth three different types of limited-ac-
cess regulated network for which this rule
applies. The first type of limited-access
network is described as a cryptographi-
cally secured distributed ledger or net-
work of interoperable distributed ledgers
that provide clearance or settlement ser-
vices and provide access only to a group
of persons made up of registered dealers
in securities or commodities, banks and
similar financial institutions, common
trust funds, or futures commission mer-
chants. Final §1.6045-1(c)(8)(iii)(B)(1)
(i). As used in this rule, an interoperable
distributed ledger means a group of dis-
tributed ledgers that permit digital assets
to travel from one permissioned distrib-
uted ledger (for example, at one securities
broker) to another permissioned distrib-
uted ledger (at another securities broker).
In such cases, while the clearance or set-

Bulletin No. 2024–31 195 July 29, 2024
tlement of the dual classification asset is
on a network of permissioned distributed
ledgers, it is anticipated that the asset will
remain in a traditional securities or com-
modities account from the perspective of
an investor in the asset and so can readily
be reported as a security or commodity
under existing rules.
The second type of limited-access net-
work is also described as a cryptographi-
cally secured distributed ledger or network
of interoperable distributed ledgers that
provide clearance or settlement services,
but this type of limited-access network is
distinguishable from the first type because
it is provided by an entity that has regis-
tered with the SEC as a clearing agency,
or has received an exemption order from
the SEC as a clearing agency, under sec-
tion 17A of the Securities Exchange Act
of 1934. Additionally, the entity must pro-
vide access to the network exclusively to
network participants, who are not required
to be registered dealers in securities or
commodities, banks and similar finan-
cial institutions, common trust funds, or
futures commission merchants, although
it is anticipated that participants typically
will be securities brokers and other regu-
lated financial institutions. Final §1.6045-
1(c)(8)(iii)(B)(1)(ii). For example, dual
classification assets cleared and settled
through a central clearing agency that
clears and settles high volumes of equity
and debt transactions on a daily basis
through automated systems for partici-
pants that are financial market participants
may be reportable as securities under this
exception if the clearance or settlement
takes place on a cryptographically secured
distributed ledger or network of interoper-
able distributed ledgers.
Finally, the third type of limited-access
regulated network is a cryptographically
secured distributed ledger controlled by a
single person that is a registered dealer in
securities or commodities, a futures com-
mission merchant, a bank or similar finan-
cial institution, a real estate investment
trust, a common trust fund, or a 1940 Act
Fund, that permits the ledger to be used
solely by itself and its affiliates (and not
by any customers or investors) to clear or
settle sales of assets. Final §1.6045-1(c)
(8)(iii)(B)(2). As with the other types of
limited-access regulated network, it is
anticipated that from an investor perspec-
tive the assets will remain in a traditional
securities or commodities account.
This exception in final §1.6045-1(c)(8)
(iii) is limited to dual classification assets
that are digital assets solely because the
sale of such dual classification asset is
cleared or settled on a limited-access regu-
lated network. Accordingly, a digital asset
commonly referred to as a cryptocurrency
that fits within the definition of commod-
ity under final §1.6045-1(a)(5)(i) because
the trading of regulated futures contracts
in that digital asset have been approved by
or certified to the CFTC will not be eligible
for this rule because the cryptocurrency
meets the definition of a digital asset for
reasons other than because it is cleared or
settled on a limited-access regulated net-
work. Given the requirement that the sole
reason that the security or commodity is a
digital asset is that transactions involving
those assets are cleared or settled on a lim-
ited-access regulated network, it is antic-
ipated that brokers will have sufficient
information to be able to determine how
to report the assets in question under these
revised rules. Accordingly, the request for
a safe harbor that would allow brokers to
avoid penalties if they consistently and
accurately report sales of dual classifi-
cation assets under either final §1.6045-
1(d)(2)(i)(A) (on Form 1099-B) or final
§1.6045-1(d)(2)(i)(B) and (D) as a digital
asset (on Form 1099-DA) is not adopted
as it is unnecessary.
The second exception to the general
dual classification asset coordination rule
in final §1.6045-1(c)(8)(i) treating such
assets as digital assets was included in the
proposed regulations. Proposed §1.6045-
1(c)(8)(iii) provided that digital asset
options or other contracts that are also
section 1256 contracts should be reported
under the rules set forth in §1.6045-1(c)
(5) of the pre-2024 final regulations for
contracts that are section 1256 contracts
and not under the proposed rules for dig-
ital assets. The final regulations retain
this exception and redesignate it as final
§1.6045-1(c)(8)(ii). Accordingly, under
this rule, for the disposition of a contract
that is a section 1256 contract, report-
ing is required under §1.6045-1(c)(5) of
the pre-2024 final regulations regard-
less of whether the contract disposed of
is a non-digital asset contract or a digi-
tal asset contract or whether the contract
was issued with respect to digital asset
or non-digital asset underlying property.
One comment raised a concern that the
proposed rule did not make it clear that
information reporting for a section 1256
contract subject to information reporting
under section 6045 should be reported on
a Form 1099-B regardless of whether the
contract is or is not a digital asset. The
final regulations respond to this concern
by providing additional clarification to
the text of §1.6045-1(c)(5)(i) of the pre-
2024 final regulations to make it clear that
reporting for all section 1256 contracts
should be on Form 1099-B. Accordingly,
information reporting for section 1256
contracts in digital asset form will be on
Form 1099-B and not on Form 1099-DA.
The third exception to the general
dual classification asset coordination rule
in final §1.6045-1(c)(8)(i) treating such
assets as digital assets applies to interests
in money market funds. Final §1.6045-
1(c)(8)(iv) provides that brokers must treat
sales of any dual classification asset that is
a share in a regulated investment company
that is permitted to hold itself out to inves-
tors as a money market fund under Rule
2a-7 under the Investment Company Act
of 1940 (17 CFR 270.2a-7) only as a sale
under final §1.6045-1(a)(9)(i) and not as a
digital asset sale under final §1.6045-1(a)
(9)(ii). Accordingly, under §1.6045-1(c)
(3)(vi) of the pre-2024 final regulations,
no return of information is required for
these shares. This exception is included
in the final regulations because the rea-
sons for not requiring reporting of money
market shares in traditional form are also
applicable for money market shares in
digital asset form. Notably, in either case,
the disposition of money market shares
by non-exempt recipients like individuals
generally will give rise to no, or de mini-
mis, gain or loss. Moreover, money mar-
ket funds are a special type of regulated
investment company that provide a highly
regulated product widely used as a surro-
gate for cash.
In response to a number of comments,
the Treasury Department and the IRS
considered whether an exception should
apply more broadly to tokenized shares
of other 1940 Act Funds. Based on pub-
licly available information, the Treasury
Department and the IRS are aware that
some 1940 Act Funds permit their shares

July 29, 2024 196 Bulletin No. 2024–31
to be bought and sold in secondary mar-
ket transactions on a cryptographically
secured distributed ledger on a direct
peer-to-peer basis – that is, an investor
may transfer the shares directly to another
investor – and that those shares may be
purchased in exchange for other digital
assets. The Treasury Department and the
IRS have determined that these transac-
tions go beyond the scope of the pre-2024
final regulations, which are applicable to
sales of securities for cash, and that such
assets therefore should be reported as dig-
ital assets. However, as described in the
discussion of tokenized securities above,
the information reportable by brokers to
investors with respect to such shares of
1940 Act Funds, including the availabil-
ity of average basis reporting, generally
should not change, although the informa-
tion will be reported on Form 1099-DA
rather than Form 1099-B.
Finally, the proposed regulations would
have included one additional exception to
the general coordination rule that would
have treated dual classification assets
as digital assets. Specifically, proposed
§1.6045-1(c)(8)(ii) provided that a digital
asset that also constitutes reportable real
estate would be treated as reportable real
estate to ensure that real estate reporting
persons would only report transactions
involving these sales as sales that are
subject to reporting under §1.6045-4(a)
of the pre-2024 final regulations and not
as sales of digital assets. One comment
noted that currently, there is no State law
that permits legal title to real estate to
be held via a digital asset token. Instead,
this comment explained that to transfer
real estate using digital assets, the digital
asset token must hold an interest in a legal
entity (typically either a limited liability
company (LLC) or a partnership) that in
turn owns the real estate. Thus, accord-
ing to this comment, each token holder
owns an ownership interest in an entity,
not a claim of ownership to real estate.
This comment also noted that, even if a
legal entity was not required to be formed
to hold title to real estate, these digital
asset interests could potentially consti-
tute an unincorporated association of real
estate co-owners meeting the definition
of a partnership under §301.7701-3(b)(1)
(i). Either way, this comment asserted,
reporting on the sale of these interests
is not appropriate as a sale of real estate
under §1.6045-4. No comments received
suggested that blockchain deeds do exist.
The Treasury Department and the IRS are
not aware of any current or proposed State
law that authorizes legal title to real estate
to be held in a digital asset token. There-
fore, to address this comment, the final
regulations remove this coordination rule
for digital assets that constitute reportable
real estate. Accordingly, brokers should
report on sales of these interests as sales
of digital assets under §1.6045-1(a)(9)(ii)
(unless the sales are eligible for the special
rule under §1.6045-1(c)(8)(iii) for securi-
ties and commodities cleared or settled on
a limited-access regulated network) and
not as sales of real estate under §1.6045-
4. The Treasury Department and the IRS
will continue to track developments in this
area for potential future guidance.
b. Other coordination rule issues
The proposed regulations characterized
assets as either digital assets or securities
based on the nature of the rights held by
the customer. Example 27 in proposed
§1.6045-1(b)(27) demonstrated that rule
as applied to a fund formed to invest
in digital assets, in which the units of
the fund were not recorded using cryp-
tographically secured distributed ledger
technology. The Example concluded that
investments in the units of this fund are
not digital assets because transactions
involving these fund units are not secured
using cryptography and are not digitally
recorded on a ledger, such as a block-
chain. One comment requested that the
final regulations clarify that if a unit in a
trust is not itself traded on a distributed
ledger, the unit in the trust should not be
treated as a digital asset merely because
the assets held by the trust are digital
assets. Generally, the holder of an interest
in a trust described in §301.7701-4(c) (a
fixed investment trust or FIT) is treated as
directly holding its pro rata share of each
asset held by the FIT. This comment raised
the concern that this normal look through
treatment could require a broker to report
transactions in FIT units as digital assets
on a Form 1099-DA even if the FIT units
are not themselves digital assets. The
final regulations amend the language of
proposed §1.6045-1(b)(27) (redesignated
in these final regulations as Example 20
in §1.6045-1(b)(20)) to clarify that for
purposes of section 6045, if a FIT unit is
not itself tradable on a cryptographically
secured distributed ledger, the broker is
not required to look through to the FIT’s
assets and should report the sale of a FIT
unit under §1.6045-1(d)(2)(i)(A) on Form
1099-B. The Example also provides that
this answer would be the same if the fund
is organized as a C corporation or partner-
ship.
The comment also requested expansion
of §1.6045-1(d)(9) of the pre-2024 final
regulations, which eliminates the need
for widely held fixed investment trusts
(WHFITs) to provide duplicate report-
ing for sales of securities, so that the rule
would also apply to WHFIT sales of dig-
ital assets. The Treasury Department and
the IRS agree that this suggested change
is appropriate and have revised the rule
in final §1.6045-1(d)(9) accordingly. As a
result, if a WHFIT sells a digital asset, and
interests in the WHFIT are held through
a securities broker, the WHFIT would
report the sale information to the broker
pursuant to §1.671-5 and the broker would
in turn send a Form 1099-DA (the appro-
priate Form 1099) to the IRS and a copy
thereof to any trust interest holder that is
not an exempt recipient.
Under the proposed regulations, a
notional principal contract (NPC) that is
executed in digital asset form is a digital
asset. See proposed §1.6045-1(a)(19).
One comment noted that there is no bro-
ker reporting under the pre-2024 final reg-
ulations under section 6045 for an NPC
that is not a digital asset. As a result, the
comment recommended that an NPC that
is a digital asset be excluded from report-
ing under section 6045. After consider-
ation of this recommendation, the Trea-
sury Department and the IRS concluded
that certain payments related to NPCs in
digital asset form should be reportable as
digital asset transactions and therefore
decline to adopt the recommendation in
the final regulations. However, taking into
account that payments on NPCs are gen-
erally not reportable under section 6045
under the pre-2024 final regulations, the
Treasury Department and the IRS intend
to continue to study the issues related
to NPC payments. Therefore, Notice
2024-57, which is being issued contem-

Bulletin No. 2024–31 197 July 29, 2024
poraneously with these final regulations,
provides that brokers are not required to
report on certain NPCs in digital form,
and that the IRS will not impose penalties
under section 6721 or section 6722 for
failure to file correct information returns
or failure to furnish correct payee state-
ments with respect to these transactions
until further guidance is issued. See Part
I.C.2. of this Summary of Comments and
Explanation of Revisions for a further dis-
cussion of Notice 2024-57.
One comment requested that the final
regulations provide examples to address
the proper partnership reporting obliga-
tions with respect to digital asset interests
that constitute an unincorporated associ-
ation meeting the definition of a partner-
ship. The final regulations do not adopt
this comment as it is outside the scope
of these regulations. Another comment
requested that the final regulations exempt
sales of tokenized partnerships investing
in real estate from reporting under sec-
tion 6045 altogether to avoid duplicative
reporting because these partnerships are
already subject to reporting such sales
under the partnership rules on Form
1065, U.S. Return of Partnership Income,
Schedule K-1, and because accountants
and tax advisors that file Schedules K-1
have more accurate information than
brokers regarding the proceeds and basis
information partners need for preparing
their Federal income tax returns. The
Treasury Department and the IRS have
concluded that partnership interests that
invest in real estate should not be treated
any differently than partnership interests
that invest in other assets. Accordingly, no
exception from reporting is made for dig-
ital assets representing partnership inter-
ests that invest in real estate.
B. Definition of brokers required to report
1. Custodial Digital Asset Brokers and
Non-Custodial Digital Asset Brokers
a. Custodial industry participants
Prior to the enactment of the Infrastruc-
ture Act, section 6045(c)(1) defined a bro-
ker to include a dealer, a barter exchange,
and any other person who (for a consider-
ation) regularly acts as a middleman with
respect to property or services. The pre-
2024 final regulations under section 6045
applied the “middleman” portion of this
definition to treat as a broker effecting a
sale a person that as part of the ordinary
course of a trade or business acts as either
(1) an agent with respect to a sale, if the
nature of the agency is such that the agent
ordinarily would know the gross proceeds
of the sale, or (2) as a principal in the
sale. See §1.6045-1(a)(1), and (a)(10)(i)
and (ii) of the pre-2024 final regulations
(redesignated in these final regs as final
§1.6045-1(a)(1) and (a)(10)(i)(A) and (C),
respectively). Under these rules, certain
digital asset industry participants that take
possession of a customer’s digital assets,
such as operators of custodial digital asset
trading platforms and certain digital asset
hosted wallet providers, as well as persons
that interact as principals and counterpar-
ties to transactions with their customers,
such as owners of digital asset kiosks and
certain issuers of digital assets who regu-
larly offer to redeem those digital assets,
would also generally be considered bro-
kers with respect to digital asset sales.
These industry participants that act as
principals and counterparties or as agents
to effect digital asset transactions on behalf
of their customers (custodial industry par-
ticipants) are generally financial institu-
tions, such as money services businesses
(MSBs), under the Bank Secrecy Act (31
U.S.C. 5311 et seq.). Fin-2019-G001,
“Application of FinCEN’s Regulations to
Certain Business Models Involving Con-
vertible Virtual Currencies,” May 9, 2019
(2019 FinCEN Guidance). Anti-money
laundering (AML) obligations apply to
financial institutions, such as MSBs as
defined by the Financial Crimes Enforce-
ment Network (FinCEN), futures com-
mission merchants and introducing bro-
kers obligated to register with the CFTC,
and broker-dealers and mutual funds obli-
gated to register with the SEC. “Leaders
of CFTC, FinCEN, and SEC Issue Joint
Statement on Activities Involving Digi-
tal Assets,” October 11, 2019. For exam-
ple, MSBs are required under regulations
issued by the Financial Crimes Enforce-
ment Network (FinCEN) of the Treasury
Department to develop, implement, and
maintain an effective AML program that is
reasonably designed to prevent the MSB
from being used to facilitate the financing
of terrorist activities and money launder-
ing. See 31 CFR part 1022.210(a). AML
programs for MSBs generally include,
among other things, policies, procedures,
and internal controls reasonably designed
to assure compliance with FinCEN’s reg-
ulations, as well as a requirement to verify
customer-related information. MSBs are
also required to register with, and make
certain reports to FinCEN, and main-
tain certain records about transmittals of
funds. See 31 CFR part 1022; 2019 Fin-
CEN Guidance. Accordingly, operators of
custodial digital asset trading platforms,
digital asset hosted wallet providers, and
digital asset kiosks have information
about their customers and, in many cases,
have already reported digital assets sales
by these customers under either section
6045 or 6050W. Consistent with the stat-
utory and regulatory definitions of broker
that existed prior to the Infrastructure Act
as well as amended section 6045, the final
regulations apply to operators of custo-
dial digital asset trading platforms, digital
asset hosted wallet providers, and digital
asset kiosks.
Numerous comments agreed that cus-
todial digital asset trading platforms were
appropriately treated as brokers under the
proposed regulations, and several com-
ments agreed that digital asset hosted
wallet providers should also be treated as
brokers. One comment requested that the
final regulations exclude from the defini-
tion of a broker digital asset hosted wallet
providers that do not have direct access
to the information necessary to know the
nature of the transactions processed or the
identities of the parties to the transaction.
The Treasury Department and the IRS do
not agree that a specific exclusion from the
definition of broker for digital asset hosted
wallet providers is necessary or appropri-
ate. The pre-2024 final regulations defined
broker generally to mean any person that,
in the ordinary course of a trade or busi-
ness during the calendar year, stands ready
to effect sales to be made by others. The
definition of effect under the pre-2024 final
regulations treats agents as effecting sales
only if the nature of the agency is such that
the agent ordinarily would know the gross
proceeds of the sale. Accordingly, a digital
asset hosted wallet provider that acts as an
agent for its customer would be subject to
reporting under section 6045 with respect
to its customer’s sale of digital assets only

July 29, 2024 198 Bulletin No. 2024–31
to the extent that the digital asset hosted
wallet provider ordinarily would know the
gross proceeds from that sale.
Another comment requested that the
regulations make clear that acting as a
broker with respect to one customer does
not mean that the person has a reporting
obligation with respect to all custom-
ers. This requested guidance relates to
§1.6045-1(c)(2) of the pre-2024 final reg-
ulations, which was not amended. This
provision makes it clear that a broker is
only required to make a return of informa-
tion for sales that the broker effects for a
customer (provided the broker effects that
sale in the ordinary course of a trade or
business to effect sales made by others).
Accordingly, the final regulations do not
adopt this comment because the change
it requests is unnecessary. Another com-
ment requested that the regulations be
clarified to state that the determination of
whether a person is a broker is determined
on an annual basis and being a broker in
one year does not mean that the person is
a broker in another year. This requested
guidance relates to a portion of §1.6045-
1(a)(1) from the pre-2024 final regulations
that was not proposed to be amended and
would apply broadly to all brokers under
sections 6045 and 6045A, not just those
who effectuate sales of digital assets.
Accordingly, the final regulations do not
adopt this comment because it is outside
the scope of these regulations.
b. Non-custodial industry participants
Unlike custodial industry participants,
which generally act as principals or as
agents to effect digital asset transactions
on behalf of their customers, industry
participants that do not take possession
of a customer’s digital assets (non-cus-
todial industry participants)
2
, such as
operators of non-custodial digital asset
trading platforms (sometimes referred to
as decentralized exchanges or DeFi) and
unhosted digital asset wallet providers,
normally do not act as custodial agents
or principals in effecting their custom-
ers’ transactions. Instead, these non-cus-
todial industry participants offer other
services, such as providing interface ser-
vices enabling their customers to interact
with trading protocols. To resolve any
uncertainty over whether these non-cus-
todial digital asset service providers are
brokers, section 80603(a) of the Infra-
structure Act amended the definition of
broker under section 6045 to add “any
person who, for consideration, is respon-
sible for regularly providing any service
effectuating transfers of digital assets on
behalf of another person” (the new digi-
tal asset middleman rule). 167 Cong. Rec.
S5702, 5703. To implement this new dig-
ital asset middleman rule, the proposed
regulations provided that, subject to cer-
tain exclusions, any person that provides
facilitative services that effectuate sales
of digital assets by customers is a broker,
provided the nature of the person’s service
arrangement with customers is such that
the person ordinarily would know or be
in a position to know the identity of the
party that makes the sale and the nature
of the transaction potentially giving rise
to gross proceeds. Proposed §1.6045-1(a)
(21)(iii)(A) provided that a facilitative
service includes the provision of a ser-
vice that directly or indirectly effectuates
a sale of digital assets, such as providing
a party in the sale with access to an auto-
matically executing contract or protocol,
providing access to digital asset trading
platforms, providing an automated market
maker system, providing order matching
services, providing market making func-
tions, providing services to discover the
most competitive buy and sell prices, or
providing escrow or escrow-like services
to ensure both parties to an exchange act
in accordance with their obligations. The
proposed regulations also carved out cer-
tain services from this definition, such as
certain distributed ledger validation ser-
vices – whether through proof-of-work,
proof-of-stake, or any other similar con-
sensus mechanism – without providing
other functions or services, as well as cer-
tain sales of hardware, and certain licens-
ing of software, where the sole function is
to permit persons to control private keys
which are used for accessing digital assets
on a distributed ledger. To ensure that
existing brokers of property already sub-
ject to broker reporting would be consid-
ered to effect sales of digital assets when
they accept, or otherwise process, certain
digital asset payments and to ensure that
digital asset brokers would be considered
to effect sales of digital assets received
as payment for digital asset transaction
costs, proposed §1.6045-1(a)(21)(iii)(B)
provided that a facilitative service also
includes the services performed by such
brokers in accepting or processing those
digital asset payments.
The Treasury Department and the IRS
received numerous comments directed at
these new digital asset middleman rules.
One comment recommended the adoption
of an IRS-approved central entity service
provider to the digital asset marketplace
that could gather customer tax identifica-
tion information and receive, aggregate,
and reconcile information from various
custodial and non-custodial industry par-
ticipants. Another comment recommended
allowing the use of an optional tax attes-
tation token to facilitate tax compliance
by non-custodial industry participants.
Many other comments recommended
that non-custodial industry participants
not be treated as brokers. Comments also
expressed concerns that the proposed defi-
nitions of a facilitative service in proposed
§1.6045-1(a)(21)(iii)(A) and position to
know in proposed §1.6045-1(a)(21)(ii) are
overbroad and would, consequently, result
in duplicative reporting of the same trans-
actions. Numerous comments said the
broad definition of a broker would stifle
American innovation and drive the digital
asset industry to move offshore. Addition-
ally, many of the comments indicated that
certain non-custodial industry participants
have not collected customer information
under AML programs, and therefore do
not have systems in place to comply with
the proposed reporting by the applicability
date for transactions on or after January 1,
2025.
The Treasury Department and the IRS
do not agree that non-custodial industry
participants should not be treated as bro-
kers. Prior to the Infrastructure Act, sec-
tion 6045(c)(1) defined the term broker
2
Some digital asset trading platforms that do not claim to offer custodial services may be able to exercise effective control over a user’s digital assets. See Treasury Department, Illicit Finance
Risk Assessment of Decentralized Finance (April 2023), https://home.treasury.gov/system/files/136/DeFi-Risk-Full-Review.pdf. No inference is intended as to the meaning or significance of
custody under any other legal regime, including the Bank Secrecy Act and its implementing regulations, which are outside the scope of these regulations.

Bulletin No. 2024–31 199 July 29, 2024
to include a dealer, a barter exchange,
and any other person who (for a consider-
ation) regularly acts as a middleman with
respect to property or services. Section
80603(a) of the Infrastructure Act clar-
ified the definition of broker under sec-
tion 6045 to include any person who, for
consideration, is responsible for regularly
providing any service effectuating trans-
fers of digital assets on behalf of another
person. According to a report by the Joint
Committee on Taxation published in the
Congressional Record prior to the enact-
ment of the Infrastructure Act, the change
clarified prior law “to resolve uncertainty
over whether certain market participants
are brokers.” 167 Cong. Rec. S5702,
5703. However, the Treasury Department
and the IRS would benefit from additional
consideration of issues involving non-cus-
todial industry participants. The Treasury
Department and the IRS have determined
that the issuance of these final regulations
requiring custodial brokers and brokers
acting as principals to report digital asset
transactions should not be delayed until
additional consideration of issues involv-
ing non-custodial industry participants is
completed because custodial brokers and
brokers acting as principals carry out a
substantial majority of digital asset trans-
actions. Clarifying information reporting
for the substantial majority of digital asset
transactions, consistent with the appli-
cability dates set forth in the proposed
regulations, will benefit both taxpayers,
who can use the reported information to
prepare their Federal income tax returns,
and the IRS, which can focus its enforce-
ment resources on taxpayers who are
more likely to have underreported their
income from digital asset transactions and
custodial brokers and brokers acting as
principals who may not be meeting their
reporting obligations. Accordingly, the
proposed new digital asset middleman
rules that apply to non-custodial indus-
try participants are not being finalized
with these final regulations. The Treasury
Department and the IRS continue to study
this area and, after full consideration of
all comments received, intend to expe-
ditiously issue separate final regulations
describing information reporting rules for
non-custodial industry participants. Until
this further regulatory guidance is issued,
the final regulations reserve on the defini-
tion of position to know in final §1.6045-
1(a)(21)(ii) and a portion of the facilitative
service definition in final §1.6045-1(a)(21)
(iii)(A). Additionally, because comments
were received addressing the breadth of
the specific exclusions provided for certain
validation services, certain sales of hard-
ware, and certain licensing of software,
the final regulations also reserve on these
exclusions. The Treasury Department and
the IRS recognize that persons that are
solely engaged in the business of provid-
ing validation services without providing
other functions or services, or persons that
are solely engaged in the business of sell-
ing certain hardware, or licensing certain
software, for which the sole function is
to permit persons to control private keys
which are used for accessing digital assets
on a distributed ledger, are not digital asset
brokers. Accordingly, notwithstanding
reserving on the underlying rule to pro-
vide time to study the comments received,
the final regulations retain the examples in
final §1.6045-1(b)(2)(ix) and (x), which
conclude that persons conducting these
actions do not constitute brokers.
The final regulations do not, however,
reserve on the portion of the facilitative
services definition in final §1.6045-1(a)
(21)(iii)(B), which was included to ensure
that sales of digital assets conducted by
certain persons other than non-custo-
dial industry participants are treated as
effected by a broker under final §1.6045-
1(a)(10). For example, proposed §1.6045-
1(a)(21)(iii)(B), which provided that a
facilitative service includes the accep-
tance of digital assets by a broker in con-
sideration for property reportable under
proposed §1.6045-1(a)(9)(i) and for bro-
ker services, was retained and redesig-
nated as final §1.6045-1(a)(21)(iii)(B)(1)
and (3), respectively. Persons that conduct
these actions have complete knowledge
about the underlying transaction because
they are typically acting as the counter-
party. Thus, knowledge is not identified
as a specific element of the definition of
facilitative services for these persons to
be treated as conducting facilitative ser-
vices. Proposed §1.6045-1(a)(21)(iii)
(B) also provided that a facilitative ser-
vice includes any service provided by a
real estate reporting person with respect
to a real estate transaction in which dig-
ital assets are paid by the buyer in full or
partial consideration for the real estate.
This rule has been retained with some
modifications to the knowledge require-
ment which must be met before a real
estate reporting person will be treated as
conducting facilitative services. See Part
I.B.4. of this Summary of Comments and
Explanation of Revisions, for a discussion
of the modified rule, now in final §1.6045-
1(a)(21)(iii)(B)(2), with respect to treating
real estate reporting persons as perform-
ing facilitative services and, thereby, as
digital asset middlemen under the final
regulations. Additionally, to ensure that a
digital asset kiosk that does not act as an
agent or dealer in a digital asset transac-
tion will nonetheless be considered a dig-
ital asset middleman capable of effecting
sales of digital assets under final §1.6045-
1(a)(10)(i)(D), final §1.6045-1(a)(21)(iii)
(B)(5) provides that the acceptance of dig-
ital assets in return for cash, stored-value
cards, or different digital assets by a phys-
ical electronic terminal or kiosk is a facil-
itative service. Like persons that accept
digital assets in consideration for property
reportable under proposed §1.6045-1(a)
(9)(i) and for broker services, knowledge
is not identified as a specific element of
the definition of facilitative services for
these kiosks to be treated as conducting
facilitative services because these kiosks
are typically acting as the counterparty in
the digital asset sale transaction. Finally,
as discussed in Part I.B.2. of this Sum-
mary of Comments and Explanation of
Revisions, final §1.6045-1(a)(21)(iii)(B)
(4) treats certain PDAPs that receive digi-
tal asset payments from one party (buyer)
and pay those digital assets, cash, or dif-
ferent digital assets to a second party as
performing facilitative services and,
thereby, as digital asset middlemen under
the final regulations.
Taken together, these final regulations
apply only to digital asset industry partic-
ipants that take possession of the digital
assets being sold by their customers, such
as operators of custodial digital asset trad-
ing platforms, certain digital asset hosted
wallet providers, certain PDAPs, and dig-
ital asset kiosks, as well as to certain real
estate reporting persons that are already
subject to the broker reporting rules. As a
result, this preamble does not set forth nor
discuss comments received relating to the
application of the proposed regulations to

July 29, 2024 200 Bulletin No. 2024–31
non-custodial industry participants (other
than persons that operate digital asset
kiosks and process payments without tak-
ing custody thereof). The Treasury Depart-
ment and the IRS will continue to consider
comments received addressing non-cus-
todial arrangements and plan to expedi-
tiously publish separate final regulations
addressing information reporting rules for
non-custodial digital asset service provid-
ers after issuance of these final regulations.
2. Processors of Digital Asset Payments
PDAPs enable persons (buyers) to
make payments to second parties (typ-
ically merchants) using digital assets. In
some cases, the buyer pays digital assets
to the PDAP, and the PDAP in turn pays
those digital assets, U.S. dollars, or differ-
ent digital assets to the merchant. In other
cases, the PDAP may not take custody of
the digital assets, but instead may instruct
or otherwise give assistance to the buyer
to transfer the digital assets directly to
the merchant. The PDAP may also have a
relationship with the merchant specifically
obligating the PDAP to process payments
on behalf of the merchant.
a. The proposed regulations
The proposed regulations used the term
digital asset payment processors instead
of PDAPs. To avoid confusion associ-
ated with the use of the acronym for dig-
ital asset payment processors, which may
have a different meaning within the digital
asset industry, and for ease in reading this
preamble, this preamble solely uses the
term PDAP, even when referencing the
proposed regulations and comments made
with respect to the proposed regulations.
The proposed regulations treated
PDAPs as brokers that effect sales of digi-
tal assets as agents for the buyer. Proposed
§1.6045-1(a)(22)(i)(A) defined a PDAP as
a person who in the ordinary course of its
business regularly stands ready to effect
digital asset sales by facilitating pay-
ments from one party to a second party by
receiving digital assets from the first party
and exchanging them into different digi-
tal assets or cash paid to the second party,
such as a merchant. In addition, recogniz-
ing that some payment recipients might
be willing to receive payments facilitated
by an intermediary in digital assets rather
than cash in a circumstance in which the
PDAP temporarily fixes the exchange
rate on the digital asset payment that is
transferred directly from a customer to
that payment recipient, proposed §1.6045-
1(a)(22)(ii) treated the transfer of digital
assets by a customer directly to a second
person (such as a vendor of goods or ser-
vices) pursuant to a processor agreement
that provides for the temporary fixing of
the exchange rate to be applied to the dig-
ital assets received by the second person
as if the digital assets were transferred by
the customer to the PDAP in exchange for
different digital assets or cash paid to the
second person.
The proposed regulations also included
in the definition of a PDAP certain pay-
ment settlement entities and certain enti-
ties that make payments to payment set-
tlement entities that are potentially subject
to reporting under section 6050W. Spe-
cifically, proposed §1.6045-1(a)(22)(i)
(B) provided that a PDAP includes a third
party settlement organization (as defined
in §1.6050W-1(c)(2)) that makes (or
submits instructions to make) payments
using one or more digital assets in settle-
ment of reportable payment transactions
as described in §1.6050W-1(a)(2). Addi-
tionally, proposed §1.6045-1(a)(22)(i)(C)
provided that the definition of a PDAP
includes a payment card issuer that makes
(or submits the instruction to make) pay-
ments in one or more digital assets to a
merchant acquiring entity, as defined
under §1.6050W-1(b)(2), in a transaction
that is associated with a reportable pay-
ment transaction under §1.6050W-1(a)(2)
that is effected by the merchant acquiring
bank.
Proposed §1.6045-1(a)(9)(ii)(D) pro-
vided that a sale includes all these types of
payments processed by PDAPs. Finally,
proposed §1.6045-1(a)(2)(ii)(A) provided
that the customer in a PDAP transaction
includes the person who transfers the digi-
tal assets or directs the transfer of the digi-
tal assets to the PDAP to make payment to
the second person.
b. Definition of PDAP, PDAP customer,
and PDAP sales
Several comments stated that some
PDAPs contract only with merchants to
process and settle digital asset payments
on the behalf of those merchants. That
is, despite the buyer benefitting from the
merchant’s relationship with the PDAP,
the buyer is not the customer of the PDAP
in these transactions. Consequently, these
comments warned, PDAPs are unable to
leverage any customer relationship to col-
lect personal identification information
and other tax documentation—including
Form W-9, Request for Taxpayer Identifi-
cation Number and Certification, or Form
W-8BEN, Certificate of Foreign Status
of Beneficial Owner for United States
Tax Withholding and Reporting (Individ-
uals)—from buyers. Another comment
asserted that treating PDAPs as brokers
conflicts with or expands the current Fin-
CEN regulatory AML program require-
ments for regulated entities to perform
due diligence on their customers. Several
comments noted that this lack of customer
relationship would exacerbate the privacy
concerns of the buyers if PDAPs working
for the merchant were required to collect
tax documentation from buyers. More-
over, these comments raised the concern
that collecting this documentation from
buyers is even more challenging for one-
time small retail purchases because buy-
ers would be unwilling to comply with
tax documentation requests at the point
of sale. Other comments disagreed with
these comments and stated that there is a
business relationship between PDAPs and
buyers that would make reporting appro-
priate. Indeed, one comment asserted
that PDAPs are technically money trans-
mitters under FinCEN regulations and,
as such, are already subject to the AML
program obligations, described in Part
I.B.1. of this Summary of Comments and
Explanation of Revisions, with respect to
the person making payments. See 31 CFR
part 1010.100(ff)(5). Other comments rec-
ommended that the definition of broker
be aligned with the concepts outlined in
FATF to, in their view, clarify that a bro-
ker must be a legal person who exercises
some measure of control or dominion over
digital assets on behalf of another person.
In response to these comments, the
Treasury Department and the IRS have
concluded that the circumstances under
which a person processing digital asset
payments for others should be required
to report information on those payments

Bulletin No. 2024–31 201 July 29, 2024
to the IRS under section 6045 should be
narrowed pending additional consider-
ation of the issues and comments received
concerning non-custodial arrangements
discussed in Part I.B.1.b. of this Summary
of Comments and Explanation of Revi-
sions. Under the final regulations, a PDAP
is required to report digital asset payments
by a buyer only if the processor already
may obtain customer identification infor-
mation from the buyer in order to comply
with AML obligations. In such cases, the
processor has the requisite relationship
with the buyer to collect additional tax
documentation to comply with informa-
tion reporting requirements. Accordingly,
final §1.6045-1(a)(2)(ii)(A) modifies
the proposed definition of customer as
it applies to PDAPs to limit the circum-
stances under which a buyer would be
considered the customer of a PDAP. Spe-
cifically, under this revised definition, the
buyer will be treated as a customer of the
PDAP only to the extent that the PDAP
has an agreement or other arrangement
with the buyer for the provision of digital
asset payment services and that agreement
or other arrangement provides that the
PDAP may verify such person’s identity
or otherwise comply with AML program
requirements, such as those under 31 CFR
part 1010, applicable to that PDAP or any
other AML program requirements. For
this purpose, an agreement or arrangement
with the PDAP includes any alternative
payment services arrangement such as a
computer or mobile application program
under which, as part of the PDAP’s cus-
tomary onboarding procedures, the buyer
is treated as having agreed to the PDAP’s
general terms and conditions. The PDAP
may also be required to report information
on the payment to the merchant on whose
behalf the PDAP is acting.
Several comments raised the concern
that, to the extent there is no contractual
relationship between the PDAP and the
buyer, the buyer is not the PDAP’s cus-
tomer, and that the proposed regulations,
therefore, exceed the Secretary’s authority
under section 6045(a), which requires per-
sons doing business as a broker to “make
a return . . . showing the name and address
of each customer [of the broker], with such
details regarding gross proceeds.” These
comments recommended that the final
regulations provide that a PDAP that does
not have a contractual relationship with a
buyer is not a broker with respect to that
buyer. Another comment suggested the
regulations should not apply to PDAPs at
all without a clear congressional mandate.
The Treasury Department and the IRS do
not agree that section 6045 requires spe-
cific statutory language with respect to
each type of broker that already fits within
the definition of broker under section
6045(c)(1). Section 6045(c)(2) defines the
term customer as “any person for whom
the broker has transacted any business.”
This definition does not require that the
specific transaction at issue be conducted
by the broker for the customer. Accord-
ingly, if a PDAP transacts some business
with the buyer—such as would be the case
if the buyer sets up a payment account
with the PDAP—then there is statutory
authority to require that the PDAP report
on the buyer’s payments, even though the
activities performed by that PDAP were
performed pursuant to a separate contrac-
tual agreement with a merchant.
One comment expressed confusion
with the definition of PDAP in the pro-
posed regulations. Specifically, this com-
ment requested clarification as to why
the definition listed a third party settle-
ment organization separately in proposed
§1.6045-1(a)(22)(i)(B) rather than merely
as a subset of the description provided
in proposed §1.6045-1(a)(22)(i)(A), in
which the person regularly facilitates pay-
ments from one party to a second party by
receiving digital assets from the first pay-
ment and exchanging those digital assets
into cash or different digital assets paid the
second party. Another comment expressed
confusion over why the processor agree-
ment rules in proposed §1.6045-1(a)(22)
(ii) and (iii) include a provision treating
the payment of digital assets to a second
party pursuant to a processor agreement
that fixes the exchange rate (processor
agreement arrangement) as a sale effected
by the PDAP. This comment also recom-
mended deleting the processor agreement
arrangement paragraphs from the defini-
tion of a PDAP and moving them to the
definition of gross proceeds.
The definition of a PDAP in the pro-
posed regulations included descriptions
of ways that a person could facilitate a
payment from one party to a second party.
Many of these descriptions involved cir-
cumstances in which the buyer transfers
the digital asset payment to the PDAP, fol-
lowed by the PDAP transferring payment
to a second party. Several of the descrip-
tions involved circumstances in which
the PDAP does not take possession of the
payment, but instead instructs the buyer to
make a direct transfer of the digital asset
payment to the second party, or otherwise,
pursuant to a processor agreement, tempo-
rarily fixes the exchange rate to be applied
to the digital assets received by the second
party.
The Treasury Department and the IRS
understand that many of the transactions
described in the proposed regulations in
which the PDAP does not take posses-
sion of the payment are undertaken today
by non-custodial industry participants.
In light of the decision discussed in Part
I.B.1. of this Summary of Comments and
Explanation of Revisions to further study
the application of the broker reporting
rules to non-custodial industry partici-
pants, the Treasury Department and the
IRS have determined that the definition of
PDAP and the definition of a sale effected
by a PDAP (PDAP sales) in these final reg-
ulations should apply only to transactions
in which PDAPs take possession of the
digital asset payment. Additionally, given
the complexity of the multi-part defini-
tion of PDAP in the proposed regulations
and in response to the public comments,
the Treasury Department and the IRS
have determined that all types of payment
transactions that were included in the vari-
ous subparagraphs of the definition should
be combined into a single simplified defi-
nition. This single definition includes the
requirement that a person must receive
the digital assets in order to be a PDAP
and also covers all transactions—and not
just those transactions described in pro-
posed §1.6045-1(a)(22)(i)(B) and (C)—in
which the PDAP receives a digital asset
and transfers that same digital asset to the
second party.
Accordingly, final §1.6045-1(a)(22)
defines a PDAP as a person who in the
ordinary course of a trade or business
stands ready to effect sales of digital assets
by regularly facilitating payments from
one party to a second party by receiving
digital assets from the first party and pay-
ing those digital assets, cash, or different
digital assets to the second party. Corre-

July 29, 2024 202 Bulletin No. 2024–31
spondingly, final §1.6045-1(a)(9)(ii)(D)
revises and simplifies the proposed regu-
lation’s definition of a sale processed by
a PDAP to include the payment by a party
of a digital asset to a PDAP in return for
the payment of that digital asset, cash, or
a different digital asset to a second party.
Accordingly, if a buyer uses a stablecoin
or other digital asset to make payment
to a PDAP that then transfers the stable-
coin, another digital asset, or cash to the
merchant, the transaction is a PDAP sale.
Additionally, as discussed in Part I.D.4. of
this Summary of Comments and Explana-
tion of Revisions, the final regulations pro-
vide that any PDAP sale that is also a sale
under one of the other definitions of sale
under final §1.6045-1(a)(9)(ii)(A) through
(C) (non-PDAP sale) that is subject to
reporting due to the broker effecting the
sale as a broker other than as a PDAP must
be treated as a non-PDAP sale. Thus, for
example, an exchange of digital assets
that a custodial broker executes between
customers will not be treated as a PDAP
sale, but instead will be treated as a sale
of digital assets in exchange for different
digital assets under final §1.6045-1(a)(9)
(ii)(A)(2).
One comment recommended that the
regulations be clarified so as not to treat
the PDAP as a broker to the extent it does
not have sufficient information about the
transaction to know it is a sale. Another
comment stated that PDAPs do, in fact,
maintain detailed records of all transac-
tions for both merchants and buyers. The
final regulations adopt this comment by
adding services performed by a PDAP to
the definition of facilitative service pro-
vided the PDAP has actual knowledge or
ordinarily would know the nature of the
transaction and the gross proceeds there-
from to ensure that payments made using
digital assets are treated as sales effected
by a broker. Final §1.6045-1(a)(21)(iii)
(B)(4). Accordingly, in a circumstance
in which the PDAP processes a payment
on behalf of a merchant and that payment
comes from a buyer with an account at
the PDAP, the PDAP would ordinarily
have the information necessary to know
that the transaction constitutes a sale and
would know the gross proceeds. As such,
that PDAP will be treated under the final
regulations as effecting the sale transac-
tion under §1.6045-1(a)(10)(i)(D) for the
buyer-customer as a digital asset middle-
man under §1.6045-1(a)(21). In contrast,
in a circumstance in which the PDAP does
not process the payment on behalf of the
merchant, the PDAP would ordinarily not
have actual knowledge or other informa-
tion that would allow the processor to
ordinarily know the nature of the transac-
tion. Accordingly, assuming nothing else
about the transaction provides the PDAP
with either actual knowledge or infor-
mation that would allow the processor to
ordinarily know the nature of the transac-
tion, the payment processor would not be
treated as providing a facilitative service
that effects a sale transaction under these
regulations.
One comment stated that PDAPs do
not have the infrastructure to collect and
store customer identification information
or to report transactions involving buyers
who do not have accounts with the PDAP.
Another comment expressed concern
about asking individuals to provide per-
sonal identifying information to PDAPs,
which could occur in the middle of a
busy store. Another comment requested
guidance on how PDAPs should collect
sensitive taxpayer information. Several
comments expressed concern about the
increased risk these rules would create
with respect to the personal identifying
information collected by PDAPs because
that information could be held by mul-
tiple brokers. Several other comments
stated that extending information report-
ing to PDAPs would create surveillance
concerns because it could allow the IRS
to collect data on merchandise or services
purchased or provided.
The Treasury Department and the IRS
understand that PDAPs that comply with
FinCEN and other regulatory require-
ments are required to collect and in some
cases report customer identification infor-
mation, and have concluded that such
PDAPs will likewise be able to implement
the systems necessary to, or contract with
service providers who can, protect sensi-
tive information of their customers. It is
appropriate to have PDAPs collect, store,
and report customer identification infor-
mation for Federal tax purposes because
reporting on digital asset payment trans-
actions is important to closing the income
tax gap attributable to digital asset trans-
actions. Indeed, reporting is particularly
helpful to buyers in these payment trans-
actions because they may not understand
that the use of digital assets to make pay-
ments is a transaction that may generate
a taxable gain or loss. Finally, the final
regulations do not require the reporting
of any information regarding the specific
services or products purchased by buyers
in payment transactions. Accordingly, the
IRS could not use this information report-
ing to track or monitor the types of goods
and services a taxpayer purchases using
digital assets.
c. Other PDAP issues
Comments also raised various other
policy and practical objections to includ-
ing PDAPs in the definition of broker.
Specifically, comments suggested that
requiring PDAPs to collect tax documen-
tation information for all purchases may
halt the development of digital assets as
an efficient and secure payment system or
may drive customers to not use PDAPs to
make their payments, potentially expos-
ing them to more fraud by unscrupulous
merchants. Other comments complained
that these rules would punish buyers who
choose to pay with digital assets and con-
fuse buyers paying with stablecoins, who
expect transactions to be no different
than cash transactions. Several comments
asserted that the benefits of having PDAPs
report on digital asset payments made by
buyers was not worth the cost because
most tax software programs are able to
track and report accurately the gains and
losses realized in connection with these
payment transactions. These comments
asserted that for taxpayers already taking
steps to comply with their Federal income
tax obligations, an information reporting
regime that provides only gross proceeds
information with respect to these transac-
tions would not produce particularly use-
ful information. Even for other taxpayers,
another comment suggested that reporting
by PDAPs provided only limited utility
because determining a gain or loss on each
purchase would still involve a separate
search for cost basis information.
The final regulations do not adopt these
comments. Information reporting facili-
tates the preparation of Federal income tax
returns (and reduces the number of inad-
vertent errors or intentional misstatements

Bulletin No. 2024–31 203 July 29, 2024
shown on those returns) by taxpayers who
engage in digital asset transactions. Infor-
mation reporting is particularly import-
ant in the case of payment transactions
involving the disposition of digital assets,
which many taxpayers do not realize must
be reported on their Federal income tax
returns. Clear information reporting rules
also helps the IRS to identify taxpayers
who have engaged in these transactions,
and thereby help to reduce the overall
income tax gap. Moreover, regarding the
impact of these regulations on the devel-
opment of digital assets as an efficient and
secure payment system, the final regula-
tions will assist digital asset owners who
are currently forced to closely monitor
and maintain records of all their digital
asset transactions to correctly report their
tax liability at the end of the year because
they will receive the necessary informa-
tion from the processor of the transac-
tions. Eliminating these high entry costs
may allow more potential digital asset
owners with little experience accounting
for dispositions of digital assets in pay-
ment transactions to enter the market.
Several comments recommended
against having PDAPs report on buyers
disposing of digital assets because these
PDAPs already report on merchants who
receive these payments under section
6050W to the extent the payments are for
goods or services. These comments raised
concerns that this duplicative reporting for
the same transaction would harm the IRS,
create an undue burden for brokers, and
cause confusion for buyers making pay-
ments. The final regulations do not adopt
these comments because the reporting is
not duplicative. The reporting under sec-
tion 6050W reports on payments made
to the merchant. That reporting is not
provided to the buyers making those pay-
ments, and therefore does not address the
gross proceeds that the buyer must report
on the buyer’s Federal income tax returns.
Another comment suggested that the
treatment of digital asset payments should
be analogous to that of cash payments.
That is, since PDAPs are not required to
report on buyers making cash payments,
they should not be required to report on
buyers making payments with digital
assets. The final regulations do not adopt
this comment because a buyer making a
cash payment does not have a taxable
transaction while a buyer making a pay-
ment with digital assets is engaging in a
sale or exchange that requires the buyer to
report any gain or loss from the disposi-
tion on its Federal income tax return.
Other comments raised the concern
that reporting by PDAPs would result in
duplicative reporting to the buyer because
the buyer’s wallet provider or another
digital asset trading platform may report
these transactions. See Part I.B.5. of this
Summary of Comments and Explanation
of Revisions for a discussion of how the
multiple broker rules provided in these
final regulations would apply to PDAPs.
Another comment recommended only
subjecting PDAPs to broker reporting if
they exchange digital assets into fiat cur-
rency. The final regulations do not adopt
this comment because digital assets are a
unique form of property which can be used
to make payments. Accordingly, given
that digital assets are becoming a more
popular form of payment, it is important
that taxpayers making payments with dig-
ital assets be provided the information
they need to report these transactions on
their Federal income tax returns.
Notwithstanding that the final regula-
tions require PDAPs to report on PDAP
sales, as discussed in Part I.D.2. of this
Summary of Comments and Explanation
of Revisions, the final regulations provide
a $10,000 de minimis threshold for qual-
ifying stablecoins below which PDAPs
will not have to report PDAP sales using
qualifying stablecoins. Additionally, the
Treasury Department and the IRS have
determined that, pursuant to discretion
under section 6045(a), it is appropriate to
provide additional reporting relief for cer-
tain low-value PDAP sales using digital
assets other than qualifying stablecoins
that are less likely to give rise to signifi-
cant gains or losses. As discussed in Part
I.D.4. of this Summary of Comments and
Explanation of Revisions, the final regu-
lations have added a de minimis annual
threshold for PDAP sales below which no
reporting is required.
3. Issuers of Digital Assets
Proposed §1.6045-1(a)(1) modified
the definition of broker to include per-
sons that regularly offer to redeem digital
assets that were created or issued by that
person, such as in an initial coin offering
or redemptions by an issuer of a so-called
stablecoin. One comment focused on sta-
blecoin issuers and recommended against
treating such issuers as brokers because it
is unclear how they would be in a position
to know the gain or loss of their custom-
ers. Issuers of digital assets that regularly
offer to redeem those digital assets will
know the nature of the sale and the gross
proceeds from the sale when they redeem
those digital assets. Accordingly, it is
appropriate to treat these issuers as bro-
kers required to report the gross proceeds
of the redemption just as obligors that
regularly issue and retire their own debt
obligations are treated as brokers and cor-
porations that regularly redeem their own
stock also are treated as brokers under
§1.6045-1(a)(1) of the pre-2024 final reg-
ulations. Moreover, since these issuers do
not provide custodial services for their
customers redeeming the issued digital
assets, they are not required to report on
the customer’s adjusted basis under final
§1.6045-1(d)(2)(i)(D). As such whether
they are able to know their customer’s
gain or loss is not relevant to whether they
should be treated as brokers under these
regulations.
4. Real Estate Reporting Persons
The proposed regulations provided that
a real estate reporting person is a broker
with respect to digital assets used as con-
sideration in a real estate transaction if
the reporting person would generally be
required to make an information return
with respect to that transaction under pro-
posed §1.6045-4(a). To ensure that real
estate reporting persons report on real
estate buyers making payment in such
transactions with digital assets, the pro-
posed regulations also included these real
estate buyers in the definition of customer
and included the services performed with
respect to these transactions by real estate
reporting persons in the definition of facil-
itative services relevant to the definition
of a digital asset middleman.
One comment raised the concern that
in some real estate transactions, direct
(peer to peer) payments of digital assets
from buyers to sellers may not be reflected
in the contract for sale. In such transac-
tions, the real estate reporting person

July 29, 2024 204 Bulletin No. 2024–31
would not ordinarily know that the buyers
used digital assets to make payment. The
Treasury Department and the IRS have
concluded that it is not appropriate at this
time to require real estate reporting per-
sons who do not know or would not ordi-
narily know that digital assets were used
by the real estate buyer to make payment
to report on such payments. Accordingly,
the definition of facilitative service in
final §1.6045-1(a)(21)(iii)(B)(2) has been
revised to limit the services provided by
real estate reporting persons that consti-
tute facilitative services to those services
for which the real estate reporting person
has actual knowledge or ordinarily would
know that digital assets were used by the
real estate buyer to make payment directly
to the real estate seller. For this purpose,
a real estate reporting person is consid-
ered to have actual knowledge that digital
assets were used by the real estate buyer
to make payment if the terms of the real
estate contract provide for payment using
digital assets. Thus, for example, if the
contract for sale states that the buyer will
make payment using digital assets, either
fixed as to number of units or fixed as to
the value, the real estate reporting person
would be treated as having actual knowl-
edge that digital assets were used to make
payment in the transaction notwithstand-
ing that such person might have to query
the buyer and seller regarding the name
and number of units used to make pay-
ment. Additionally, a separate communi-
cation to the real estate reporting person,
for example, to ensure that the value of
the digital asset payment is reflected in
any commissions or taxes due at closing,
would constitute actual knowledge by the
real estate reporting person that digital
assets were used by the real estate buyer
to make payment directly to the real estate
seller.
One comment recommended that to
relieve burden on the real estate reporting
person, the form on which the real estate
seller’s gross proceeds are reported (Form
1099-S, Proceeds From Real Estate
Transactions) be revised with a check box
to indicate that digital assets were paid
in the transaction and with a new box for
the buyer’s name, address, and tax iden-
tification number (TIN). These revisions
would allow the real estate reporting per-
son to file one Form 1099-S instead of one
Form 1099-DA (with respect to the real
estate buyer) and one Form 1099-S (with
respect to the real estate seller). The final
regulations do not make this suggested
change because it would be inappropriate
to include both parties to the transaction
on the same information return. The bro-
ker reporting regulations require copies of
Form 1099-S to be furnished to the tax-
payer, and it would be inappropriate to
require disclosure of either party’s TIN
to the other. For a discussion of how the
multiple broker rule would apply to a real
estate transaction involving a real estate
reporting person and a PDAP, see Part
I.B.5. of this Summary of Comments and
Explanation of Revisions.
Notwithstanding these decisions
regarding the appropriateness of report-
ing under these regulations by real estate
reporting persons, as discussed in Part VII.
Of this Summary of Comments and Expla-
nation of Revisions, the applicability date
for reporting has been delayed and backup
withholding relief has been provided for
real estate reporting persons.
5. Exempt Recipients and the Multiple
Broker Rule
a. Sales effected for exempt recipients
The proposed regulations left
unchanged the exceptions to reporting
provided under §1.6045-1(c)(3)(i) of the
pre-2024 final regulations for exempt
recipients, such as certain corporations,
financial institutions, tax exempt organi-
zations, or governments or political subdi-
visions thereof. Thus, the proposed regula-
tions did not create a reporting exemption
for sales of digital assets effected on behalf
of a customer that is a digital asset bro-
ker. Several comments recommended that
custodial digital asset brokers be added
to the list of exempt recipients under the
final regulations because the comments
asserted that these brokers are subject to
rigorous oversight by numerous Federal
and State regulators. In response to the
request that custodial digital asset bro-
kers be added to the list of exempt recip-
ients, final §1.6045-1(c)(3)(i)(B)(12) adds
digital asset brokers to the list of exempt
recipients for sales of digital assets, but
limits such application to only U.S. digi-
tal asset brokers because brokers that are
not U.S. digital asset brokers (non-U.S.
digital asset brokers) are not currently
subject to reporting on digital assets under
these final regulations. See Part I.G. of this
Summary of Comments and Explanation
of Revisions for the definition of a U.S.
digital asset broker and a discussion of
the Treasury Department’s and the IRS’s
plans to implement the CARF. Addition-
ally, the list also does not include U.S.
digital asset brokers that are registered
investment advisers that are not otherwise
on the list of exempt recipients (§1.6045-
1(c)(3)(i)(B)(1) through (11) of the pre-
2024 final regulations) because registered
investment advisers were not previously
included in the list of exempt recipients.
For this purpose, a registered investment
adviser means a registered investment
adviser registered under the Investment
Advisers Act of 1940, 15 U.S.C. 80b-1, et
seq., or as a registered investment adviser
with a state securities regulator. See Part
I.B.5.b. of this Summary of Comments and
Explanation of Revisions for the docu-
mentation that a broker effecting a sale on
behalf of a U.S. digital asset broker (other
than a registered investment adviser) must
obtain pursuant to final §1.6045-1(c)(3)(i)
(C)(3) to treat such customer as an exempt
recipient under final §1.6045-1(c)(3)(i)(B)
(12).
b. The multiple broker rule
The proposed regulations also did not
extend the multiple broker rule under
§1.6045-1(c)(3)(iii) of the pre-2024 final
regulations to digital asset brokers. Com-
ments overwhelmingly requested that the
final regulations implement a multiple
broker rule applicable to digital asset bro-
kers to avoid burdensome and confusing
duplicative reporting. Several comments
recommended that the rule in §1.6045-
1(c)(3)(iii) of the pre-2024 final regula-
tions, which provides that the broker that
submits instructions to another broker,
such as a digital asset trading platform,
should have the obligation to report the
transaction to the IRS, not the broker that
receives the instructions and executes the
transaction, because the brokers that sub-
mit instructions are in a position to pro-
vide reporting information to those clients
with whom they maintain a direct rela-
tionship, while the latter are not. Another

Bulletin No. 2024–31 205 July 29, 2024
comment recommended requiring only
the digital asset broker that has the final
ability to consummate the sale to report
the transaction to the IRS unless that bro-
ker has no ability to backup withhold.
Another comment recommended allowing
digital asset brokers to enter into contracts
for information reporting to establish who
is responsible for reporting the transaction
to the IRS. Finally, several comments rec-
ommended that, when two digital asset
brokers would otherwise have a reporting
obligation with respect to a sale trans-
action, that only the digital asset broker
crediting the gross proceeds to the cus-
tomer’s wallet address or account have the
obligation to report the transaction to the
IRS because this is the broker that has the
best ability to backup withhold.
As discussed in Part VI. of this Sum-
mary of Comments and Explanation of
Revisions, backup withholding on these
transactions is a necessary and essential
tool to ensure that important informa-
tion for tax enforcement is reported to
the IRS. Because the broker crediting the
gross proceeds to the customer’s wallet
address or account is in the best position
to backup withhold on these transactions
if the customer does not provide the bro-
ker with the necessary tax documentation,
final §1.6045-1(c)(3)(iii)(B) adopts a mul-
tiple broker rule for digital asset brokers
that would require the broker crediting the
gross proceeds to the customer’s wallet
address or account to report the transac-
tion to the IRS when more than one dig-
ital asset broker would otherwise have a
reporting obligation with respect to a sale
transaction. The relief for the broker that
is not the broker crediting the gross pro-
ceeds to the customer’s wallet address or
account, however, is conditioned on that
broker obtaining proper documentation
from the other broker as discussed in the
next paragraph. Additionally, the final
regulations do not adopt the suggested
rule that would allow a broker to shift the
responsibility to report to another broker
based on an agreement between the bro-
kers because the broker having the obli-
gation to report in that case may not have
the ability to backup withhold. A broker,
of course, is not prohibited from contract-
ing with another broker or with another
third party to file the required returns on
its behalf.
Numerous comments provided recom-
mendations in response to the request in
the proposed regulations for suggestions
to ensure that a digital asset broker would
know with certainty that the other digital
asset broker involved in a transaction is
also a broker with a reporting obligation
under these rules. One comment raised a
concern with a rule requiring the broker
obligated to report to provide notice to
the other broker that it will make a return
of information for each sale because that
requirement would be overly burdensome.
Another comment recommended that the
broker obtain from the obligated broker a
Form W-9 that has been modified to add
an exempt payee code for digital asset
brokers and a unique broker identification
number. Another comment recommended
that, absent actual knowledge to the con-
trary, a broker should be able to rely on a
reasonable determination based on another
broker’s name or other publicly available
information it has about the other broker
(sometimes referred to as the eye-ball test)
that the other broker is a U.S. digital asset
broker. To avoid any gaps in reporting,
another comment recommended against
allowing brokers to treat other brokers as
U.S. digital asset brokers based on actual
knowledge or the existing presumption
rules. Finally, another comment recom-
mended that the IRS establish a registra-
tion system and searchable database for
digital asset brokers like that used for for-
eign financial institutions under the pro-
visions commonly known as the Foreign
Account Tax Compliance Act (FATCA) of
the Hiring Incentives to Restore Employ-
ment Act of 2010, Public Law 111–147,
124 Stat. 71 (March 18, 2010).
Because of the risk that the multiple
broker rule could result in no reporting,
the final regulations do not adopt the
so-called eye-ball test or the existing pre-
sumption rules for determining if another
broker is a U.S. digital asset broker. The
final regulations also do not adopt an IRS
registration system for U.S. digital asset
brokers because the IRS is still consider-
ing the benefits and burdens of a registra-
tion system for both the IRS and brokers.
Instead, the final regulations adopt a rule
that to be exempt from reporting under the
multiple broker rule, a broker must obtain
from another broker a Form W-9 certifying
that the other broker is a U.S. digital asset
broker (other than a registered investment
adviser that is not otherwise on the list of
exempt recipients (§1.6045-1(c)(3)(i)(B)
(1) through (11)) of the pre-2024 final reg-
ulations). Because the current Form W-9
does not have this certification, the notice
referred to in Part VII. of this Summary of
Comments and Explanation of Revisions
will permit brokers to rely upon a written
statement that is signed by another broker
under penalties of perjury that the other
broker is a U.S. digital asset broker until
sometime after the Form W-9 is revised
to accommodate this certification. It is
contemplated that the instructions to the
revised Form W-9 will give brokers who
have obtained private written certifica-
tions a reasonable transition period before
needing to obtain a revised Form W-9
from the other broker.
One comment requested clarification
regarding which broker—the real estate
reporting person or the PDAP—is respon-
sible for filing a return with respect to
the real estate buyer in a transaction in
which the real estate buyer transfers dig-
ital assets to a PDAP that in turn transfers
cash to the real estate seller. The multiple
broker rule included in final §1.6045-1(c)
(3)(iii)(B) would apply in this case if the
real estate reporting person is aware that
the PDAP was involved to make the pay-
ment on behalf of the real estate buyer and
obtains from the PDAP the certification
described above that the PDAP is a U.S.
digital asset broker. If the transaction is
undertaken in any other way, it is unclear
that the real estate reporting person would
know the identity of the PDAP or whether
that PDAP was required to report on the
transaction. Accordingly, the real estate
reporting person would be required to
report on the transaction without regard
to whether the PDAP also is required to
report. It is anticipated that taxpayers will
only rarely receive two statements regard-
ing the same real estate transaction; how-
ever, when they do, taxpayers will be able
to inform the IRS should the IRS inquire
that the two statements reflect only one
transaction.
Another comment requested guidance
on how the information reporting rules
would work with respect to a digital asset
hosted wallet provider that contracts with
another business to perform the hosted
wallet services for the broker’s custom-

July 29, 2024 206 Bulletin No. 2024–31
ers on the broker’s behalf. In response to
the comment, the final regulations clarify
that a broker should be treated as provid-
ing hosted wallet services even if it hires
an agent to perform some or all of those
services on behalf of the broker and with-
out regard to whether that hosted wallet
service provider is also in privity with
the customer. Additionally, to ensure this
interpretation is incorporated in the final
regulations, the final regulations revise
the definition of covered security in final
§1.6045-1(a)(15)(i)(J) to reference bro-
kers that provide custodial services for
digital assets, rather than hosted wallet
services for digital assets, to clarify that
services provided by the brokers’ agents
will be ascribed to the broker without
regard to the specific custodial method
utilized. To the extent a hosted wallet pro-
vider acts as an agent of the broker and is
in privity with the customer, the multiple
broker rules described herein should avoid
duplicative reporting.
Finally, as discussed in Part I.B.1. of
this Summary of Comments and Expla-
nation of Revisions, the Treasury Depart-
ment and the IRS are continuing to study
the question of how a multiple broker rule
would apply to the non-custodial digital
asset industry.
C. Definition of sales subject to reporting
1. In General
The proposed regulations modified
the definition of a sale subject to report-
ing to include the disposition of a digital
asset in exchange for cash, one or more
stored-value cards, or a different digital
asset. In addition, the proposed regula-
tions included in the definition of sale the
disposition of a digital asset by a customer
in exchange for property (including secu-
rities and real property) of a type that is
subject to reporting under section 6045
or in consideration for the services of a
broker. Finally, the proposed regulations
provided that a sale includes certain dig-
ital asset payments by a customer that are
processed by a PDAP.
Several comments recommended
that the definition of sale not include
exchanges of digital assets for different
digital assets or certain other property
because such reporting would be imprac-
tical for brokers, confusing for taxpayers,
and not consistent with the reporting rules
for non-digital assets. Another comment
recommended limiting reporting to off-
ramp transactions, which signify the tax-
payer’s exit from an investment in digital
assets. In contrast, another comment sup-
ported the requirement for information
reporting on exchanges of digital assets
for different digital assets because tax-
payers must report all taxable gain or loss
transactions of this type that occur within
their taxable year.
The final regulations do not adopt the
comments to limit the definition of sale to
cash transactions. Digital assets are unique
among the types of assets that are subject
to reporting under section 6045 because
they are commonly exchanged for differ-
ent digital assets in trading transactions,
for example an exchange of bitcoin for
ether. Some digital assets can readily func-
tion as a payment method and, as such,
can also be exchanged for other property
in payment transactions. As explained in
Notice 2014-21, and clarified in Reve-
nue Ruling 2023-14, 2023-33 I.R.B. 484
(August 14, 2023), the sale or exchange
of a digital asset that is property has tax
consequences that may result in a tax lia-
bility. Thus, when a taxpayer disposes of
a digital asset to make payment in another
transaction, the taxpayer has engaged in
two taxable transactions: the first being
the disposition of the digital asset and the
second being the payment associated with
the payment transaction. In contrast, when
a taxpayer disposes of cash to make pay-
ment, the taxpayer has, at most, only one
taxable transaction. Accordingly, these
regulations require reporting on sales and
certain exchanges of digital assets because
substantive Federal tax principles do not
treat the use of digital assets to make pay-
ments in the same way as the use of cash
to make payments.
Unlike digital assets, traditional finan-
cial assets subject to broker reporting
are generally disposed of for cash. That
is why the definition of sale in §1.6045-
1(a)(9)(i) only requires reporting for
cash transactions. In contrast, the bar-
ter exchange rules in §1.6045-1(e) do
require reporting on property-for-property
exchanges because the barter industry, by
definition, applies to property-for-prop-
erty exchanges and not only cash transac-
tions. Accordingly, the modified definition
of sale for digital assets exchanged for
other property reflects the differences in
the underlying transactions as compared
to traditional financial assets, not the
disparate treatment of similarly situated
transactions based solely on technological
differences. Moreover, the purpose behind
information reporting is to make taxpay-
ers aware of their taxable transactions so
they can report them accurately on their
Federal income tax returns and to make
those transactions more transparent to the
IRS to reduce the income tax gap.
Another comment raised a concern
that including exchanges of digital assets
for property and services exceeded the
authority provided to the Secretary by the
Infrastructure Act. The Treasury Depart-
ment and the IRS do not agree with this
comment. The term “sale” is not used in
section 6045(a), which provides broadly
that the Secretary may publish regula-
tions requiring returns by brokers with
details regarding gross proceeds and other
information the Secretary may require by
forms or regulations. Nothing in section
6045 limits “gross proceeds” to the results
of a sale rather than an exchange and the
term sale was first defined in the regu-
lations under section 6045 long before
the enactment of the Infrastructure Act.
Moreover, the Infrastructure Act modified
the definition of broker to include certain
persons who provide services effectuating
transfers of digital assets, which are part
of any exchange of digital assets. Accord-
ingly, the changes made by the Infrastruc-
ture Act do not provide any limitations
on how the Secretary can define the term
when applied to the digital asset industry.
Another comment suggested that treating
the exchange of digital assets for other
digital assets or services as a taxable event
is impractical and harmful to taxpayers,
and that digital assets should be subject to
tax only when taxpayers sell those assets
for cash. See Part II.A. of this Summary of
Comments and Explanation of Revisions
for discussion of that issue.
2. Definition of Dispositions
Several comments raised questions
about whether the definition of sale,
which includes any disposition of a digi-
tal asset in exchange for a different digital

Bulletin No. 2024–31 207 July 29, 2024
asset, applies to certain dispositions that
may or may not be taxable. For this rea-
son, several comments recommended that
the final regulations not require reporting
on certain transactions until substantive
guidance is issued on the tax treatment of
those transactions. One comment specif-
ically mentioned reporting should not be
applied to transactions involving what it
referred to as the “wrapping” or “unwrap-
ping” of tokens for the purpose of obtain-
ing a token that is otherwise like the dis-
posed-of token in order to use the received
token on a particular blockchain. In con-
trast, another comment suggested that the
final regulations should require reporting
wrapping and unwrapping transactions.
One comment suggested that exchanges
of digital assets involving “liquidity pool”
tokens should also be subject to reporting
under the final regulations. Another com-
ment suggested that the final regulations
provide guidance on whether reporting
is required on exchanges of digital assets
for liquidity pool or “staking pool” tokens
because these transactions typically rep-
resent contributions of tokens when the
contributor’s economic position has not
changed. This comment also suggested,
if these contributions are excluded from
reporting, that the Treasury Department
and the IRS study how information report-
ing rules apply when the contributors are
“rewarded” for these “contributions” or
when they receive other digital assets
in exchange for the disposition of these
pooling tokens. Another comment recom-
mended, instead, that the final regulations
explicitly address the information report-
ing requirements associated with staking
rewards and hard forks and recommended
that they should be treated like taxable
stock dividends for reporting purposes.
Another comment recommended that the
final regulations address whether digital
asset loans and short sales of digital assets
will be subject to reporting. The comment
expressed the view that the substantive tax
treatment of such loans is unresolved, and
further suggested that the initial exchange
of a digital asset for an obligation to return
the same or identical digital asset and the
provision of cash, stablecoin, or other dig-
ital asset collateral in the future may well
constitute a disposition and, in the absence
of a statutory provision like section 1058
of the Code, may be taxable.
The Treasury Department and the
IRS have determined that certain digital
asset transactions require further study to
determine how to facilitate appropriate
reporting pursuant to these final regula-
tions under section 6045. Accordingly, in
response to these comments, Notice 2024-
57 is being issued with these final regula-
tions that will provide that until a determi-
nation is made as to how the transactions
identified in the notice should be reported,
brokers are not required to report on these
identified transactions, and the IRS will
not impose penalties for failure to file cor-
rect information returns or failure to fur-
nish correct payee statements with respect
to these identified transactions.
One comment recommended that an
exchange of digital assets for governance
tokens or any other exchange for tokens
that could be treated as a contribution to
an actively managed partnership or asso-
ciation also be excluded from reporting
under section 6045 until the substantive
Federal tax consequences of these con-
tributions are addressed in guidance. The
final regulations do not adopt this recom-
mendation. Whether exchanges of dig-
ital assets for other digital assets could
be treated as a contribution to a partner-
ship or association is outside the scope of
these regulations. Additionally, because
the potential for duplicate reporting also
exists for non-digital asset partnership
interests, Treasury Department and the
IRS have concluded that different rules
should not apply to sales of digital asset
partnership interests. Finally, the more
general question of whether reporting on
partnership interests (in digital asset form
or otherwise) under section 6045 is appro-
priate in light of the potential for duplicate
reporting is outside the scope of this regu-
lations project.
The preamble to the proposed regu-
lations requested comments regarding
whether the broker reporting regulations
should apply to include initial coin offer-
ings, simple agreements for future tokens,
and similar contracts, but did not propose
such reporting. One comment recom-
mended that initial coin offerings, simple
agreements for future tokens, and similar
contracts should be covered by broker
reporting under the final regulations while
another comment asserted that this report-
ing would not be feasible. Upon consid-
eration of the comments, the Treasury
Department and the IRS have determined
that the issues raised by these comments
require further study. Accordingly, the
final regulations do not adopt the com-
ment’s recommendations. However, the
Treasury Department and the IRS may
consider publishing additional guidance
that could require broker reporting for
such transactions.
3. Exceptions for Certain Closed Loop
Transactions
As discussed in Part I.A.3. of this
Summary of Comments and Explanation
of Revisions with respect to closed loop
digital assets, the Treasury Department
and the IRS do not intend the informa-
tion reporting rules under section 6045
to apply to the types of virtual assets that
exist only in a closed system and cannot
be sold or exchanged outside that system
for fiat currency. Rather than carve these
assets out from the definition of a digital
asset, however, the final regulations add
these closed loop transactions to the list
of excepted sales that are not subject to
reporting under final §1.6045-1(c)(3)(ii).
Inclusion on the list of excepted sales is
not intended to create an inference that
the transaction is a sale of a digital asset
under current law. Instead, inclusion on
the list merely means that the Treasury
Department and the IRS have determined
that information reporting on these trans-
actions is not appropriate at this time.
One comment recommended that the
definition of digital assets be limited
to exclude from reporting transactions
involving dispositions of NFTs used by
loyalty programs. The comment explained
that these loyalty programs do not permit
customers to transfer their digital asset
tokens by sale or gift outside of the pro-
gram’s closed (that is, permissioned) dis-
tributed ledger. The final regulations add
these loyalty program transactions to the
list of excepted sales for which reporting
is not required. This exception is limited,
however, to those programs that do not
permit customers to transfer, exchange,
or otherwise use, the tokens outside of
the program’s closed distributed ledger
network because tokens that have a mar-
ket outside the program’s closed network
raise Federal tax issues similar to those

July 29, 2024 208 Bulletin No. 2024–31
with other digital assets that are subject to
reporting.
Another comment recommended that
video game tokens that owners have only
a limited ability to sell outside the video
game environment be excluded from the
definition of digital assets because sales
of these tokens represent a low risk of
meaningful Federal tax non-compliance.
The final regulations do not treat sales of
video game tokens that can be sold out-
side the video game’s closed environment
as excepted sales. Instead, as with the loy-
alty program tokens, the final regulations
limit the excepted sale treatment to only
those dispositions of video game tokens
that are not capable of being transferred,
exchanged, or otherwise used, outside the
closed distributed ledger environment.
Several comments requested that the
final regulations exclude from reporting
transactions involving digital represen-
tations of assets that may be transferred
only within a fixed network of banks using
permissioned distributed ledgers to com-
municate payment instructions or other
back-office functions. According to these
comments, bank networks use digital
assets as part of a messaging service. The
comments noted that these digital assets
have no intrinsic value, function merely
as a tool for recordkeeping, and are not
freely transferable for cash or other digital
assets outside the system. To address these
transactions, one comment recommended
that the definition of digital asset be lim-
ited to only those digital assets that are
issued and traded on permissionless (that
is, open to the public) distributed ledgers.
Other comments requested that the excep-
tion apply to permissioned interoperable
distributed ledgers, that is, digital assets
that can travel from one permissioned dis-
tributed ledger (for example, at one bank)
to another permissioned distributed ledger
(at another bank).
The Treasury Department and the
IRS are concerned that a broadly appli-
cable restriction on the definition of dig-
ital assets could inadvertently create an
exception for other digital assets that
could be involved in transactions that give
rise to taxable gain or loss. Accordingly,
to address these comments, the final reg-
ulations add certain transactions within a
single cryptographically secured distrib-
uted ledger, or network of interoperable
distributed ledgers, to the list of excepted
sales for which reporting is not required.
Specifically, final §1.6045-1(c)(3)(ii)(G)
provides that an excepted sale includes
the disposition of a digital asset repre-
senting information with respect to pay-
ment instructions or the management of
inventory that does not consist of digital
assets, which in each case does not give
rise to sales of other digital assets within
a cryptographically secured distributed
ledger (or network of interoperable dis-
tributed ledgers) if access to the distrib-
uted ledgers (or network of interoperable
distributed ledgers) is restricted to only
users of such information and if the digital
assets disposed of are not capable of being
transferred, exchanged, or otherwise used,
outside such distributed ledger or net-
work. No inference is intended that such
transactions would otherwise be treated
as sales of digital assets. This exception,
however, does not apply to sales of digital
assets that are also sales of securities or
commodities that are cleared or settled on
a limited-access regulated network subject
to the coordination rule in final §1.6045-
1(c)(8)(iii). See Part I.A.4.a. of this Sum-
mary of Comments and Explanation of
Revisions for an explanation of the special
coordination rule applicable to securities
or commodities that are cleared or settled
on a limited-access regulated network.
The final regulations also include a gen-
eral exception for closed-loop transactions
in order to address other such transactions
not specifically brought to the attention
of the Treasury Department and the IRS.
Because the Treasury Department and the
IRS do not have the information avail-
able to evaluate those transactions, this
exception applies only to a limited class
of digital assets. The digital assets must
be offered by a seller of goods or provider
of services to its customers and exchange-
able or redeemable only by those cus-
tomers for goods or services provided by
such seller or provider, and not by others
in a network. In addition, the digital asset
may not be capable of being transferred,
exchanged, or otherwise used outside the
cryptographically secured distributed led-
ger network of the seller or provider and
also may not be sold or exchanged for
cash, stored-value cards, or stablecoins at
a market rate inside the seller or provid-
er’s distributed ledger network.
The treatment of closed-loop trans-
actions as excepted sales discussed here
is not intended to be broadly applicable
to any digital asset sold within a permis-
sioned distributed ledger network because
such a broad exception could generate
incentives for the creation of distributed
ledger networks that are nominally per-
missioned but are, in fact, open to the pub-
lic. If similar digital assets that cannot be
sold or exchanged outside of a controlled,
permissioned ledger and that do not raise
new tax compliance concerns are brought
to the attention of the Treasury Depart-
ment and the IRS, transactions involving
those digital assets may also be designated
as excepted sales under final §1.6045-1(c)
(3)(ii)(A).
4. Other Exceptions
One comment requested that utility
tokens that are limited to a particular time-
frame or event be treated like closed sys-
tem tokens. The final regulations do not
adopt this suggestion because not enough
information was provided for the Trea-
sury Department and the IRS to determine
whether these tokens are capable of being
transferred, exchanged, or otherwise used,
outside of the closed distributed ledger
environment. Another comment requested
that digital assets used for test purposes
be excluded from the definition of dig-
ital assets. According to this comment,
test blockchain networks allow users to
receive digital assets for free or for a nom-
inal fee as part of the creation and testing
of software. These networks have sunset
dates beyond which the digital assets cre-
ated cannot be used. The final regulations
do not adopt this comment because not
enough information was provided to know
if these networks are closed distributed
ledger environments or if the tokens are
capable of being transferred, exchanged,
or otherwise used, prior to the network’s
sunset date.
One comment requested that the final
regulations be revised to prevent the
application of cascading transaction fees
in a sale of digital assets for different dig-
ital assets when the broker withholds the
received digital assets to pay for such fees.
For example, a customer exchanges one
unit of digital asset AB for 100 units of
digital asset CD (first transaction), and to

Bulletin No. 2024–31 209 July 29, 2024
pay for the customer’s digital asset trans-
action fees, the broker withholds 10 per-
cent (or 10 units) of digital asset CD. The
comment recommended that the sale of
the 10 units of CD in the second transac-
tion be allocated to the original transaction
and not be separately reported. The Trea-
sury Department and the IRS have deter-
mined that a limited exception from the
definition of sale should apply to cascad-
ing digital asset transaction fees. Specifi-
cally, final §1.6045-1(c)(3)(ii)(C) excepts
a sale of digital asset units withheld by
the broker from digital assets received
by the customer in any underlying digital
asset sale to pay for the customer’s digital
asset transaction costs. The special spe-
cific identification rule in final §§1.6045-
1(d)(2)(ii)(B)(3) and 1.1012-1(j)(3)(iii)
ensures that the sale of the withheld units
does not give rise to gain or loss. See Part
VI.B. of this Summary of Comments and
Explanation of Revisions for a discussion
of the application of this excepted sales
rule when the sale of such withheld units
gives rise to an obligation by the broker
under section 3406 to deduct and withhold
a tax.
D. Information to be reported for digital
asset sales
1. In General
The proposed regulations required
that for each digital asset sale for which
a broker is required to file an information
return, the broker report, among other
things, the date and time of such sale set
forth in hours, minutes, and seconds using
Coordinated Universal Time (UTC). The
proposed regulations requested com-
ments regarding whether UTC time was
appropriate and whether a 12-hour clock
or a 24-hour clock should be used for
this reporting. Some comments agreed
with reporting the time of sale based on
UTC time; however, other comments sug-
gested using the customer’s local time
zone as configured on the platform or in
the wallet. Other comments suggested
that it is not technologically or operation-
ally feasible to use the time zone of the
customer’s domicile. Another comment
raised the concern that reporting in dif-
ferent time zones from the broker’s time
zone would make the broker and the IRS
unable to reconcile backup withholding,
timely tax deposits, and other annual fil-
ings. Still other comments requested bro-
ker flexibility in reporting the time of sale,
provided the broker reported the time of
the customer’s purchases and sales con-
sistently. Several other comments raised
the concern that reporting on the time
of transaction was excessively burden-
some due to the number of tax lots that
the broker’s customers could potentially
acquire and sell in a single day. Another
comment suggested that the informa-
tion reported with respect to the time of
the transaction should be the same as the
information reported on the Form 1099-B
for traditional asset sales unless there is a
compelling reason to do otherwise. Addi-
tionally, several comments suggested that
the burden of developing or modifying
systems to report the time of sale was not
warranted because the time of sale within
a date (that is reported) does not generally
impact customer holding periods if the
broker treats the time zone of purchases
and sales consistently.
The final regulations adopt the rec-
ommendation to remove the requirement
to report the time of the transaction. The
Treasury Department and the IRS are
concerned about the burdensome nature
of the time reporting requirement and
the administrability of reconciling dif-
ferent times for customer transactions
and backup withholding deposits. Addi-
tionally, the issues raised by the time of
sale with respect to digital asset year-end
transactions are generally the same as for
traditional asset sales. It is expected that
brokers will determine the date of pur-
chase and date of sale of a customer’s
digital assets based on a consistent time
zone so that holding periods are reported
consistently, and that brokers will provide
customers with the information necessary
for customers to report their year-end sale
transactions accurately.
The proposed regulations also required
that, for each digital asset sale for which
a broker is required to file an information
return and for which the broker effected the
sale on the distributed ledger, the broker
report the transaction identification (trans-
action ID or transaction hash) associated
with the digital asset sale and the digital
asset address (or digital asset addresses if
multiple) from which the digital asset was
transferred in connection with the sale.
Additionally, for transactions involving
sales of digital assets that were previously
transferred into the customer’s hosted
wallet with the broker (transferred-in
digital asset), the proposed regulations
required the broker to report the date and
time of such transferred-in transaction, the
transaction ID of such transfer-in transac-
tion, the digital asset address (or digital
asset addresses if multiple) from which
the transferred-in digital asset was trans-
ferred, and the number of units transferred
in by the customer as part of that trans-
fer-in transaction. Numerous comments
raised privacy and surveillance concerns
associated with the requirement to report
transaction ID and digital asset address
information. These comments noted that
a person or entity who knows the digital
asset address of another gains access not
only to that other user’s purchases and
exchanges on a blockchain network, but
also the entire transaction history associ-
ated with that user’s digital asset address.
One comment expressed concern that
reporting transaction ID and digital asset
addresses would link the transaction his-
tory of the reported digital asset addresses
to the taxpayer, thus exposing the finan-
cial and spending habits of that taxpayer.
Other comments expressed that report-
ing this information also creates a risk
that the information could be intercepted
by criminals who could then attempt
to extort or otherwise gain access to the
private keys of identified persons with
digital asset wealth. In short, many com-
ments expressed strongly stated views that
requiring this information creates privacy,
safety, and national security concerns and
could imperil U.S. citizens.
Other comments suggested that the
information reporting rules should bal-
ance the IRS’s need for transparency with
the taxpayer’s interest in privacy. Thus,
reporting of transaction IDs and digital
asset addresses should not be required
because the information exceeds the infor-
mation that the IRS needs to confirm the
value of reported gross proceeds and cost
basis information. Further, another com-
ment asserted that the IRS does not need
transaction ID and digital asset address
information because the IRS already has
powerful tools to audit taxpayers and col-
lect this information on audit. Other com-

July 29, 2024 210 Bulletin No. 2024–31
ments raised concerns with the burden
of this requirement for custodial brokers.
Citing the estimate of the start-up costs
required to put systems in place to com-
ply with the proposed regulations’ broker
reporting requirements, another comment
raised the concern that many industry
participants are smaller businesses with
limited funding and resources that cannot
afford to build infrastructure to securely
store this information. Another comment
raised the concern that reporting of trans-
action ID and digital asset address infor-
mation would make the Form 1099-DA
difficult for taxpayers to read. Another
comment noted that this information is not
helpful to taxpayers, who should already
know this information. Other comments
suggested that the reporting standard for
digital assets should not be any more bur-
densome than it is for securities, and that
any additional data fields for digital assets
would force traditional brokers that also
effect sales of digital assets to modify their
systems. Another comment suggested that
the final regulations should not require
the reporting of transaction ID and digi-
tal asset address information in order to
align the information reported under sec-
tion 6045 with the information required
under the CARF, a draft of which would
have required the reporting of digital asset
addresses but ultimately did not include
such a requirement.
Some comments offered alternative
solutions for providing the IRS with the
visibility that this information would
provide. For example, one comment sug-
gested that because of the large number of
digital asset transactions, brokers should
only report the digital asset addresses (not
transaction IDs) associated with transac-
tions. Another comment recommended
the use of impersonal tax ID numbers that
would not reveal the customer’s full iden-
tity to address privacy concerns. Another
comment suggested it would be less bur-
densome to require reporting of account
IDs rather than digital asset addresses.
Another comment suggested that the
reporting of this information be optional
or otherwise limited to transactions that
involve a high risk of tax evasion or
non-compliance or that otherwise exceed
a large threshold. Another comment rec-
ommended the use of standardized tax lot
identification like the securities industry.
Another comment recommended instruct-
ing brokers to retain this information for
later examination. Another comment rec-
ommended that brokers not report this
information but, instead, be required to
retain this information to align with the
CARF reporting requirements.
The Treasury Department and the IRS
considered these comments. Although
transaction ID and digital asset address
information would provide uniquely
helpful visibility into a taxpayer’s trans-
action history, which the IRS could use
to verify taxpayer compliance with past
tax reporting obligations, the final reg-
ulations remove the obligation to report
transaction ID and digital asset address
information. The Treasury Department
and the IRS have concluded, however,
that this information will be important
for IRS enforcement efforts, particularly
in the event a taxpayer refuses to provide
it during an examination. Accordingly,
final §1.6045-1(d)(11) provides a rule that
requires brokers to collect this informa-
tion with respect to the sale of a digital
asset and retain it for seven years from
the due date for the related information
return filing. This collection and retention
requirement, however, would not apply to
digital assets that are not subject to report-
ing due to the special reporting methods
discussed in Parts I.D.2. through I.D.4. of
this Summary of Comments and Explana-
tion of Revisions. The seven-year period
was chosen because the due date for elec-
tronically filed information returns under
section 6045 is March 31 of the calendar
year following the year of the sale trans-
action. Because most taxpayers’ statute
of limitations for substantial omissions
from gross income will expire six years
from the April 15 filing date for their Fed-
eral income tax return, a six-year reten-
tion period from the March 31 filing date
would end before the statute of limitations
expires. Therefore, the final regulations
designated a seven-year period for brokers
to retain this information to ensure the IRS
will have access to all the records it needs
during the time that the taxpayer’s statute
of limitations is open. The IRS intends to
monitor the information reported on digi-
tal assets and the extent to which taxpay-
ers comply with providing this informa-
tion when requested by IRS personnel as
part of an audit or other enforcement or
compliance efforts. If abuses are detected
that hamper the IRS’s ability to enforce
the Code, the Treasury Department and
the IRS may reconsider this decision to
require brokers to maintain this informa-
tion in lieu of reporting it to the IRS.
Another comment raised the concern
that custodial brokers may not have trans-
action ID and digital asset address infor-
mation associated with digital assets that
were transferred-in to the broker before
the applicability date of these regulations.
This comment recommended that the
reporting requirement be made effective
only for assets that were transferred-in
to the custodial broker on or after Janu-
ary 1, 2023, to align with the enactment
of the Infrastructure Act. The Treasury
Department and the IRS understand that
brokers may not have transaction ID and
digital asset address information associ-
ated with digital assets that were trans-
ferred-in to the broker before the appli-
cability date of these regulations. The
Treasury Department and the IRS, how-
ever, decline to adopt an applicability
date rule with respect to the collection
and retention of this information because
some brokers may receive the information
on transferred-in assets and to the extent
they do, that information should be pro-
duced when requested under the IRS’s
summons authority. Accordingly, brokers
should maintain transaction ID and digital
asset address information associated with
digital assets that were transferred-in to
the broker before the applicability date of
this regulation to the extent that informa-
tion was retained in the ordinary course of
business.
The proposed regulations also required
that for each digital asset sale for which
a broker is required to file an information
return, that the broker report whether the
consideration received in that sale was
cash, different digital assets, other prop-
erty, or services. Numerous comments
raised the concern that reporting the spe-
cific consideration received is too intru-
sive and causes security concerns. The
final regulations do not make any changes
in response to these comments because the
language in the proposed (and final) regu-
lations does not require brokers to report
the specific goods or services purchased
by the customer, but instead requires the
broker to report on the category type that

Bulletin No. 2024–31 211 July 29, 2024
the consideration falls into. For example,
if digital asset A is used to make a payment
using the services of a PDAP for a motor
vehicle, the regulations require the PDAP
to report that the consideration received
was for property (as opposed to cash, dif-
ferent digital assets, broker services, or
other property). The purpose of this rule is
to allow the IRS to be able to distinguish
between sales involving categories of con-
sideration because sales for cash do not
raise the same valuation concerns as sales
for different digital assets, other prop-
erty, or services. In cases in which digital
assets are exchanged for different digital
assets, however, the Form 1099-DA may
request brokers to report that specific dig-
ital asset received in return because of the
enhanced valuation concerns that arise in
these transactions. Another comment sug-
gested that providing the gross proceeds
amount in a non-cash transaction would
not be helpful or relevant. The final regu-
lations do not adopt this comment because
gross proceeds reporting on non-cash
transactions is, in fact, helpful and rele-
vant to customers who must include gains
and losses from these transactions on their
Federal income tax returns.
The proposed regulations would have
required the broker to report the name
of the digital asset sold. One comment
noted that there is no universal conven-
tion or standard naming convention for
digital assets. As a result, many digital
assets share the same name or even the
same ticker symbol. This comment rec-
ommended that the final regulations allow
brokers the flexibility to provide enough
information to reasonably identify the
digital asset at issue. This comment also
recommended that brokers be given the
ability to provide the name of the trading
platform where the transaction was exe-
cuted to ensure that the name of the digital
asset is clearly communicated. The final
regulations do not adopt this comment
because it is more appropriate to address
these issues on the Form 1099-DA and its
instructions.
The proposed regulations also required
that, for each digital asset sale for which
a broker is required to file an information
return, the broker report the gross pro-
ceeds amount in U.S. dollars regardless
of whether the consideration received in
that sale was cash, different digital assets,
other property, or services. One comment
recommended that brokers not be required
to report gross proceeds in U.S. dollars
for transactions involving the disposition
of digital assets in exchange for different
digital assets, but instead be required to
report only the name of the digital asset
received and the number of units received
in that transaction. Although this sugges-
tion would relieve the broker from having
to determine the fair market value of the
received digital assets in that transaction,
the final regulations do not adopt this
suggestion because the U.S. dollar value
of the received digital assets is informa-
tion that taxpayers need to compute their
tax gains or losses and the IRS needs to
ensure that taxpayers report their transac-
tions correctly on their Federal income tax
returns.
The proposed regulations required bro-
kers to report sales of digital assets on a
transactional (per-sale) basis. One com-
ment recommended that the final regu-
lations alleviate burden on brokers and
instead provide for aggregate reporting,
with a separate Form 1099-DA filed for
each type of digital asset. The final regu-
lations do not adopt this recommendation.
Transactional reporting on sales of digital
assets is generally necessary so that the
amount received in a digital asset sale
can be compared with the basis of those
digital assets to determine gain or loss.
Transactional reporting is most helpful to
taxpayers who must report these transac-
tions on their Federal income tax returns
and to the IRS to ensure taxpayers report
these transactions on their Federal income
tax returns.
Several comments recommended that
final regulations include a de minimis
threshold for digital asset transactions
that would exempt from reporting minor
sale transactions—and in particular pay-
ment transactions—falling below that
threshold. One comment suggested that
such a de minimis threshold could help
to prevent taxpayers from moving their
digital assets to self-custodied locations
that may be outside the scope of broker
reporting. One comment recommended
that brokers not be required to obtain
tax documentation from customers (and
therefore not report on those customers’
tax identification numbers) for taxpayers
with annual transactions below a de mini-
mis threshold. A few comments recom-
mended that separate de minimis thresh-
olds or reduced reporting requirements be
applied to brokers with lower transaction
volumes during a start-up or transitional
period. Some comments recommended
aggregate annual thresholds for this pur-
pose, for example based on the customer’s
aggregate gross proceeds or aggregate net
gain for the year from these transactions,
whereas other comments recommended
per-transaction thresholds based either on
gross proceeds or net gain generated from
each transaction. One comment suggested
that whatever threshold is applied, that it
only be used for PDAPs.
Except as discussed in Parts I.B.2.,
I.D.2., and I.D.3. of this Summary of
Comments and Explanation of Revisions
(involving payment sale transactions and
certain transactions involving qualify-
ing stablecoins and specified NFTs), the
final regulations do not adopt an addi-
tional de minimis threshold for digital
asset sales for several reasons. First, any
per-transaction threshold for the types of
digital assets not subject to the de minimis
thresholds discussed in Parts I.B.2., I.D.2.,
and I.D.3. of this Summary of Comments
and Explanation of Revisions would not
be easy for brokers to administer because
these thresholds are more easily subject
to manipulation and structuring abuse
by taxpayers, and brokers are unlikely to
have the information necessary to prevent
these abuses by taxpayers, for example by
applying an aggregation or anti-structur-
ing rule. Second, the de minimis threshold
for qualifying stablecoins will already
give brokers the ability to avoid reporting
on dispositions of $10,000 in qualifying
stablecoins, which are the types of digital
assets that are least likely to give rise to
significant gains or losses, and the de mini-
mis threshold for payment sale transac-
tions will give PDAPs the ability to avoid
reporting on dispositions of other types
of digital assets that do not exceed $600.
Third, extending any additional annual
threshold to sales of these other types of
digital assets that are more likely to give
rise to tax gains and losses will leave tax-
payers without the information they need
to compute those gains and losses and will
leave the IRS without the information it
needs to ensure that taxpayers report all
transactions required to be reported on

July 29, 2024 212 Bulletin No. 2024–31
their Federal income tax returns. Fourth,
information reporting without taxpayer
TINs is generally of limited utility to the
IRS for verifying taxpayer compliance
with their reporting obligations. Finally, a
separate de minimis threshold or reduced
reporting requirements for small brokers
would be relatively easy for brokers to
manipulate and would leave the customers
of such brokers without essential informa-
tion.
2. Optional Reporting Rules for Certain
Qualifying Stablecoins
a. Description of the reporting method
As discussed in Part I.A.1. of this Sum-
mary of Comments and Explanation of
Revisions, the Treasury Department and
the IRS have determined that it is appro-
priate to permit brokers to report certain
stablecoin sales under an optional alter-
native reporting method to alleviate bur-
densome reporting for these transactions.
This reporting method was developed
after careful consideration of the com-
ments submitted recommending a tailored
exemption from reporting for certain sta-
blecoin sales. These recommendations
took different forms, including requests
for exemptions for certain types of sta-
blecoins and recommendations against
granting an exemption for other types of
stablecoins. One comment suggested that
reporting relief would not be appropriate
for dispositions of stablecoins for cash or
property other than different digital assets.
These so-called “off-ramp transactions”
convert the owner’s overall digital asset
investment into a non-digital asset invest-
ment and, the comment stated, could
provide taxpayers and the IRS with the
opportunity to reconcile and verify the
blockchain history of such stablecoins to
ensure that previous digital asset transac-
tions were reported. The Treasury Depart-
ment and the IRS agree that reporting is
appropriate and important for off-ramp
transactions involving stablecoins because
the IRS would be able to use this informa-
tion to gain visibility into previously unre-
ported digital asset transactions.
Several comments recommended
requiring reporting on stablecoin sales
when the reporting reflects explicit trad-
ing activity around fluctuations involv-
ing the stablecoin. Because stablecoins
do not always precisely reflect the value
of the fiat currencies to which they are
pegged, trading activity associated with
fluctuations in stablecoins are more likely
to generate taxable gains and losses. The
Treasury Department and the IRS have
concluded that traders seeking to profit
from stablecoin fluctuations are likely to
sell these stablecoins for cash (in an off-
ramp transaction) or for other stablecoins
that have not deviated from their desig-
nated fiat currency pegs. Accordingly, the
Treasury Department and the IRS have
concluded that reporting on sales of sta-
blecoins for different stablecoins is also
appropriate to assist in tax administration.
In discussing other types of trans-
actions, several comments noted that a
disposition of a stablecoin for other dig-
ital assets often reflects mere momentary
ownership of the stablecoin in transactions
that use the stablecoin as a bridge asset
in an exchange of one digital asset for a
second digital asset. These comments also
noted that, to the extent that a disposition
of a stablecoin for a different digital asset
does give rise to gain or loss, that gain or
loss will ultimately be reflected (albeit on
a net basis) when the received digital asset
is later sold or exchanged. The Treasury
Department and the IRS agree that, in
contrast to sales of stablecoins for cash or
other stablecoins, reports on sales of sta-
blecoins for different digital assets (other
than stablecoins) are less important for tax
administration. Accordingly, the Treasury
Department and the IRS have concluded
that it is appropriate to allow brokers not
to report sales of certain stablecoins for
different digital assets that are not also
stablecoins.
Some comments recommended
exempting sales of stablecoins from cost
basis reporting given their belief in the
low likelihood that these sales would
result in gain or loss. Other comments
recommended that the final regulations
permit combined or aggregate reporting
for stablecoin sales to lessen the report-
ing burden for brokers and the burden of
receiving returns on the IRS. The Treasury
Department and the IRS agree that basis
reporting for all types of stablecoin sales
may not justify the burden of tracking and
reporting those sales. Although taxpayers
that trade around stablecoin fluctuations
would benefit from cost basis reporting,
the Treasury Department and the IRS
have concluded that these traders are more
likely to be more sophisticated traders that
are able to keep basis records on their
own. The Treasury Department and the
IRS have also concluded that allowing for
reporting of stablecoin sales on an aggre-
gate basis would strike an appropriate
balance between the taxpayer’s and IRS’s
need for information and the broker’s
interest in a reduced reporting burden.
In addition to an overall aggregate
reporting approach, numerous comments
also recommended that the final regula-
tions include a de minimis threshold for
these stablecoin sales that would exempt
reporting on a taxpayer’s stablecoin sales
to the extent that taxpayer’s total gross
proceeds from all stablecoin sales for the
year did not exceed a specified threshold.
Several comments suggested de minimis
thresholds based on the taxpayer’s aggre-
gate net gain from stablecoin sales for the
year. Other comments recommended the
use of per-transaction de minimis thresh-
olds, based either on the gain or loss in the
transaction or the gross proceeds from the
transaction.
The Treasury Department and the IRS
considered these comments to decide
whether to further reduce the overall bur-
den on brokers and the IRS. The final reg-
ulations do not adopt a per-transaction de
minimis threshold because any per-trans-
action threshold for stablecoins would be
relatively easy for customers to abuse by
structuring their transactions. Although
anti-structuring rules based on the intent
of the taxpayer have been used in other
information reporting regimes, such as
section 6050I of the Code, similar rules
would be unadministrable here. Under
section 6050I, the person who receives
payment is the person who files the infor-
mation returns and will know when a
payor is making multiple payments as
part of the same transaction. For purposes
of section 6045 digital asset transaction
reporting, however, brokers may not have
the information necessary to determine the
motives behind their customer’s decisions
to engage in numerous smaller stablecoin
transactions instead of fewer larger trans-
actions involving these stablecoins. More-
over, even for transactions exceeding a de
minimis threshold, per-transaction report-

Bulletin No. 2024–31 213 July 29, 2024
ing still has the potential to result in a very
large number of information returns, with
a correspondingly large burden on bro-
kers and the IRS. The final regulations
also do not adopt an aggregate de minimis
threshold based on gains or losses because
many brokers will not have the acquisi-
tion information necessary to determine
basis, which would be necessary in order
to be able to take advantage of such a de
minimis rule, thus making the threshold
less effective at reducing the number of
information returns required to be filed.
Instead, the final regulations adopt an
aggregate gross proceeds threshold as
striking an appropriate balance between
a threshold that will provide the greatest
burden relief for brokers and still provide
the IRS with the information needed for
efficient tax enforcement. Additionally, to
avoid manipulation and structuring tech-
niques that could be used to abuse this
threshold, the final regulations require
that the overall threshold be applied as a
single threshold applicable to a single cus-
tomer’s sales of all stablecoins regardless
of how many accounts or wallets that cus-
tomer may have with the broker.
Numerous comments recommended
various de minimis thresholds ranging
from $10 to $50,000. In determining the
dollar amount that should be used for this
de minimis threshold, the Treasury Depart-
ment and the IRS considered that the gross
proceeds reported for these stablecoin
transactions are unlikely to reflect ordi-
nary income or substantial net gain. The
Treasury Department and the IRS have
concluded that a larger de minimis thresh-
old would eliminate most of the reporting
on customers with small stablecoin hold-
ings and likely small amounts of gain or
loss without allowing more significant
sales of fiat-based stablecoins to evade
both information and income tax report-
ing. Accordingly, the Treasury Depart-
ment and the IRS have determined that a
$10,000 threshold is the most appropriate
because that threshold aligns with the
reporting threshold under section 6050I,
which Congress has adopted as the thresh-
old for requiring certain payments of cash
and cash-like instruments to be reported.
In sum, the final regulations adopt an
optional $10,000 overall annual de mini-
mis threshold for certain qualifying sta-
blecoin sales and permit sales over this
amount to be reported on an aggregate
basis rather than on a transactional basis.
Specifically, in lieu of requiring brokers to
report gross proceeds and basis on stable-
coin sales under the transactional report-
ing rules of §1.6045-1(d)(2)(i)(B) and
(C), the final regulations at §1.6045-1(d)
(10)(i) permit brokers to report designated
sales of certain stablecoins (termed qual-
ifying stablecoins) under an alternative
reporting method described at §1.6045-
1(d)(10)(i)(A) and (B). A designated sale
of a qualifying stablecoin is defined in
final §1.6045-1(d)(10)(i)(C) to mean any
sale as defined in final §1.6045-1(a)(9)(ii)
(A) through (D) of a qualifying stablecoin
other than a sale of a qualifying stablecoin
in exchange for different digital assets that
are not qualifying stablecoins. In addi-
tion, a designated sale of a qualifying sta-
blecoin includes any sale of a qualifying
stablecoin that provides for the delivery
of a qualifying stablecoin pursuant to the
settlement of any executory contract that
would be treated as a designated sale of
the qualifying digital asset under the pre-
vious sentence if the contract had not been
executory. Final §1.6045-1(d)(10)(i)(C)
also defines the term non-designated sale
of a qualifying stablecoin as any sale of
a qualifying stablecoin other than a des-
ignated sale of a qualifying stablecoin.
A broker reporting under this optional
method is not required to report sales of
qualifying stablecoins that are non-desig-
nated sales of qualifying stablecoins under
either this optional method or the transac-
tional reporting rules. Accordingly, for
example, if a customer uses a qualifying
stablecoin to buy another digital asset that
is not a qualifying stablecoin, no reporting
would be required if the broker is using
the optional reporting method for qualify-
ing stablecoins.
Additionally, if a customer’s aggregate
gross proceeds (after reduction for the
allocable digital asset transaction costs)
from all designated sales of qualifying
stablecoins do not exceed $10,000 for the
year, a broker using the optional reporting
method would not be required to report
those sales. The Treasury Department and
the IRS anticipate that the combination of
allowing no reporting of non-designated
sales of qualifying stablecoins and the
$10,000 annual threshold for all desig-
nated sales of qualifying stablecoins will
have the effect of eliminating reporting
on qualifying stablecoin transactions for
many customers.
If a customer’s aggregate gross pro-
ceeds (after reduction for the allocable
digital asset transaction costs) from all
designated sales of qualifying stablecoins
exceed $10,000 for the year, the broker
must report on a separate information
return for each qualifying stablecoin for
which there are designated sales. Final
§1.6045-1(d)(10)(i)(B). If the aggregate
gross proceeds exceed the $10,000 thresh-
old, reporting is required with respect to
each qualifying stablecoin for which there
are designated sales even if the aggre-
gate gross proceeds for that qualifying
stablecoin is less than $10,000. This rule
is illustrated in final §1.6045-1(d)(10)(i)
(D)(2) (Example 2). A broker reporting
under this method must report on a sep-
arate Form 1099-DA or any successor
form in the manner required by the form
or instructions the following information
with respect to designated sales of each
type of qualifying stablecoin:
(1) The name, address, and taxpayer
identification number of the customer;
(2) The name of the qualifying stable-
coin sold;
(3) The aggregate gross proceeds for
the year from designated sales of the qual-
ifying stablecoin (after reduction for the
allocable digital asset transaction costs);
(4) The total number of units of the
qualifying stablecoin sold in designated
sales of the qualifying stablecoin;
(5) The total number of designated sale
transactions of the qualifying stablecoin;
and
(6) Any other information required by
the form or instructions.
Brokers that want to use this reporting
method in place of transactional reporting
are not required to submit any form or oth-
erwise make an election to be eligible to
report in this manner. Additionally, brokers
may report sales of qualifying stablecoins
under this optional reporting method for
some or all customers, though the method
chosen for a particular customer must be
applied for the entire year for that custom-
er’s sales. A broker may change its report-
ing method for a customer from year to
year. Because the obligation to file returns
under the transactional method in final
§1.6045-1(d)(2)(i)(B) is discharged only

July 29, 2024 214 Bulletin No. 2024–31
when a broker files information returns
under the optional reporting method under
§1.6045-1(d)(10)(i), brokers that fail to
report a customer’s sales under either
method will be subject to penalties under
section 6721 for failure to file information
returns under the transactional method.
See Part VI.B. of this Summary of Com-
ments and Explanation of Revisions for a
discussion of how the backup withholding
rules will apply to payments falling below
this de minimis threshold and to the gross
proceeds of non-designated sales of quali-
fying stablecoins.
In the case of a joint account, final
§1.6045-1(d)(10)(v) provides a rule
for the broker to determine which joint
account holder will be the customer for
purposes of determining whether the cus-
tomer’s combined gross proceeds for all
accounts owned exceed the $10,000 de
minimis threshold. This joint account rule
follows the general rules for determining
which joint account holder’s name and
TIN should be reported by the broker on
the information return (but for the appli-
cation of the relevant threshold). Like the
general rules, the joint account holder’s
name and TIN that must be reported by
the broker is determined after the appli-
cation of the backup withholding rules
under §31.3406(h)-2(a). For example,
under these rules, if two or more indi-
viduals own a joint account, the account
holder that is treated as the customer is
generally the first named individual on
the account. See Form W-9 at p.5. If,
however, the first named individual does
not supply a certified TIN to the broker
(or supplies a Form W-8BEN establish-
ing exempt foreign status) and if another
individual joint account holder supplies a
certified TIN, then the broker must treat
that other individual as the customer for
this purpose. See §31.3406(h)-2(a)(3).
Alternatively, if the first named indi-
vidual joint account holder supplies a
Form W-8BEN establishing exempt for-
eign status and the other individual joint
account holder does not supply a certified
TIN (or a Form W-8BEN) to the broker,
then the broker must treat that other indi-
vidual as the customer for this purpose
because that is the individual that caused
the broker to begin the backup withhold-
ing that will be shown on the information
return.
b. Qualifying stablecoin
In describing which stablecoins they
thought should be afforded reporting
relief, comments recommended many
different definitions, and those defini-
tions generally included several types of
requirements. Because the recommended
definitions encompass multiple kinds of
digital assets, for ease of description here
we will use the term “purported stable-
coin” as a stand-in for the type of asset the
comments wanted to exempt from some or
all reporting. First, many comments rec-
ommended that the purported stablecoin
must have been designed or structured to
track the value of a fiat currency for use as
a means of making payment. Other com-
ments recommended looking to whether
the purported stablecoin is marketed as
pegged to the fiat currency or whether
the stablecoin is denominated on a 1:1
basis by reference to the fiat currency.
Second, the comments proposed that the
purported stablecoin must, in fact, func-
tion as a means of exchange and be gener-
ally accepted as payment by third parties.
Third, the comments generally recom-
mended that the purported stablecoin have
some type of built-in mechanism designed
to keep the value of the purported stable-
coin in line with the value of the tracked
fiat currency, or at least within designated
narrow bands of variation from value of
the fiat currency. Further, these comments
recommended that this stabilization mech-
anism must actually work in practice to
keep the trading value of the purported
stablecoin within those designated narrow
bands.
Proposals for how this stabilization
mechanism requirement could be met var-
ied. For example, several comments rec-
ommended a requirement that the issuer
guarantee redemption at par or otherwise
be represented by a separate claim on
the issuer denominated in fiat currency.
Another comment recommended that the
issuer meet collateralization (or reserve)
requirements and provide annual third
party attestation reports regarding reserve
assets. Another comment proposed that
these reserves be held in segregated,
bankruptcy-remote reserve accounts for
the benefit of holders. Another comment
proposed that these reserves be held in
short-term, liquid assets denominated in
the same fiat currency. Other comments
suggested requiring that the purported sta-
blecoin be issued on receipt of funds for
the purpose of making payment transac-
tions. Several other comments proposed
requiring that the purported stablecoin
be regulated by a Federal, State, or local
government. One comment suggested
prohibiting any stabilization mechanism
that is based on an algorithm that achieves
price stability by managing the supply
and demand of the stablecoin against a
secondary token that is not price-pegged.
Several comments recommended requir-
ing that the purported stablecoin not devi-
ate significantly from the fiat currency to
which it is pegged. For example, the com-
ments recommended that the value of the
stablecoin not be permitted to fall outside
a specified range (with suggestions rang-
ing from 1 percent to 10 percent) for a
meaningful duration over specified peri-
ods (such as for more than 24 hours within
any consecutive 10-day period or for any
period during a 180-day period during the
previous calendar year).
Because the purpose of the optional
reporting method is to minimize report-
ing on very high volumes of transactions
involving little to no gain or loss, and
because the optional reporting regime will
ensure at least some visibility into trans-
actions that in the aggregate exceed the
$10,000 threshold, the Treasury Depart-
ment and the IRS have determined that
the definition of fiat currency-based sta-
blecoins should be relatively broad to
provide the most reduction of burden on
brokers and the IRS. Thus, because the
optional reporting method for stablecoins
will provide for aggregate reporting of all
proceeds from sales for cash or other sta-
blecoins exceeding the de minimis thresh-
old, it is not necessary to limit the defini-
tion of qualifying stablecoins to those with
specific stabilization mechanisms such as
fiat currency reserve requirements, as long
as the stablecoin, in fact, retains its peg to
the fiat currency.
Accordingly, based on these consider-
ations, the final regulations describe qual-
ifying stablecoins as any digital asset that
meets three conditions set forth in final
§1.6045-1(d)(10)(ii)(A) through (C) for
the entire calendar year. First the digital
asset must be designed to track on a one-
to-one basis a single convertible currency

Bulletin No. 2024–31 215 July 29, 2024
issued by a government or a central bank
(including the U.S. dollar). Final §1.6045-
1(d)(10)(ii)(A).
Second, final §1.6045-1(d)(10)(ii)(B)
requires that the digital asset use one of two
stabilization mechanisms set forth in final
§1.6045-1(d)(10)(ii)(B)(1) and (2), which
are based on the recommendations made
by the comments. The first stabilization
mechanism provided in final §1.6045-1(d)
(10)(ii)(B)(1) sets forth a results-focused
test. Under this stabilization mechanism,
the stabilization requirement is met if
the stabilization mechanism causes the
unit value of the digital asset not to fluc-
tuate from the unit value of the convert-
ible currency it was designed to track by
more than 3 percent over any consecutive
10-day period during the calendar year.
Final §1.6045-1(d)(10)(ii)(B)(1) also pro-
vides that UTC should be used in deter-
mining when each day within this 10-day
period begins and ends. UTC time was
chosen so that the same digital asset will
satisfy or not satisfy this test for all bro-
kers regardless of the time zone in which
such broker keeps its books and records.
Additionally, this stabilization mechanism
provides design flexibility to stablecoin
issuers because it does not turn on how a
digital asset maintains a stable value rela-
tive to a fiat currency, so long as it does.
The second stabilization mechanism pro-
vided in final §1.6045-1(d)(10)(ii)(B)(2),
in contrast, sets forth a design-focused test
that provides more certainty to brokers at
the time of a transaction. Under this sta-
bilization mechanism, the stabilization
requirement is met if regulatory require-
ments apply to the issuer of the digital
asset requiring the issuer to redeem the
digital asset at any time on a one-to-one
basis for the same convertible currency
that the stablecoin was designed to track.
Because a qualifying stablecoin that sat-
isfies this second stabilization mechanism
includes key requirements set forth in the
specified electronic money product defini-
tion under section IV.A.4. of the CARF,
it is anticipated that this definition will be
considered when regulations are drafted to
implement the CARF. See Part I.G.2. of
this Summary of Comments and Explana-
tion of Revisions (discussing U.S. imple-
mentation of the CARF).
Third, under final §1.6045-1(d)(10)
(ii)(C), to be a qualifying stablecoin, the
digital asset must generally be accepted as
payment by persons other than the issuer.
This acceptance requirement would be
met if the digital asset is accepted by the
broker as payment for other digital assets
or is accepted by a second party. An exam-
ple of this is acceptance by a merchant
pursuant to a sale effected by a PDAP.
To avoid confusion for brokers, cus-
tomers, and the IRS, the Treasury Depart-
ment and the IRS have concluded that the
determination of whether a digital asset
is a qualifying stablecoin or not must be
consistent throughout the entire year.
Accordingly, the definition of a qualifying
stablecoin requires that the digital asset
meet the three conditions for the entire
calendar year. For example, if a digital
asset loses its peg and no longer satisfies
the stabilization mechanism set forth in
final §1.6045-1(d)(10)(ii)(B)(1), it will
not be treated as a qualifying stablecoin
for the entire year unless the digital asset
satisfies the stabilization mechanism set
forth in final §1.6045-1(d)(10)(ii)(B)(2).
See Part VI.B. of this Summary of Com-
ments and Explanation of Revisions for
a discussion of the backup withholding
exception for sales of digital assets that
would have been non-designated sales of
a qualifying stablecoin up to and includ-
ing the date that digital asset loses its peg
and no longer satisfies the stabilization
mechanism set forth in final §1.6045-1(d)
(10)(ii)(B)(1).
The Treasury Department and the IRS
recognize that brokers will not know at
the beginning of a calendar year whether
a digital asset that would be a qualifying
stablecoin solely under the results-fo-
cused test will be a qualifying stablecoin
for that year, and therefore will need to
be prepared to report and backup with-
hold on sales of that asset. However, it
is anticipated that the results-focused test
will rarely result in a digital asset losing
qualifying stablecoin status unless there
is a significant and possibly permanent
loss of parity between the stablecoin
and the convertible currency to which it
is pegged. Other alternatives suggested
by comments, such as a retrospective
test that is based on whether a digital
asset failed a results-based test during a
period in the past, for example the 180
days prior to a sale, could result in dif-
ferent treatment of the same digital asset
depending on when a sale of the digital
asset took place during a calendar year,
which would be confusing for both bro-
kers and customers. Basing qualifica-
tion on the results for a prior year would
alleviate that concern, but could result
in treating a digital asset as a qualifying
stablecoin for a year in which it was not
stable, and as not a qualifying stablecoin
for a later year in which it is stable, which
would not achieve the purposes of the
optional reporting method for qualifying
stablecoins. Accordingly, the Treasury
Department and the IRS have concluded
that a test that treats a digital asset as a
qualifying stablecoin, or not, for an entire
calendar year is the most administrable
way to achieve those purposes.
3. Optional Reporting Rules for Certain
Specified Nonfungible Tokens
a. Description of the reporting method
Notwithstanding the conclusion dis-
cussed in Part I.A.2. of this Summary
of Comments and Explanation of Revi-
sions that the definition of digital assets
includes NFTs, the Treasury Department
and the IRS considered the many com-
ments received suggesting a modified
reporting approach under section 6045 for
all or a subset of NFTs. One comment rec-
ommended against requiring reporting for
NFTs for which the owner does not have
the expectation that the NFT will return
gain. The final regulations do not adopt
this comment because it would be overly
burdensome for brokers to determine
each customer’s investment expectation.
Other comments recommended against
any reporting on NFT transactions by bro-
kers under section 6045 because reporting
under section 6050W (on Form 1099-K,
Payment Card and Third Party Network
Transactions) is more appropriate for
NFT sellers. Indeed, these comments
noted, brokers that meet the definition of
third party settlement organizations under
section 6050W(b)(3) are already filing
Forms 1099-K on their customers’ sales of
NFTs. The final regulations do not adopt
these comments because the Treasury
Department and the IRS have concluded
that the reporting rules should apply uni-
formly to NFT marketplaces, and not all
digital asset brokers meet the definition of

July 29, 2024 216 Bulletin No. 2024–31
a third party settlement organization under
section 6050W(b)(3).
Several comments raised valuation
considerations, particularly in NFT-for-
NFT exchanges or NFT sales in conjunc-
tion with physical goods or events, as a
reason to exempt all NFTs from reporting.
The final regulations do not adopt these
comments because taxpayers engaging
in these transactions still need to report
the transactions on their Federal income
tax returns. Additionally, the final regu-
lations already permit brokers that cannot
determine the value of property customers
receive in a transaction with reasonable
accuracy to report that the gross proceeds
have an undeterminable value. Final
§1.6045-1(d)(5)(ii)(A).
Other comments recommended against
requiring reporting for all NFT transac-
tions because NFTs, unlike other digital
assets, are easier for taxpayers to track on
the relevant blockchain. As a result, these
comments suggested, taxpayers do not
need to be reminded of their NFT sales
and can more easily determine their bases
in these assets by referencing the public
blockchain. The final regulations do not
adopt this comment because to be help-
ful for closing the income tax gap, infor-
mation reporting must not only provide
the information necessary for taxpayers
to compute their tax gains, it must also
provide the IRS with that information to
ensure that taxpayers report all transac-
tions required to be reported on their Fed-
eral income tax returns.
Several comments asserted that the
cost of reporting on non-financial NFTs
outweighs the tax administration benefits
to taxpayers and the IRS because these
assets generally do not have substantial
value, and as such transactions in these
assets do not contribute meaningfully to
the income tax gap. For example, sev-
eral comments cited to publicly available
statistics showing that many NFT trans-
actions involve small dollar amounts.
According to comments, the average price
of an NFT transaction was only $150 for
the third quarter of 2022, and the median
NFT transaction value was only $37.69
over the six-month period ending Octo-
ber 1, 2023.
3
Additionally, the comments
stated that the value of approximately
45 percent of all NFT transactions was
less than $25, and 82 percent of all NFT
transaction were valued at less than $500,
when compared to total exchange volume
on the largest centralized and decentral-
ized exchanges.
4
Given the cost of trans-
actional reporting and the relatively small
value of the transactions, several com-
ments suggested that aggregate reporting,
in a regime analogous to that under section
6050W for reporting on payment card and
third party network transactions, would
lessen the burden of broker reporting on
non-financial NFTs without a meaningful
curtailment of the overall goal of reducing
the income tax gap. Other comments rec-
ommended against NFT basis reporting
under this aggregate reporting proposal
because, unlike cryptocurrency and other
fungible tokens, past purchase prices for
NFTs are trackable on the blockchain
through the NFT’s unique token identifi-
cation. Another comment recommended
against transactional reporting for creators
of non-financial NFTs (primary sales)—as
opposed to resellers of non-financial NFTs
(secondary sales)—because transactional
reporting for creators would needlessly
result in large numbers of separate reports.
Additionally, this comment recommended
that primary sales of non-financial NFTs
should be reported under section 6050W
instead of under section 6045 because
returns under section 6045 would incor-
rectly report gross proceeds income
instead of ordinary income.
Transactional reporting under section
6045 is generally necessary to allow tax-
payers and the IRS to compare the gross
proceeds taxpayers received in sales of
certain property with the cost basis of that
property. Because the cited statistics show
that a substantial portion of non-financial
NFT transactions are small dollar transac-
tions for which taxpayers can more easily
track their own cost basis, the Treasury
Department and the IRS agree that the
cost of transactional reporting for low-
value non-financial NFTs may outweigh
the benefits to taxpayers and the IRS.
Accordingly, the final regulations have
added a new optional alternative report-
ing method for sales of certain NFTs to
allow for aggregate reporting instead of
transactional reporting, with a de minimis
annual threshold below which no report-
ing is required. Brokers that do not wish
to build a separate system for NFTs eligi-
ble for aggregate reporting can report all
NFT transactions under the transactional
system. Additionally, brokers do not need
to submit any form or otherwise make
an election to report under this method
and are not required to report under this
optional method consistently from cus-
tomer to customer or from year to year;
however, the method chosen for a particu-
lar customer must be applied for the entire
year for that customer’s sales. Finally, to
address the comment regarding the dis-
tinction between primary sales of NFTs
that give rise to ordinary income and sec-
ondary sales of NFTs that give rise to gross
proceeds, brokers choosing to report sales
of NFTs under this optional method must
report, to the extent ordinarily known,
the portion of the total gross proceeds
reported attributable to primary sales (that
is, the first sale of the particular NFT).
Given the statistics cited showing the
relatively small average and median val-
ues for non-financial NFT transactions,
numerous comments said these small
purchases should not need to be reported
and several comments recommended
the application of a de minimis thresh-
old below which reporting would not be
required at all to alleviate reporting on
an overwhelming majority of NFT sales.
3
One comment cited an article that referenced a report from NonFungible.com, which stated that all data included was sourced from the blockchain via its own dedicated blockchain nodes.
The report includes a table showing the average price for an NFT in the third quarter of 2022 was $154. This was a drop in value from an average price of $643 from the second quarter of
2022. Another said: The data sets underlying these estimates consist of public blockchain data regarding NFT volume, centralized exchange volume, and decentralized exchange volume. See
Dune Analytics, https://dune.com/browse/dashboards (last visited October 30, 2023); Dune Analytics, https://github.com/duneanalytics/spellbook/tree/main (last visited October 30, 2023);
The Block, https://www.theblock.co/data/crypto-markets/spot/cryptocurrency-exchange-volume-monthly (last visited Oct. 30, 2023).
4
One comment referenced data reported in an article published on Medium’s website, “Most artists are not making money off NFTs and here are some graphs to prove it” from April 19, 2021.
This article stated it was based on blockchain and other marketplace data for the week of March 14 through March 21, 2021. During that timeframe, according to the article, 33.6 percent of
primary sales of NFTs were $100 or less; 20 percent of primary sales were $100 to $200, and 7.7 percent of primary sales were $200 to $300. While not an exact match to the information
provided by the comment, the sales data in this article are comparable.

Bulletin No. 2024–31 217 July 29, 2024
Some comments recommended the use of
a per-transaction threshold with proposed
thresholds ranging from $50 to $50,000,
while other comments recommended an
aggregate gross proceeds threshold, sim-
ilar to the $600 threshold applicable under
section 6050W(e), as most appropriate.
Because some of these NFT sales are cur-
rently reportable under section 6050W,
the Treasury Department and the IRS have
concluded that it would be most appro-
priate to follow the same $600 reporting
threshold applicable under that provision.
Accordingly, the final regulations adopt an
annual $600 de minimis threshold for each
customer below which brokers reporting
under the optional aggregate method are
not required to report gross proceeds from
these NFTs transactions. If the custom-
er’s total gross proceeds (after reduction
for any allocable digital asset transaction
costs) from sales of specified NFTs exceed
$600 for the year, a broker may report
those sales on an aggregate basis in lieu
of reporting those sales under the transac-
tional reporting rules. A broker reporting
under this method must report on a Form
1099-DA (or any successor form) in the
manner required by the form or instruc-
tions the following information with
respect to the customer’s sales of specified
NFTs:
(1) The name, address, and taxpayer
identification number of the customer;
(2) The aggregate gross proceeds for
the year from all sales of specified NFTs
(after reduction for the allocable digital
asset transaction costs);
(3) The total number of specified NFTs
sold; and
(4) Any other information required by
the form or instructions.
Additionally, a broker reporting under
this method must report the aggregate
gross proceeds that are attributable to the
first sale by the creator or minter of the
specified NFT to the extent the broker
would ordinarily know that the transac-
tion is the first sale of the specified NFT
token by the creator or minter. It is antici-
pated that a broker would ordinarily know
that the transaction is the first sale of the
specified NFT by the creator or minter if
the broker provided services to the creator
or minter that enabled the creator to create
(or minter to mint) the specified NFT. It is
also anticipated that, to the extent a broker
inquires whether the customer’s sale of the
specified NFT will be a first sale, that the
broker would ordinarily know this infor-
mation based on the customer’s response.
Brokers are not required to seek out such
information from third party sources, such
as a public blockchain or through block-
chain analytics.
The IRS intends to monitor NFTs
reported under this optional aggregate
reporting method to determine whether
this reporting hampers its tax enforcement
efforts. If abuses are detected, the IRS will
reconsider these special reporting rules for
NFTs. For a discussion of how the backup
withholding rules apply to payments fall-
ing below this de minimis threshold, see
Part VI.B. of this Summary of Comments
and Explanation of Revisions. See Part
I.D.2.a. of this Summary of Comments and
Explanation of Revisions for a discussion
of how the de minimis threshold is applied
to joint account holders.
b. Specified nonfungible token
In determining the specific subset
of NFTs that should be eligible for this
optional aggregate reporting method, the
final regulations considered the comments
received in favor of eliminating report-
ing on sales of certain types of NFTs.
For example, one comment suggested the
final regulations apply a “use test” to dis-
tinguish between NFTs that are used for
investment purposes and those that are
used for enjoyment purposes. The final
regulations do not adopt this comment to
define the subset of NFTs that are eligible
for aggregate reporting because determin-
ing how a customer uses an NFTs would
not be administratively feasible for most
brokers. Another comment recommended
that reporting should be required for those
NFTs which (on a look through basis) ref-
erence assets that were previously subject
to reporting under §1.6045-1 or other-
wise could be used to deliver value, such
as a method of payment. The Treasury
Department and the IRS generally agree
with the distinction made in this comment
because brokers already must determine
if an effected sale is that of a security,
commodity, etc. under the definitions pro-
vided under the section 6045 regulations.
Accordingly, making the determination
that an asset referenced by an NFT fits
within those same definitions—or other-
wise references a digital asset other than
an NFT— is administrable and should not
create significantly more burden for bro-
kers. Because both types of NFT can result
in taxable income, however, the Treasury
Department and the IRS disagree with the
comment’s conclusion that only NFTs that
reference assets previously subject to bro-
ker reporting or otherwise could be used
to deliver value should be subject to the
final regulations. Instead, it is appropriate
to require transactional reporting on sales
of NFTs that reference previously report-
able assets or otherwise could be used
to deliver value and allow for aggregate
reporting on sales of other NFTs.
Accordingly, the final regulations under
§1.6045-1(d)(10)(iii) permit optional
aggregate reporting for specified NFTs
that look to the character of the underly-
ing assets, if any, referenced by the NFT.
Under these rules, to constitute a specified
NFT, the digital asset must be of the type
that is indivisible (that is, the digital asset
cannot be subdivided into smaller units
without losing its intrinsic value or func-
tion) and must be unique as determined by
the inclusion in the digital asset itself of a
unique digital identifier, other than a dig-
ital asset address, that distinguishes that
digital asset from all other digital assets.
Final §1.6045-1(d)(10)(iv)(A) and (B).
This means that the unique digital iden-
tifier is inherently part of the token itself
and not merely referenced by the digital
asset. Taken together, these requirements
would exclude all fungible digital assets
from the definition of specified NFTs,
including the smallest units of such dig-
ital assets. The Treasury Department and
the IRS considered whether the smallest
units of fungible digital assets should be
included in the definition of specified
NFTs to the extent specialized off-chain
software catalogs and indexes such units.
The final regulations do not include such
units in the definition of specified NFTs
because, even if it was appropriate to
include these assets in the definition of
specified NFTs based on the application
of off-chain software, the specialized off-
chain software that catalogs and indexes
such units, in fact, indexes every such
unit regardless of whether the particular
unit is trading separately or as part of a
larger denomination of such digital asset.

July 29, 2024 218 Bulletin No. 2024–31
As a result, including these indexed digi-
tal assets in the definition would arguably
result in larger denominations of a fungi-
ble digital asset being treated as combina-
tions of multiple specified NFTs and thus
subject to the optional aggregate reporting
rule. Moreover, a definitional distinc-
tion that would ask brokers to look to the
indexed units to determine if the indexed
unit has any value separate from the fungi-
ble asset value would be difficult for bro-
kers to administer.
In addition to satisfying these two cri-
teria associated with the nonfungibility
of the digital asset itself, to be a specified
NFT, the digital asset must not directly
(or indirectly through one or more other
digital assets that also satisfy the thresh-
old nonfungibility tests) provide the
holder with an interest in certain excluded
property. Excluded property generally
includes assets that were previously sub-
ject to reporting under §1.6045-1 of the
pre-2024 final regulations or any digital
asset that does not satisfy either of the two
criteria. Specifically, excluded property is
defined as any security as defined in final
§1.6045-1(a)(3), commodity as defined in
final §1.6045-1(a)(5), regulated futures
contract as defined in final §1.6045-1(a)
(6), or forward contract as defined in final
§1.6045-1(a)(7). Finally, excluded prop-
erty includes any digital asset that does
not satisfy the two threshold nonfungibil-
ity tests, such as a qualifying stablecoin or
other non-NFT digital assets.
In contrast, a digital asset that satisfies
the two criteria and references or provides
an interest in a work of art, sports memo-
rabilia, music, video, film, fashion design,
or any other property or services (non-ex-
cluded property) other than excluded
property is a specified NFT that is eligi-
ble for the optional aggregate reporting
rule under the final regulations. An NFT
that constitutes a security or commodity
or other excluded property is an interest
in excluded property for this purpose.
Additionally, by excluding any NFT that
provides the holder with any interest in
excluded property from the definition of
specified NFTs, an NFT that provides
an interest in both excluded property
and non-excluded property will not be
included in the definition of specified
NFT. This result lets brokers avoid having
to undertake burdensome valuations with
respect to NFTs that reference more than
one type of property.
While several comments indicated
that it would be administratively feasible
for brokers to review each NFT to deter-
mine the nature of the underlying assets,
one comment requested the adoption of a
presumption test that would treat an NFT
as an interest in financial assets unless
the broker categorizes it otherwise. The
Treasury Department and the IRS have
concluded that a presumption rule for dis-
tinguishing between NFTs that is based on
whether a broker chooses to categorize the
underlying assets could potentially lead
to abuse. Brokers that find it too difficult
to determine the nature of assets refer-
enced by NFTs can choose not to use the
optional aggregate reporting method for
NFTs. Accordingly, the final regulations
do not adopt this presumption rule.
4. Reporting Rules for PDAP Sales
As discussed in Part I.B.2. of this Sum-
mary of Comments and Explanation of
Revisions, the Treasury Department and
the IRS have determined that it is appro-
priate to permit some reporting relief for
small PDAP sale transactions. Several
comments offered alternatives to reporting
on payment transaction sales to reduce the
reporting burden of PDAPs. For example,
several comments suggested exempting
PDAPs from the requirement to report
cost basis because PDAPs have no visibil-
ity into the customer’s cost basis. The final
regulations do not make any changes to
address this comment because neither the
proposed regulations nor the final regula-
tions require PDAPs to report cost basis
precisely because it is the understanding
of the Treasury Department and the IRS
that these brokers may not currently have
any way to know the customer’s cost
basis.
Numerous comments recommended
against any reporting of payments pro-
cessed by PDAPs on purchases of com-
mon, lower-cost items such as a cup of
coffee or ordinary consumer goods. Other
comments recommended that the final
regulations adopt a de minimis thresh-
old for these purchases to reduce the
overall reporting burden for these bro-
kers. Another comment asserted that the
changes made by the Infrastructure Act
to section 6050I (requiring trades or busi-
nesses to report the receipt of more than
$10,000 in cash including digital assets)
shows that Congress did not intend for
section 6045 to capture lower-value dig-
ital asset purchase transactions. Another
comment suggested that the potential
revenue loss involving most purchases is
extremely low and that using digital assets
to make everyday purchases is not a realis-
tic means of tax avoidance. This comment
noted that the digital assets that are used
to purchase daily items are stablecoins
that do not ordinarily fluctuate in value.
Another comment suggested a per trans-
action de minimis threshold for report-
ing on payments equal to the $10,000
threshold in section 6050I or the $50,000
threshold in the CARF. Another comment
suggested that the de minimis threshold
should match the annual threshold under
section 6050W, though this comment also
noted that this $600 threshold amount was
too low. Another comment recommended
a per-transaction threshold for purchases
over $500 (adjusted for inflation), but also
recommended, if this de minimis rule is
adopted, that taxpayers be reminded in
the instructions to Forms 1040 and 1099-
DA that they still must report the gains
and losses from these unreported payment
transactions.
As discussed in Parts I.A.1. and I.D.2.
of this Summary of Comments and Expla-
nation of Revisions, the final regulations
adopt an optional $10,000 overall annual
de minimis threshold for qualifying stable-
coin sales and permit sales over this amount
to be reported on an aggregate basis rather
than on a transactional basis. This $10,000
annual threshold applies to PDAPs who
choose to report qualifying stablecoin
transactions under this optional method.
Accordingly, given the comment that dig-
ital asset purchase transactions often are
made using stablecoins, many purchases
made using the services of PDAPs will
not be reported due to the application of
that de minimis threshold for payment
transactions. This sizable overall annual
threshold for payments made using qual-
ifying stablecoins is appropriate because
taxpayers are unlikely to have significant
(if any) unreported gains or losses from
these payment transactions that fall below
the $10,000 threshold. In contrast, as sug-
gested by one comment, allowing for a de

Bulletin No. 2024–31 219 July 29, 2024
minimis threshold for digital assets other
than qualifying stablecoins that are more
likely to give rise to significant gains and
losses likely would not be helpful to tax-
payers who use them. This is because they
would have to separately account for their
payment transactions below the thresh-
old to accurately report their gains and
losses from these transactions for which
they would not receive an information
return. Moreover, because many PDAP
transactions involve transactions in which
the digital assets are first exchanged for
cash before that cash is transmitted to
the merchant, a high threshold for these
transactions could create an incentive for
taxpayers to dispose of their highly appre-
ciated digital assets by way of payments
just to avoid tax reporting. Notwithstand-
ing these concerns, if a given taxpayer
engages in relatively low-value payment
transactions involving digital assets other
than qualifying stablecoins, reporting to
the IRS may not be as important in over-
coming the overall income tax gap as the
burden it would impose on PDAPs.
Accordingly, after balancing these
competing concerns, the Treasury Depart-
ment and the IRS have concluded that an
annual de minimis threshold of $600 would
be appropriate for PDAP sales under
final §1.6045-1(a)(9)(ii)(D) because that
threshold is similar to the threshold under
sections 6041, 6041A, and 6050W(e) of
the Code, thereby reflecting the balance
between accurate tax reporting and infor-
mation reporting requirements imposed on
brokers that Congress thought appropri-
ate. Additionally, this overall threshold for
PDAP sales should be more administrable
because PDAPs would not have to adopt
processes to monitor structuring activities
used by customers to evade reporting. See,
e.g., §1.6050I-1(c)(1)(ii)(B)(2) (treating
an instrument as cash where the recipient
knows that it is being used to avoid report-
ing). Under this threshold, PDAPs would
not have to report PDAP sales of digital
assets with respect to a customer if those
sales did not exceed $600 for the year. If
a customer’s PDAP sales exceed $600 for
the year, all of that customer’s sales would
be reportable under the general transac-
tional reporting rules, because customers
need that reporting to identify taxable dis-
positions of digital assets. Additionally, to
avoid having to apply multiple de minimis
thresholds to the same digital assets, the
de minimis threshold for PDAP sales only
applies to digital assets other than quali-
fying stablecoins or specified NFTs. Thus,
for example, if a customer has PDAP sales
of $9,000 using qualifying stablecoins
and PDAP sales of $500 using digital
assets other than qualifying stablecoins
(or specified NFTs) for a particular year,
the PDAP should apply the $600 thresh-
old for the second set of PDAP sales to
eliminate the reporting obligation on the
PDAP sales of $500. Under these facts,
the PDAP would not be required to report
any of the customer’s digital asset transac-
tions for the year.
In the case of a joint account, final
§1.6045-1(d)(2)(i)(C) provides a rule (by
cross-reference to final §1.6045-1(d)(10)
(v)) for the broker to determine which
joint account holder will be the customer
for purposes of determining whether the
customer’s combined gross proceeds for
all accounts owned exceed the $600 de
minimis threshold. See Part I.D.3.a. of this
Summary of Comments and Explanation
of Revisions for a discussion of how the
de minimis threshold is applied to joint
account holders.
Finally, because a sale under final
§1.6045-1(a)(9)(ii)(A) through (C) that
is effected by brokers holding custody
of the customer’s digital assets or act-
ing as the counterparty to the sale could
also be structured to meet the definition
of a PDAP sale effected by that broker,
final §1.6045-1(a)(9)(ii)(D) provides that
any PDAP sale that is also a sale under
one of the other definitions of sale under
final §1.6045-1(a)(9)(ii)(A) through (C)
(non-PDAP sale) that would be subject to
reporting due to the broker effecting the
sale as a broker other than as a PDAP must
be treated as a non-PDAP sale. Thus, if a
customer instructs a custodial broker to
exchange digital asset A for digital asset
B, and that broker executes the transaction
by transferring payment (digital asset A)
to a second person that is also a customer
of that broker, the sale will be treated as
a sale under §1.6045-1(a)(9)(ii)(A)(2),
not as a PDAP sale and not eligible for
the $600 de minimis threshold. Similarly,
if a PDAP, acting as an agent to a buyer
of merchandise, receives digital assets
from that buyer along with instructions
to exchange those digital assets for cash
to be paid to a merchant, the sale will be
treated as a sale under §1.6045-1(a)(9)
(ii)(A)(1) and not as a PDAP sale. If, in
this last example, the PDAP exchanges
the digital assets received from the buyer
for cash as an agent to the merchant and
not the buyer, then the sale will be treated
as a PDAP sale because the sale under
§1.6045-1(a)(9)(ii)(A)(1) would not be
subject to reporting by the broker, but for
the broker being a PDAP.
E. Determining gross proceeds and
adjusted basis
In defining gross proceeds and initial
basis in a sale transaction, the proposed
information reporting regulations gen-
erally followed the substantive tax rules
under proposed §1.1001-7(b) for comput-
ing the amount realized from transactions
involving the sale or other disposition of
digital assets and the substantive rules
under proposed §1.1012-1(h) for com-
puting the basis of digital assets received
in transactions involving the purchase or
other acquisition of digital assets. In addi-
tion, the proposed information reporting
regulations generally followed the sub-
stantive tax rules proposed in §§1.1001-
7(b) and 1.1012-1(h)(3) for determining
the fair market value of property or ser-
vices received or transferred by the cus-
tomer in an exchange transaction involv-
ing digital assets.
1. Valuation Issues
Under longstanding legal principles,
the value of property exchanged for other
property received ordinarily should be
equal in value. Under these principles, in
an exchange of property, both the amount
realized on the property transferred and
the basis of the property received in an
exchange, ordinarily are determined by
reference to the fair market value of the
property received. See, e.g., United States
v. Davis, 370 U.S. 65 (1962); Philadelphia
Park Amusement Co. v. United States, 126
F. Supp. 184 (Ct. Cl. 1954); Rev. Rul.
55–757, 1955–2 C.B. 557.
The proposed rules under proposed
§1.6045-1 generally followed these sub-
stantive rules for determining fair market
value of property or services received by
the customer in an exchange transaction

July 29, 2024 220 Bulletin No. 2024–31
involving digital assets. Specifically, pro-
posed §1.6045-1(d)(5)(ii)(A) provided
that in determining gross proceeds, the fair
market value should be measured as of the
date and time the transaction was effected.
Additionally, except in the case of ser-
vices giving rise to digital asset transac-
tion costs, to determine the fair market
value of services or property (including
different digital assets or real property)
paid to the customer in exchange for dig-
ital assets, proposed §1.6045-1(d)(5)(ii)
(A) provided that the broker must use a
reasonable valuation method that looks
to contemporaneous evidence of value of
the services, stored-value cards, or other
property. In contrast, because the value of
digital assets used to pay for digital asset
transaction costs is likely to be signifi-
cantly easier to determine than any other
measure of the value of services giving
rise to those costs, the proposed regula-
tions provided that brokers must look to
the fair market value of the digital assets
used to pay for digital asset transaction
costs in determining the fair market value
of services (including the services of any
broker or validator involved in executing
or validating the transfer) giving rise to
those costs.
In the case of one digital asset
exchanged for a different digital asset,
proposed §1.6045-1(d)(5)(ii)(A) provided
that the broker may rely on valuations per-
formed by a digital asset data aggregator
using a reasonable valuation method. For
this purpose, the proposed regulations pro-
vided that a reasonable valuation method
looks to the exchange rate and the U.S.
dollar valuations generally applied by the
broker effecting the exchange as well as
other brokers, taking into account the pric-
ing, trading volumes, market capitaliza-
tion, and other relevant factors in conduct-
ing the valuation. Proposed §1.6045-1(d)
(5)(ii)(C) also provided that a valuation
method is not a reasonable method if the
method over-weighs prices from exchang-
ers that have low trading volumes, if the
method under-weighs exchange prices
that lie near the median price value, or if it
inappropriately weighs factors associated
with a price that would make that price an
unreliable indicator of value. Additionally,
proposed §1.6045-1(d)(5)(ii)(B) provided
that the broker must look to the fair market
value of the services or property received
if there is a disparity between the value of
the services or property received and the
value of the digital asset transferred in a
digital asset exchange transaction. How-
ever, if the broker reasonably determines
that the value of services or property
received cannot be valued with reasonable
accuracy, proposed §1.6045-1(d)(5)(ii)
(B) provided that the fair market value of
the received services or property must be
determined by reference to the fair mar-
ket value of the transferred digital asset.
Finally, proposed §1.6045-1(d)(5)(ii)(B)
provided that the broker must report an
undeterminable value for gross proceeds
from the transferred digital asset if the
broker reasonably determines that neither
the digital asset nor the services or other
property exchanged for the digital asset
can be valued with reasonable accuracy.
The Treasury Department and the IRS
solicited comments on: (1) whether the
fair market value of services giving rise
to digital asset transaction costs (includ-
ing the services of any broker or validator
involved in executing or validating the
transfer) should be determined by looking
to the fair market value of the digital assets
used to pay for the transaction costs, and
(2) whether there are circumstances under
which an alternative valuation rule would
be more appropriate.
The responses to these inquiries varied.
One comment agreed that using the fair
market value of the digital assets used as
payment would be the most feasible and
easily attainable means of valuing such
services. A few comments stated the pro-
posed approach would be problematic,
because: (1) market prices of digital assets
are highly volatile, not always reflecting
the actual economic value of the services
rendered, and (2) the reliance on the fair
market value of the digital assets, instead
of the services rendered, would be incon-
sistent with longstanding legal principles,
resulting in significant compliance costs
and recordkeeping burdens. Instead, the
comments recommended that the Trea-
sury Department and the IRS develop and
re-propose alternative valuation metrics.
Another comment recommended that
the fair market value of the services giv-
ing rise to digital asset transaction costs
should be based on the contracted price
agreed to by the parties. Another comment
stated that these questions rested on an
improper assumption that transaction fees
should be or can be calculated at a mar-
ket value. This comment recommended
that the final rules provide taxpayers and
brokers with the option of determining the
value of such services using the acquisi-
tion cost of the digital assets used as pay-
ment. One comment advised that many
digital assets do not have easily ascertain-
able fair market values, particularly when
involving services, other digital assets, or
non-standard forms of consideration.
The final regulations do not adopt the
recommendations for alternative valu-
ation approaches. As noted, except in
the case of services giving rise to digital
asset transaction costs, the proposed reg-
ulations required that brokers look to the
value of services or property received by
the customer in exchange for transferred
digital assets in determining gross pro-
ceeds. Only when the services or property
received cannot be valued does the broker
need to look to the fair market value of
the transferred digital assets. For broker
services giving rise to digital asset trans-
action costs, the proposed regulations
required brokers to look to the fair market
value of the digital assets used to pay for
digital asset transaction costs because it is
likely to be significantly easier for brokers
to determine the value of the transferred
digital assets than it is to value their ser-
vices. These valuation rules are reasonable
and appropriate because they are consis-
tent with United States v. Davis, 370 U.S.
65 (1962); Philadelphia Park Amusement
Co. v. United States, 126 F. Supp. 184 (Ct.
Cl. 1954); Rev. Rul. 55–757, 1955–2 C.B.
557, discussed previously in this Part I.E.1.
The proposed alternatives do not conform
with these authorities. Additionally, these
rules provide practical approaches for bro-
kers to use that are less burdensome than
a rule requiring a case-specific valuation
of services or other property, particularly
for digital asset brokers who likely have
more experience valuing digital assets
transferred.
Several comments stated that bro-
kers would need more detailed guidance
on how to determine fair market value
in digital asset transactions, including
the reasonable methods brokers can use
for assigning U.S. dollar pricing to each
unique transaction. This comment rec-
ommended allowing brokers to choose a

Bulletin No. 2024–31 221 July 29, 2024
reasonable pricing methodology that is
convenient for them. For example, this
comment noted that it is standard indus-
try practice today to use a daily volume
weighted average price (VWAP) to value.
Another comment recommended estab-
lishing a safe harbor rule that would allow
a digital asset’s price any time during the
date of sale to be used to report gross pro-
ceeds. The final regulations do not adopt
these comments because the suggested
approaches are not consistent with exist-
ing case law and IRS guidance as the
determination of fair market value must
generally be determined at the time of the
transaction. See Cottage Savings Asso-
ciation v. Commissioner, 499 U.S. 554
(1991).
2. Allocation of Digital Asset Transaction
Costs
Proposed §1.6045-1(d)(5)(iv) and (d)
(6)(ii)(C)(2) followed the substantive tax
rules provided under proposed §§1.1001-
7(b) and 1.1012-1(h) for allocating
amounts paid to effect the disposition or
acquisition of a digital asset (digital asset
transaction costs). Specifically, these rules
generally provided that in the case of a
sale or disposition of digital assets, the
total digital asset transaction costs paid
by the customer are generally allocable
to the disposition of the digital assets.
Conversely, in the case of an acquisition
of digital assets, the total digital asset
transaction costs paid by the customer are
generally allocable to the acquisition of
the digital assets. The rules also provided
an exception in an exchange of one digi-
tal asset for another digital asset differing
materially in kind or in extent. In that case,
the proposed regulations allocated one-
half of any digital asset transaction cost
paid by the customer in cash or property
to effect the exchange to the disposition of
the transferred digital asset and the other
half to the acquisition of the received dig-
ital asset (the split digital asset transaction
cost rule). As is discussed in Part II.B.1.
of this Summary of Comments and Expla-
nation of Revisions, many comments were
received raising several concerns with the
split digital asset transaction cost rule. For
the reasons discussed in that Part, the final
§§1.1001-7(b) and 1.1012-1(h) include
revised rules to instead allocate 100 per-
cent of the digital asset transaction costs
to the disposition of the transferred digi-
tal asset in the case of an exchange of one
digital asset for another digital asset differ-
ing materially in kind or in extent. Corre-
spondingly, the final §1.6045-1(d)(5)(iv)
(B) and (d)(6)(ii)(C)(2) include revised
rules to follow the final substantive tax
rules and now require 100 percent of the
digital asset transaction costs to be allo-
cated to the disposition of the transferred
digital asset in the case of an exchange of
one digital asset for another digital asset
differing materially in kind or in extent.
Comments were also received express-
ing concern in the case of digital asset
transaction costs imposed on dispositions
of digital assets used to pay those costs
(cascading digital asset transaction costs).
As discussed in Part II.B.4. of this Sum-
mary of Comments and Explanation of
Revisions, the substantive rules have been
revised to respond to these comments, and
final §1.6045-1(d)(5)(iv)(C) correspond-
ingly provides that, in the case of a sale
of digital assets in exchange for different
digital assets, for which the acquired dig-
ital assets are withheld to pay the digital
asset transaction costs to effect the orig-
inal transaction, the total digital asset
transaction costs paid by the customer to
effect both the original transaction and any
dispositions of digital assets to pay such
costs are allocable exclusively to the orig-
inal transaction. Final §1.1012-1(h)(2)(ii)
(C) includes a similar rule. Additionally,
final §1.6045-1(d)(6)(ii)(C)(2) follows
this rule by cross referencing the rules at
final §1.6045-1(d)(5)(iv)(C).
3. Ordering Rules
a. Adequate identification of digital assets
The proposed information reporting
regulations provided ordering rules for
a broker to determine which units of the
same digital asset should be treated as sold
when the customer previously acquired,
or had transferred in, multiple units of that
same digital asset on different dates or at
different prices by cross referencing the
identification rules in the proposed sub-
stantive tax law regulations. Specifically,
proposed §1.1012-1(j)(3)(ii) provided that
the taxpayer can make an adequate iden-
tification of the units sold, disposed of, or
transferred by specifying to the broker, no
later than the date and time of sale, dis-
position, or transfer, the particular units of
the digital asset to be sold, disposed of, or
transferred by reference to any identifier
(such as purchase date and time or pur-
chase price paid for the units) that the bro-
ker designates as sufficiently specific to
allow it to determine the basis and holding
period of those units. The units so identi-
fied, under the proposed regulations, are
treated as the units of the digital asset sold,
disposed of, or transferred to determine
the basis and holding period of such units.
This identification must also be taken into
consideration in identifying the taxpay-
er’s remaining units of the digital asset
for purposes of subsequent sales, dispo-
sitions, or transfers. Identifying the units
sold, disposed of, or transferred solely on
the taxpayer’s books or records is not an
adequate identification of the digital assets
if the assets are held in the custody of a
broker.
To make the final regulations more
accessible for brokers, the final regula-
tions set forth the identification rules in
final §1.6045-1(d)(2)(ii)(B) as well as in
final §1.1012-1(j)(3) for taxpayers. A few
comments criticized proposed §1.1012-
1(j)(3)(i) for requiring an adequate iden-
tification of digital assets held in the cus-
tody of brokers to be made no later than
the date and time of the transaction. One
comment advised that the proposed rule
would provide less flexibility than cur-
rently allowed for making an adequate
identification of stock under §1.1012-1(c)
(8). The limited flexibility, the comment
warned, would pose as “a trap for the
unwary” for some taxpayers. The final reg-
ulations do not adopt these comments. On
the contrary, the volatile nature of digital
assets and their markets makes the timing
requirement necessary. The proposed rule
is analogous to §1.1012-1(c)(8) because
settlement for securities takes place one or
more days after a trade while the settle-
ment period for digital asset transactions
is typically measured in minutes. In both
cases, a specific identification must be
made before the relevant asset is delivered
for settlement. Accordingly, the Treasury
Department and the IRS have determined
that the timing requirement for adequate
identifications does not pose an undue
burden on taxpayers, and the final rules

July 29, 2024 222 Bulletin No. 2024–31
retain the principles set forth in proposed
§1.1012-1(j)(3)(i).
One comment recommended that the
final rules adopt a more flexible, princi-
ples-based approach for identifying dig-
ital assets held in the custody of brokers
that would allow brokers the flexibility to
implement basis identification in a man-
ner that fits their particular systems and
business models, so long as the end result
provides sufficient transparency and accu-
racy. The Treasury Department and the
IRS have determined that a uniform rule
is preferable to the proposed discretionary
rule because of administrability concerns
and because it does not result in an undue
burden for brokers. As a result, the Trea-
sury Department and the IRS do not adopt
this recommendation.
A few comments recommended the
inclusion of a rule allowing taxpayers to
make adequate identifications by standing
orders so taxpayers would be able to make
these identifications using a predeter-
mined set of parameters rather than mak-
ing them on a per-transaction basis, for
example, uniformly identifying the high-
est cost or closest cost basis available. The
final regulations adopt this recommenda-
tion. Accordingly, final §§1.1012-1(j)(3)
(ii) and 1.6045-1(d)(2)(ii)(B)(2) include a
rule allowing taxpayers to a use a stand-
ing order or instruction to make adequate
identifications.
Another comment requested guidance
on whether a taxpayer would be treated
as having made an adequate identifica-
tion under proposed §1.1012-1(j)(3)(ii)
if the notified broker is only able to offer
one method by which identifications can
be made for units of a digital asset held in
the broker’s custody. The final regulations
adopt a clarification pursuant to this com-
ment. Accordingly, in the case of a broker
who only offers one method by which a
taxpayer may make a specific identifica-
tion for units of a digital asset held in the
broker’s custody, final §§1.1012-1(j)(3)
(ii) and 1.6045-1(d)(2)(ii)(B)(2) treat such
method as a standing order or instruction
for the specific identification of the digi-
tal assets, and thus as an adequate iden-
tification unless the special rules in final
§§1.1012-1(j)(3)(iii) and 1.6045-1(d)(2)
(ii)(B)(3) apply.
Another comment requested clarifica-
tion on whether an email sent by a tax-
payer would satisfy the broker-notifica-
tion requirement of proposed §1.1012-1(j)
(3)(ii). The Treasury Department and the
IRS have determined that it would be most
appropriate to allow brokers the discretion
to determine the forms by which a notifi-
cation can or must be made and whether
a particular type of notification, by email
or otherwise, is sufficiently specific to
identify the basis and holding period of
the sold, disposed of, or transferred units.
Accordingly, to provide brokers with
maximum flexibility, the final regulations
do not adopt a rule concerning the form of
the notification.
A few comments recommended against
the proposed regulations’ use of similar
ordering rules for digital assets as apply to
stocks because blockchains are uniquely
different from traditional financial sys-
tems. The final regulations do not adopt
this comment. Although some digital
assets may differ in certain ways from
other asset classes, the Treasury Depart-
ment and the IRS have concluded that the
proposed ordering rules provide the most
accurate methodology to determine basis
and holding period of digital assets.
As discussed in Part VI.C. of this
Summary of Comments and Explanation
of Revisions, the final regulations add a
default specific identification rule to avoid
the need to separately report and backup
withhold on certain units withheld in a
transaction to pay other costs. In particu-
lar, in a transaction involving the sale of
digital assets in exchange for different dig-
ital assets and for which the broker with-
holds units of the digital assets received
in the exchange to pay the customer’s
digital asset transaction costs or to sat-
isfy the broker’s obligation under section
3406 to deduct and withhold a tax with
respect to the underlying transaction, final
§§1.1012-1(j)(3)(iii) and 1.6045-1(d)(2)
(ii)(B)(3) provide that the withheld units
when sold will be treated as coming from
the units received regardless of any other
adequate identification (including stand-
ing order) to the contrary.
This special default specific identifi-
cation rule ensures that the disposition
of the withheld units will not give rise to
gain or loss. Final §1.6045-1(c)(3)(ii)(C)
provides that the units that are so withheld
for the purpose of paying the customer’s
digital asset transaction costs are exempt
from reporting, thus minimizing the bur-
den on brokers who would have to other-
wise report on this low value (and no gain
or loss) transaction and any other further
withheld units to pay for cascading trans-
action fees that do not give rise to gains or
losses. As discussed in Part VI.C. of this
Summary of Comments and Explanation
of Revisions, although units that are so
withheld for the purpose of satisfying the
broker’s obligation under section 3406 to
deduct and withhold a tax with respect to
the underlying transaction also do not give
rise to gain or loss, final §1.6045-1(c)(3)
(ii)(D) provides that these units are only
exempt from reporting if the broker sells
the withheld units for cash immediately
after the underlying sale. The latter lim-
itation was added to the reporting exemp-
tion to decrease the valuation risks of units
withheld for the purpose of satisfying the
broker’s backup withholding obligations.
See Part VI.B. of this Summary of Com-
ments and Explanation of Revisions, for
a more detailed discussion of these valu-
ation risks.
b. No identification of units made
In cases where a customer does not
provide an adequate identification by the
date and time of sale, proposed §1.6045-
1(d)(2)(ii)(B) provided that the broker
should treat the units of the digital asset
that are sold as the earliest units of that
type of digital asset that were either pur-
chased within or transferred into the cus-
tomer’s account with the broker. The pro-
posed regulations provided that units of a
digital asset are treated as transferred into
the customer’s account as of the date and
time of the transfer.
Numerous comments raised concerns
with the rule requiring brokers to treat
units transferred into the customer’s
account as if they were purchased on the
transfer-in date without regard to whether
the customer provided the broker with
actual purchase date information because
it is inconsistent with the default identifi-
cation rule, which requires that the units
sold be based on actual purchase dates.
As such, these comments noted, the rule
will disrupt the reasonable expectations
of brokers and customers that make a
good faith effort to track lots and basis to
have lot identifications align. Addition-

Bulletin No. 2024–31 223 July 29, 2024
ally, one comment raised the concern that
this ordering rule would force custodial
brokers to keep track of multiple acqui-
sition dates for customers, one for bro-
ker ordering purposes and another for the
customer’s cost-basis purposes. Another
comment recommended that exceptions
to the ordering rule be made to enhance
accuracy, align tax treatment with real-
world transactions, and minimize report-
ing errors. One comment recommended
allowing brokers the option of applying
the existing first-in-first-out (FIFO) rules
for securities brokers, provided they do so
consistently. For a discussion of the FIFO
rules, see Part II.C.3. of this Summary of
Comments and Explanation of Revisions.
That is, until rules under section 6045A
rules are in place, this comment recom-
mended that the final regulations allow
brokers to rely upon records generated in
the ordinary course of the broker’s busi-
ness that evidence the customer’s actual
acquisition date for a digital asset, either
because another broker provided that
information or the customer provided it
upon transfer, unless the broker knows
that information is incorrect.
The Treasury Department and the IRS
solicited comments on whether there
were any alternatives to requiring that
the ordering rules for digital assets left in
the custody of a broker be followed on an
account-by-account basis, for example, if
brokers have systems that can otherwise
account for their customers’ transactions.
Several comments advised against the
adoption of account-based ordering rules,
viewing such rules as imposing unnec-
essary costs and technical challenges,
impeding industry innovation, and ignor-
ing the current industry practice of using
omnibus accounting structures or trans-
action aggregation. Instead, these com-
ments recommended the adoption of dis-
cretionary ordering rules for digital assets
left in the custody of brokers that would
allow brokers to decide how to track and
report the basis of these digital assets.
Another comment recommended that the
final rules adopt a more flexible, princi-
ples-based approach for digital assets in
the custody of a broker that would allow
brokers the flexibility to implement basis
identification in a manner that fit their
systems and business models, so long as
the result provides sufficient transparency
and accuracy. Another comment recom-
mended that brokers be allowed to apply
more flexible “lot-relief” ordering rules.
Another comment recommended that the
final rules require the consistent appli-
cation of a uniform rule for identifying
digital assets in the custody of a broker.
Consistency, the comment advised, would
be key to maintaining the integrity of
cost basis for transfers of digital assets in
the custody of a broker between brokers
and eliminating the need for taxpayers to
reconcile discrepancies. The final regula-
tions do not adopt the recommendations
to provide brokers with the discretion to
implement their preferred ordering rules
for digital assets in the custody of bro-
kers. The Treasury Department and the
IRS have determined that a uniform rule
is preferable to the proposed discretionary
rule because of administrability concerns
and because having all brokers follow a
single, consistent method does not result
in an undue burden for brokers.
Numerous comments requested that
the final regulations provide safe har-
bor penalty relief to brokers that rely on
reasonably reliable outside data that sup-
plies purchase-date information. In this
regard, several comments noted that the
aggregation market offers software solu-
tions to track digital assets as they move
through the blockchain ecosystem, thus
enabling these aggregators to keep metic-
ulous records of taxpayers’ digital asset
tax lots. Accordingly, these comments
opined that purchase date information
from these aggregators constitutes reason-
ably reliable purchase-date information.
Although one comment suggested that
any information provided by a customer
should be considered reasonably reliable,
other comments had more specific sugges-
tions, such as email purchase/trade confir-
mations from other brokers or immutable
data on a public distributed ledger. Other
comments suggested that brokers should
also be allowed to consider purchase date
information received from independent
third parties, such as official platform
records from recognized digital asset trad-
ing platforms, because these records are
typically subject to regulatory oversight
and verification. Another comment rec-
ommended that brokers be allowed to rely
upon records audited by reputable third
party firms that undergo rigorous verifica-
tion processes as well as information from
any government-approved source or tax
authority.
The Treasury Department and the IRS
have determined that inconsistencies
between broker records and customer
records regarding digital asset lots in
the custody of a broker may give rise to
complexities and reporting inaccuracies.
Accordingly, final §1.6045-1(d)(2)(ii)(B)
(4) provides that a broker may take into
account customer-provided acquisition
information for purposes of identifying
which units are sold, disposed of, or trans-
ferred under the identification rules. Cus-
tomer-provided acquisition information
is defined as reasonably reliable informa-
tion, such as the date and time of acqui-
sition units of a digital asset, provided to
the broker by a customer or the custom-
er’s agent no later than the date and time
of a sale, disposition, or transfer. Reason-
ably reliable information for this purpose
includes purchase or trade confirmations
at other brokers or immutable data on a
public distributed ledger. A broker that
takes into account customer-provided
acquisition information for purposes of
identifying which units are sold, disposed
of, or transferred is deemed to have relied
upon this information in good faith if the
broker neither knows nor has reason to
know that the information is incorrect
for purposes of the information reporting
penalties under sections 6721 and 6722.
This penalty relief does not apply, how-
ever, to a broker who takes into account
customer-provided acquisition informa-
tion for purposes of voluntarily report-
ing the customer’s basis. The Treasury
Department and the IRS, notwithstand-
ing, plan to study further the types of
information that could be included in
customer-provided acquisition informa-
tion to determine if certain information
is sufficiently reliable to permit reporting
the customer’s basis. Finally, it should
be noted that, although taxpayers may in
some cases be entitled to penalty relief
from reporting incorrect amounts on
their Federal income tax returns due to
reasonable cause reliance on informa-
tion included on a Form 1099, this relief
would not be permitted to the extent the
information included on that Form is due
to incomplete or incorrect customer-pro-
vided acquisition information.

July 29, 2024 224 Bulletin No. 2024–31
Final §1.6045-1(d)(2)(i)(B)(8) requires
brokers to report on whether they relied
upon such customer-provided acquisition
information in identifying the unit sold
to alert customers and the IRS that the
information supplied on the Form 1099-
DA is, in part, based on customer-pro-
vided acquisition information described
in final §1.6045-1(d)(2)(ii)(B)(4). Under
this rule, if the broker takes into account
customer-provided acquisition informa-
tion in determining which unit was sold,
the broker must report that it has done
so, regardless of whether information on
the particular unit sold was derived from
the broker’s own records or from the cus-
tomer or its agent. The Treasury Depart-
ment and the IRS anticipate that brokers
will likely identify all units sold as relying
on customer-provided acquisition infor-
mation for customers that regularly trans-
fer digital assets to that broker and provide
that broker with customer-provided acqui-
sition information.
Final §1.6045-1(d)(2)(ii)(B) revises the
rule in proposed §1.6045-1(d)(2)(ii)(B)
for the identification of the digital asset
unit sold so that it also applies to dispo-
sitions and other transfers as well as sales
because brokers need clear identification
rules for these transactions to ensure they
have the information they need about the
digital assets that are retained in the cus-
tomer’s account. Additionally, the final
regulations add a rule to accommodate
the unlikely circumstance in which the
broker does not have any transfer-in date
information about the units in the broker’s
custody—such as could be the case if the
broker’s transfer-in records are destroyed
and the broker has not received any rea-
sonably reliable acquisition date informa-
tion from the customer or the customer’s
agent. Addressing that circumstance, final
§1.6045-1(d)(2)(ii)(B)(1) provides that in
cases in which the broker does not receive
an adequate identification of the units sold
from the customer by the date and time
of the sale, disposition, or transfer, and in
which the broker does not have adequate
transfer-in date records and does not have
or take into account customer-provided
acquisition information, the broker must
first report the sale, disposition, or trans-
fer of units that were not acquired by the
broker for the customer. Thereafter, the
broker must treat units as sold, disposed
of, or transferred in order of time from the
earliest date on which units of the same
digital asset were acquired by the cus-
tomer. A broker may take into account
customer-provided acquisition informa-
tion described in final §1.6045-1(d)(2)(ii)
(B)(4) to determine when units of a digital
asset were acquired by the customer if the
broker neither knows nor has reason to
know that the information is incorrect. For
this purpose, unless the broker takes into
account customer-provided acquisition
information, the broker must treat units
of a digital asset that are transferred into
the customer’s account as acquired as of
the date and time of the transfer. Finally,
while it is inevitable that some customers
will fail to provide their brokers with rea-
sonably reliable acquisition information or
that brokers will decline in some circum-
stances to rely upon customer-provided
acquisition information, customers none-
theless can avoid lot identification incon-
sistencies by adopting a fallback standing
order to track lots in a manner consistent
with the broker’s tracking requirements.
Finally, one comment requested that
the final regulations set forth the proce-
dures the IRS will follow when a broker’s
reported cost basis amount does not match
the cost basis reported by customers due
to lot identification inconsistences. The
final regulations do not adopt this com-
ment as being outside the scope of these
regulations.
F. Basis reporting rules
Section 6045(g) requires a broker that
is otherwise required to make a return
under section 6045(a) with respect to cov-
ered securities to report the adjusted basis
with respect to those securities. Under
section 6045(g)(3)(A), a covered secu-
rity is any specified security acquired on
or after the acquisition applicable date if
the security was either acquired through
a transaction in the account in which the
security is held or was transferred to that
account from an account in which the
security was a covered security, but only
if the broker received a transfer statement
under section 6045A with respect to that
security. Because rulemaking under sec-
tion 6045A with respect to digital assets
was not proposed, much less finalized, the
proposed regulations limited the definition
of a covered security for purposes of dig-
ital asset basis reporting to digital assets
that are acquired in a customer’s account
by a broker providing hosted wallet ser-
vices (that is, custodial services for such
digital assets). Accordingly, under the pro-
posed regulations, mandatory basis report-
ing was only required for sales of digital
assets that were previously acquired, held
until sale, and then sold by a custodial bro-
ker for the benefit of a customer.
One comment raised the concern that
brokers do not have access to cost-basis
information with respect to transactions
that are effected by other brokers. This
comment recommended that the final reg-
ulations delay requiring brokers to report
adjusted basis until the purchase infor-
mation sharing mechanism under section
6045A is implemented. The proposed
regulations did not require basis reporting
for sale transactions effected by custodial
brokers of digital assets that were not
previously acquired by that broker in the
customer’s account. Accordingly, the final
regulations do not adopt this comment.
However, a clarification has been made
to final §1.6045-1(d)(2)(i)(D) in order to
avoid confusion on this point.
Section 80603(b)(1) of the Infrastruc-
ture Act added digital assets to the list of
specified securities for which basis report-
ing is specifically required and provided
that a digital asset is a covered security if
it is acquired on or after January 1, 2023
(the acquisition applicable date for digital
assets). Based on this specific authority
provided by the Infrastructure Act, the
proposed regulations provided that for
each sale of a digital asset that is a covered
security for which a broker is required to
make a return of information, the broker
must also report the adjusted basis of the
digital asset sold, the date and time the
digital asset was purchased, and whether
any gain or loss with respect to the dig-
ital asset sold is long-term or short-term
(within the meaning of section 1222 of the
Code). Additionally, proposed §1.6045-
1(a)(15)(i)(J) modified the definition of a
covered security for which adjusted basis
reporting would be required to include
digital assets acquired in a customer’s
account on or after January 1, 2023, by a
broker providing hosted wallet services.
Several comments raised the concern
that adjusted basis reporting for digital

Bulletin No. 2024–31 225 July 29, 2024
assets acquired before the applicability
date of the regulations would make accu-
rate reporting of adjusted basis difficult
and, in some cases, impossible. These
comments instructed that, to accurately
track the adjusted basis of digital assets
in an account, brokers need not only pur-
chase price information but also clear lot
ordering rules to be sure that the basis of
a digital asset sold is removed from the
basis pool of the digital assets remaining
in the account. Additionally, these com-
ments noted that, the basis reported to
customers will not be accurate unless cus-
tomers applied the same lot ordering rules.
The comments also indicated that tax-
payers do not have the means to provide
brokers with adequate identification of
shares they previously sold. Thus, while
brokers likely have information about dig-
ital assets acquired on or after January 1,
2023, because there were no clear order-
ing rules in place for transactions that took
place on or after January 1, 2023, brokers
will not know which lots their custom-
ers previously reported as sold between
January 1, 2023 and the January 1, 2026
date their systems are in place to allow
for cost-basis reporting under these final
regulations. Thus, brokers do not have the
information necessary to track the basis of
the digital assets that remain in the cus-
tomer’s account.
Several comments also raised the con-
cern that brokers need time, not only to cap-
ture the original cost basis for digital asset
lots and to build systems to track adjusted
basis of digital assets consistent with the
ordering rules in the final regulations, but
also to build systems capable of perform-
ing complex adjustments for gifting and
other blockchain events. While one com-
ment indicated that the earliest that brokers
could implement adjusted basis tracking
is January 1, 2025, other comments stated
that brokers should not be required to start
building (or revising existing systems) until
these regulations are final. Accordingly,
these comments recommended aligning
the acquisition applicable date for digital
assets with the proposed January 1, 2026,
applicable date for basis reporting to allow
digital asset brokers to build basis reporting
systems and basis tracking systems at the
same time.
The Treasury Department and the IRS
considered these comments. Despite the
critical value of adjusted basis tracking
and reporting to the broker’s custom-
ers and to overall tax administration, the
final regulations adopt the recommen-
dation made by these comments to align
the acquisition applicable date for digital
assets with the January 1, 2026, applica-
bility date for adjusted basis reporting. The
Treasury Department and the IRS, how-
ever, strongly encourage brokers to work
with their customers who, as described in
Part II.C.2. of this Summary of Comments
and Explanation of Revisions, are subject
to the new ordering rules for transactions
beginning on or after January 1, 2025, to
facilitate an earlier transition to these new
basis tracking rules to the extent possible.
The proposed regulations required
adjusted basis reporting for sales of digital
assets treated as covered securities and for
non-digital asset options and forward con-
tracts on digital assets only to the extent
the sales are effected on or after January
1, 2026, in order to allow brokers addi-
tional time to build appropriate reporting
and basis retrieval systems. Several com-
ments requested a delay in the proposed
applicability date for basis reporting. One
comment suggested that further delay was
warranted because the applicability date
for digital asset basis reporting is not con-
sistent with the length of time that stock-
brokers were given to implement cost
basis reporting rules.
The final regulations do not adopt this
request for a delay for several reasons.
First, brokers have been on notice that
cost basis reporting in some form would
be required since the Infrastructure Act
was enacted in 2021. Second, many bro-
kers already have systems in place to
report cost basis to their customers as a
service and other brokers have contracts
with third party service providers to do the
same. Third, cost basis reporting is essen-
tial to taxpayers and the IRS to ensure that
gains and losses are accurately reported
on taxpayers’ Federal income tax returns.
Fourth, the initial applicability date for
cost basis reporting for digital assets—
over four years after the Infrastructure
Act was enacted—is not inconsistent with
the initial 2011 implementation of the
cost basis reporting rules for stockbro-
kers, which was only three years after the
Energy Improvement and Extension Act
of 2008 was enacted. Notwithstanding this
decision, the IRS intends to work closely
with stakeholders to ensure the smooth
implementation of the basis reporting
rules, including the mitigation of penalties
in the early stages of implementation for
all but particularly egregious cases involv-
ing intentionally disregarding these rules.
G. Exceptions to reporting of sales
effected by brokers on behalf of exempt
foreign persons and non-U.S. broker
reporting
1. In General
The proposed regulations provided the
same exceptions to reporting in §1.6045-
1(c) for exempt recipients and excepted
sales for brokers effecting sales of dig-
ital assets (digital asset brokers) that are
in the final regulations for securities bro-
kers. Similar to the case of a securities
broker effecting a sale of an asset other
than a digital asset, the proposed regula-
tions provided an exception to a broker’s
reporting of a sale of digital assets effected
for a customer that is an exempt foreign
person and requirements for applying the
exception. See §1.6045-1(g)(1) through
(3) (for sales other than digital assets) and
proposed §1.6045-1(g)(4) (for sales of
digital assets). For a broker to treat a cus-
tomer as an exempt foreign person for a
sale of a digital asset, the proposed regula-
tions provided requirements for valid doc-
umentation of foreign status, standards of
knowledge for a broker’s reliance on this
documentation, and presumption rules in
the absence of documentation that may be
relied upon to determine a customer’s sta-
tus as a U.S. or foreign person. Under the
proposed regulations, these requirements
differed in certain respects depending on
the broker’s status as a U.S. digital asset
broker, a controlled foreign corporation
(CFC), a digital asset broker conducting
activities as a money services business
(MSB), or as a non-U.S. digital asset
broker or a CFC digital asset broker not
conducting activities as an MSB (each as
defined in the proposed regulations). See
proposed §1.6045-1(g)(4)(i). A broker’s
status within one of the foregoing catego-
ries also dictated whether a sale of digi-
tal assets was considered effected at an
office either inside or outside the United
States, a determination that in some cases

July 29, 2024 226 Bulletin No. 2024–31
dictated whether a broker was treated as
a broker for a sale of a digital asset under
proposed §1.6045-1(a)(1) and whether the
exception to backup withholding under
§31.3406(g)-1(e) applied to a sale that is
reportable. See proposed §1.6045-1(a)(1)
(defining broker).
Under the proposed regulations, a
U.S. digital asset broker is a U.S. payor
or middleman as defined in §1.6049-5(c)
(5), other than a CFC, that effects sales of
digital assets on behalf of others. A U.S.
payor or middleman includes a U.S. per-
son (including a foreign branch of a U.S.
person), a CFC (as defined in §1.6049-5(c)
(5)(i)(C)), certain U.S. branches that agree
to be treated as U.S. persons, a foreign
partnership with controlling U.S. partners
or a U.S. trade or business, and a foreign
person for which 50 percent or more of
its gross income is effectively connected
with a U.S. trade or business. Thus, a U.S.
digital asset broker included both U.S.
persons and certain categories of non-
U.S. persons (other than CFCs). Because
it is a U.S. payor or middleman, a U.S.
digital asset broker is a broker under pro-
posed §1.6045-1(a)(1) with respect to all
sales of digital assets it effects for its cus-
tomers, such that the broker must report
with respect to a sale absent an applicable
exception to reporting. To except report-
ing based on a customer’s status as an
exempt foreign person, a U.S. digital asset
broker must have obtained a withholding
certificate (that is, an applicable Form
W-8) to which it must have applied cer-
tain reliance requirements when it was not
permitted to treat the customer as a for-
eign person under a presumption rule. If a
U.S. digital asset broker was not permitted
to treat a customer as an exempt foreign
person and failed to obtain a valid Form
W-9 for the customer when required under
§1.6045-1(c), backup withholding under
section 3406 applied to proceeds from
digital assets sales made on behalf of the
customer.
The proposed regulations also speci-
fied requirements for foreign brokers that
are not U.S. digital asset brokers for sales
of digital assets. Under the proposed reg-
ulations, a broker effecting sales of dig-
ital assets that is not a U.S. digital asset
broker is either a CFC digital asset broker
or a non-U.S. digital asset broker, which
have different requirements depending
on whether they conduct activities as a
MSB. A non-U.S. digital asset broker or
CFC digital asset broker conducts activ-
ities as an MSB under the proposed reg-
ulations when it is registered with the
Department of the Treasury under 31 CFR
part 1022.380 (or any successor guid-
ance) as an MSB, as defined in 31 CFR
part 1010.100(ff). The requirements for
non-U.S. digital asset brokers and CFC
digital asset brokers conducting activities
as MSBs reference the requirements that
apply to a U.S. digital asset broker. In the
case of a CFC digital asset broker not con-
ducting activities as an MSB, the broker
is (similar to a U.S. digital asset broker)
a U.S. payor or middleman, such that it
is a broker under proposed §1.6045-1(a)
(1) with respect to all sales of digital asset
it effects for its customers. Unlike a U.S.
digital asset broker, however, a CFC dig-
ital asset broker not conducting activities
as an MSB was permitted to treat a cus-
tomer as an exempt foreign person based
on certain documentary evidence sup-
porting the customer’s foreign status (in
lieu of a Form W-8), and, because sales
of digital assets it effects for customers
are treated as effected at an office outside
the United States, the exception to backup
withholding in proposed §31.3406(g)-1(e)
applied to a sale reportable by the broker.
In the case of a non-U.S. digital asset
broker not conducting activities as an
MSB, more limited requirements applied
than those that applied to other digital
asset brokers. Under the proposed regu-
lations, unless the broker collects certain
information about a customer that shows
certain specified “U.S. indicia,” the broker
has no reporting or backup withholding
requirements under the proposed regula-
tions. If the broker has such U.S. indicia
for a customer, a sale effected for the cus-
tomer is treated as effected at an office of
the broker inside the United States. In that
case, the broker was required to report
with respect to a sale of a digital asset it
effected for the customer when required
under §1.6045-1(c) unless it was permit-
ted to treat the customer as an exempt for-
eign person based on certain documentary
evidence or a withholding certificate it was
permitted to rely upon, or when the broker
was permitted to treat the customer as a
foreign person under a presumption rule.
Finally, the exception to backup withhold-
ing in proposed §31.3406(g)-1(e) would
have applied to a sale of digital assets
reportable by a non-U.S. digital asset bro-
ker not conducting activities as an MSB.
2. Non-U.S. Digital Asset Brokers and
the CARF
Several comments on the proposed
regulations’ rules requiring non-U.S.
brokers to report information on digital
asset transactions recommended that the
rules be revised to provide that non-U.S.
brokers that are reporting information
on U.S. customers to other jurisdictions
under the CARF should not be required to
report information to the IRS and should
not have to obtain a separate U.S. certifi-
cation from a customer. Other comments
requested that the implementation of rules
for non-U.S. brokers be delayed until they
are harmonized with the CARF. Other
comments relating to the proposed regula-
tions’ rules requiring non-U.S. brokers to
report information on digital asset transac-
tions recommended that a single diligence
standard apply to all non-U.S. brokers.
The Treasury Department and the IRS
agree that rules requiring non-U.S. bro-
kers to report information on digital asset
transactions should be revised in order to
allow for the implementation of the CARF
by the United States. As described in the
preamble to the proposed regulations,
under the CARF, the IRS would provide
information on foreign persons for whom
U.S. brokers effect sales of digital assets
to other countries that have implemented
the CARF and receive information from
those countries about transactions by
U.S. persons with non-U.S. digital asset
brokers. Regulations implementing the
CARF would exempt non-U.S. brokers
that are reporting information on U.S.
customers to jurisdictions that exchange
information with the IRS pursuant to
an automatic exchange of information
mechanism from reporting information
on such U.S. customers to the IRS under
section 6045. This would mean that such
non-U.S. brokers would not be required
to report information on U.S. customers
to both the IRS and a foreign tax admin-
istration that is exchanging information
with the IRS. The rules provided in the
proposed regulations, when finalized and
as revised to take into account comments

Bulletin No. 2024–31 227 July 29, 2024
received on diligence standards and other
issues, therefore would be expected to
apply only to a limited set of non-U.S.
brokers in jurisdictions that do not imple-
ment the CARF and exchange digital
asset information with the United States.
Accordingly, the final regulations reserve
on the rules requiring non-U.S. brokers to
report information on U.S. customers to
the IRS, in order to coordinate the rules
for non-U.S. brokers under section 6045
with new rules that will implement the
CARF.
The Treasury Department and the IRS
intend to propose regulations that would,
if finalized, implement CARF in suffi-
cient time for the United States to begin
exchanges of information with appro-
priate partner jurisdictions in 2028 with
respect to transactions effected in the 2027
calendar year. It is anticipated that those
proposed regulations also would require
U.S. digital asset brokers to report infor-
mation on their foreign customers resident
in such jurisdictions, so that the IRS could
provide that information to those jurisdic-
tions pursuant to automatic exchange of
information mechanisms. Since the pro-
posed CARF regulations would require
additional reporting by U.S. digital asset
brokers, the final regulations have been
drafted taking the CARF definitions into
account where feasible in order to mini-
mize differences between the types of
information that U.S. digital asset brokers
are required to report under the final reg-
ulations and under forthcoming proposed
CARF regulations. It is anticipated, how-
ever, that the information required to be
reported by U.S. digital asset brokers
under the forthcoming proposed CARF
regulations would differ from the infor-
mation required to be reported under the
final regulations in significant ways. For
example, the CARF requires reporting of
acquisitions and transfers of digital assets,
requires all reporting to take place on an
aggregate basis, and has different rules for
reporting of stablecoins than the final reg-
ulations.
As the final regulations reserve on the
rules of §1.6045-1(g)(4) relating to non-
U.S. brokers, the final regulations limit
the definition of a U.S. digital asset broker
for purposes of applying the provisions
of §1.6045-1(g)(4). For these brokers,
these provisions include documentation,
reliance, and presumption rules to deter-
mine whether they may treat customers as
exempt foreign persons. The final regula-
tions indicate as reserved those paragraphs
of the proposed regulations that addressed
definitions or requirements specific to bro-
kers that are not U.S. digital asset brokers.
For example, the final regulations reserve
the rules for CFC digital asset brokers,
non-U.S. digital asset brokers conducting
activities as money service businesses and
other non-U.S. digital asset brokers that
were described in proposed §1.6045-1(g)
(4). As a result, the remainder of this Part
I.G. discusses those comments relevant to
U.S. digital asset brokers (or digital asset
brokers generally) and excludes discus-
sion of comments specific to only non-
U.S. brokers. Comments specific to non-
U.S. brokers will be addressed as part of
future regulations.
3. Revised U.S. Indicia for Brokers to
Rely on Documentation
As referenced in Part I.G.1. of this Sum-
mary of Comments and Explanation of
Revisions, under the proposed regulations
a digital asset broker is subject to specified
requirements for relying on a Form W-8
to treat a customer as an exempt foreign
person. With respect to a Form W-8 that is
a beneficial owner withholding certificate,
the proposed regulations provided that a
digital asset broker may rely on the certif-
icate unless the broker has actual knowl-
edge or reason to know that the certificate
is unreliable or incorrect. Similar to a
securities broker effecting a sale, a digital
asset broker is treated as having “reason to
know” that a beneficial owner withhold-
ing certificate for a customer is unreliable
or incorrect based on certain indicia of
the customer’s U.S. status (U.S. indicia),
which are for this purpose cross-refer-
enced in proposed §1.6045-1(g)(4)(vi)(B)
to the U.S. indicia in proposed §1.6045-
1(g)(4)(iv)(B)(1) through (5) (setting forth
the U.S. indicia relevant to a non-U.S. dig-
ital asset broker’s requirements under the
proposed regulations).
The U.S. indicia in proposed §1.6045-
1(g)(4)(iv)(B)(1) through (5) included the
U.S. indicia in §1.1441-7(b)(5), which
generally apply to determine when a
U.S. withholding agent is treated as hav-
ing “reason to know” that a beneficial
owner withholding certificate is unreliable
or incorrect and which are also applied
for that purpose to a securities broker
effecting a sale. See §1.6045-1(g)(1)(ii).
Proposed §1.6045-1(g)(4)(iv) further
includes as U.S. indicia the following:
(1) a customer’s communication with the
broker using a device (such as a computer,
smart phone, router, server or similar
device) that the broker has associated with
an Internet Protocol (IP) address or other
electronic address indicating a location
within the United States; (2) cash paid to
the customer by a transfer of funds into an
account maintained by the customer at a
bank or financial institution in the United
States, cash deposited with the broker by
a transfer of funds from such an account,
or if the customer’s account is linked to
a bank or financial account maintained
within the United States; or (3) one or
more digital asset deposits into the cus-
tomer’s account at the broker were trans-
ferred from, or digital asset withdrawals
from the customer’s account were trans-
ferred to, a digital asset broker that the
broker knows or has reason to know to be
organized within the United States, or the
customer’s account is linked to a digital
asset broker that the broker knows or has
reason to know to be organized within the
United States. As noted in the preamble to
the proposed regulations, the additional
U.S. indicia were included to account for
the digital nature of the activities of digital
asset brokers, including that they do not
typically have physical offices and com-
municate with customers by digital means
rather than by mail.
Many comments were received that
raised issues with the proposed new U.S.
indicia. Some comments noted coordina-
tion issues that could arise from the new
indicia for brokers effecting sales of both
securities and digital assets. These com-
ments requested that the U.S. indicia for
digital asset brokers be aligned with the
U.S. indicia applicable to traditional finan-
cial brokers so that brokers effecting sales
in both capacities could avoid maintaining
parallel systems to monitor differing U.S.
indicia depending on the type of sale. A
comment noted that some securities bro-
kers may transact only digitally with cus-
tomers, such that the stated reasoning for
the new U.S. indicia is not limited to digi-
tal asset brokers.

July 29, 2024 228 Bulletin No. 2024–31
Other comments objected to one or
more of the specified new U.S. indicia,
questioning the usefulness of certain of
the indicia for identifying potential U.S.
customers and noting excessive burdens
on brokers in tracking the required infor-
mation. They noted that IP addresses are
not reliable indicators of a customer’s res-
idence given that the location indicated
by an IP address will change when cus-
tomers travel outside of their countries
of residence and can be masked by the
use of a virtual private network (VPN)
so that a customer’s actual location can-
not be determined. A comment noted that
the proposed regulations do not describe
whether an IP address would be required
to be checked for all contacts with the cus-
tomer as they do not define a “customer
contact” for this purpose.
Some comments raised concerns
with the U.S. indicia relating to transfers
effected for customers to and from U.S.
bank accounts and U.S. digital asset bro-
kers. Certain of those comments noted
that the proposed regulations do not spec-
ify how a broker should determine that a
customer’s transfer is to or from a U.S.
digital asset broker, with one comment
suggesting an actual knowledge standard
be permitted, and another comment sug-
gesting that the IRS publish a list of U.S.
digital asset brokers. Another comment
noted that a customer’s dealings with U.S.
digital asset brokers or U.S. banks is not
a good indication of a customer’s U.S.
status. Finally, some comments noted that
requiring determinations of U.S. status for
every transfer would add burdens on dig-
ital asset brokers that exceed those result-
ing from the static forms of U.S. indicia
that apply to securities brokers (such as for
standing instructions to pay amounts to a
U.S. account) and may be read to require
documentation cures at multiple times.
Because the comments raise concerns
sufficient for the Treasury Department
and the IRS to reconsider the additional
U.S. indicia, the final regulations do not
include any of the additional U.S. indicia
that are in the proposed regulations for
U.S. digital asset brokers. Thus, for pur-
poses of the reliance requirements of U.S.
digital asset brokers, the final regulations
include only the U.S. indicia generally
applicable to U.S. securities brokers. The
Treasury Department and the IRS intend
to consider whether additional U.S. indi-
cia should be part of the proposed require-
ments that would be applicable to non-
U.S. digital asset brokers (as referenced in
Part I.G.2. of this Summary of Comments
and Explanation of Revisions).
4. Transitional Determination of Exempt
Foreign Status
To provide additional time for digi-
tal asset brokers to collect the necessary
documentation to treat existing customers
as exempt foreign persons, the proposed
regulations provided a transitional rule for
a broker to treat a customer as an exempt
foreign person for sales of digital assets
effected before January 1, 2026, that were
held in a preexisting account established
with a broker before January 1, 2025. A
broker may apply this transitional rule if
the customer has not been previously clas-
sified as a U.S. person by the broker, and
information the broker has for the cus-
tomer includes a residence address that is
not a U.S. address. See proposed §1.6045-
1(g)(4)(vi)(F).
No comments were received in
response to this proposed rule. The final
regulations include this transitional relief.
The dates for which relief will apply have
been modified to apply to sales effected
before January 1, 2027, that were held
in an account established with a broker
before January 1, 2026.
5. Certification of Individual Customer’s
Presence in U.S.
With respect to the requirements for a
valid beneficial owner withholding certif-
icate provided by a customer to a broker
to treat the customer as an exempt foreign
person, the proposed regulations stated
that a beneficial owner withholding cer-
tificate provided by an individual (that is,
a Form W-8BEN) must include a certifi-
cation that the beneficial owner has not
been, and at the time the certificate is fur-
nished reasonably expects not to be, pres-
ent in the United States for 183 days or
more during each calendar year to which
the certificate pertains. See proposed
§1.6045-1(g)(4)(ii)(B). This certification
is based on the same requirement appli-
cable to a securities broker in §1.6045-
1(g)(1)(i) to allow the broker to rely on
a beneficial owner withholding certificate
to treat an individual as an exempt for-
eign person. One comment stated that this
certification requirement would not add
sufficient value or reliability to a standard
or substitute Form W-8BEN and further
noted that language relating to the sub-
stantial presence test is included only in
the instructions for Form W-8BEN, with
a cross-reference in the form’s jurat. The
comment thereby asserted that an indi-
vidual may be unaware they are attesting
to this standard when they sign a Form
W-8BEN. The comment suggested that
this language be removed in the final reg-
ulations.
As referenced in the comment, this
certification relates to a customer’s
potential classification as a U.S. individ-
ual under the substantial presence test
in §301.7701(b)-1(c). It also relates to
whether an individual customer is sub-
ject to tax on capital gains from sales or
exchanges under section 871(a)(2) of the
Code when the individual remains a res-
ident alien under section 7701(b)(3)(B)
of the Code despite being present in the
United States for 183 days or more during
a year. As indicated in the preamble to the
proposed regulations, Form W-8BEN spe-
cifically requires that an individual certify
to the individual’s status as an exempt
foreign person in accordance with the
instructions to the form, which include this
requirement (relating to broker and barter
transactions associated with the form).
Thus, this certification is both sufficiently
described in the proposed regulations with
respect to its reference to Form W-8BEN
and relevant to an individual’s claim
of exempt foreign person status. More-
over, this certification is required today
for Forms W-8BEN collected by secu-
rities brokers and the Treasury Depart-
ment and the IRS have determined that
the same certification should be required
for Forms W-8BEN collected by digital
asset brokers. Thus, this comment is not
adopted, and this certification requirement
is included in the final regulations for a
beneficial owner withholding certification
provided to a U.S. digital asset broker. In
response to this comment, the IRS may
consider revising Form W-8BEN or its
instructions to highlight this requirement
more prominently for individuals com-
pleting the form.

Bulletin No. 2024–31 229 July 29, 2024
6. Substitute Forms W-8
As described in Part I.G.1. of this Sum-
mary of Comments and Explanation of
Revisions, the proposed regulations pro-
vided that a digital asset broker may treat
a customer as an exempt foreign person
if the broker receives a valid Form W-8
upon which it may rely. They also permit a
broker to rely upon a substitute Form W-8
that meets the requirements of §1.1441-
1(e)(4). See proposed §1.6045-1(g)(4)(ii)
(B) and (g)(4)(vi)(A)(1). Some comments
requested that the final regulations be
amended to allow substitute certification
forms based on other reporting regimes to
reduce broker compliance burdens, reduce
customer confusion, and streamline global
information reporting. Some comments
specially suggested that FATCA or Com-
mon Reporting Standard (CRS) self-cer-
tifications (adjusted to account for digital
assets) be permitted as qualifying substi-
tute forms. A comment supported the use
of the type of substitute form described in
Notice 2011-71, 2011 I.R.B. 233 (August
19, 2011), to establish a payee’s status as a
foreign person for section 6050W report-
ing purposes.
The Treasury Department and the IRS
agree that a broker’s ability to leverage a
certification form already in use for other
purposes may reduce compliance burdens
associated with documenting customers.
As stated in the preceding paragraph,
however, the proposed regulations already
permitted brokers to rely on substitute cer-
tification forms that meet the standard that
applies for purposes of section 1441 of the
Code. Under this standard, a substitute
form must include information substan-
tially similar to that required on an official
certification form and the certifications
relevant to the transactions associated
with the form. This standard is similar to
the standard for the substitute form spec-
ified in Notice 2011-71 (in reference to
the comment to use that substitute form).
Additionally, as the comments referenc-
ing the use of self-certifications pertaining
to foreign reporting regimes presumably
were made with respect to their use by
non-U.S. brokers, and as the requirements
for non-U.S. brokers are reserved, these
comments are not further considered for
the final regulations. See Part I.G.2. of
this Summary of Comments and Explana-
tion of Revisions. As under the proposed
regulations, the final regulations provide
that a U.S. digital asset broker may rely
on a substitute Form W-8 that meets the
standard for purposes of section 1441 to
establish a customer’s foreign status.
H. Definitions and other comments
The proposed regulations defined a
hosted wallet as a custodial service pro-
vided to a user that electronically stores
the private keys to digital assets held on
behalf of others and an unhosted wallet
as a non-custodial means of storing, elec-
tronically or otherwise, a user’s private
keys to digital assets held by or for the
user. Included in the definition of unhosted
wallets was a statement that unhosted wal-
lets can be provided through software that
is connected to the Internet (a hot wallet)
or through hardware or physical media
that is disconnected from the Internet (a
cold wallet). Several comments noted that
these definitions were confusing because
the proposed regulations failed to define
a wallet more generally. The final regu-
lations adopt this comment and define a
wallet as a means of storing, electroni-
cally or otherwise, a user’s private keys to
digital assets held by or for the user. Final
§1.6045-1(a)(25)(i).
The proposed regulations also provided
that “a digital asset is considered held in
a wallet or account if the wallet, whether
hosted or unhosted, or account stores the
private keys necessary to transfer access
to, or control of, the digital asset.” Sev-
eral comments expressed confusion with
this definition. One comment suggested
that this definition was not consistent with
how distributed ledgers work because
digital assets themselves are not held in
wallets but rather exist on the blockchain.
The Treasury Department and the IRS rec-
ognize that digital assets are not actually
stored in wallets. Indeed, the preamble to
the proposed regulations explained that
references to an owner “holding” digital
assets generally or “holding” digital assets
in a wallet or account were meant to refer
to holding or controlling, whether directly
or indirectly through a custodian, the keys
to the digital assets. To address the com-
ment, however, the final regulations con-
form the definition in the text to the pre-
amble’s explanation. Accordingly, under
the final §1.6045-1(a)(25)(iv), “[a] digital
asset is referred to in this section as held in
a wallet or account if the wallet, whether
hosted or unhosted, or account stores the
private keys necessary to transfer con-
trol of the digital asset.” Additionally, the
final definition provides that a digital asset
associated with a digital asset address that
is generated by a wallet, and a digital asset
associated with a sub-ledger account of a
hosted wallet, are similarly referred to as
held in a wallet. The same concept applies
to references to “held at a broker,” “held
by the user of a wallet,” “acquired in a
wallet or account,” or “transferred into a
wallet or account.” Holding, acquiring, or
transferring, in these cases, refer to hold-
ing, acquiring, or transferring the ability
to control, whether directly or indirectly
through a custodian, the keys to the digital
assets.
Another comment suggested references
to “wallet or account” in this definition
and elsewhere in the proposed regulations
failed to recognize the difference between
those terms in the digital asset industry.
The final regulations do not adopt this
comment. Although many terms in the
digital asset industry may have their own
unique meaning, the terms wallet and
account, in these final regulations, are
used synonymously.
Another comment indicated that there
were several additional unclear defini-
tions, including “software,” “platform,”
and “ledger.” The regulations do not adopt
this comment. Standard rules of construc-
tion apply to give undefined terms, such as
software, ledger, and platform, their usual
meaning. These terms are sufficiently
basic to not warrant additional definitions.
I. Comments based on constitutional
concerns
1. First Amendment
Multiple comments alleged that the
proposed regulations, if finalized, would
violate the First Amendment to the U.S.
Constitution on a variety of asserted bases.
Some comments viewed the proposed reg-
ulations as requiring developers to include
code in their products that would reveal
customer data, while others asserted that
the proposed regulations would require
persons who fit the definition of broker

July 29, 2024 230 Bulletin No. 2024–31
to write their software in a manner that
goes directly against their closely held
political, moral, and social beliefs. Com-
ments also said the proposed regulations
would infringe on a taxpayer’s freedom
of association under the First Amendment
because the IRS could use the taxpayer
identification information and wallet data
reported by brokers to monitor their finan-
cial associations.
The Department of the Treasury and
the IRS do not agree that the regulations
as proposed or as finalized infringe upon
rights guaranteed by the First Amendment.
The First Amendment provides, among
other things, that “Congress shall make no
law . . . abridging the freedom of speech.”
U.S. CONST. Amend. I. Protected speech
includes the right to utter, print, distribute,
receive, read, inquire about, contemplate,
and teach ideas. Griswold v. Connecticut,
381 U.S. 479, 482 (1965). It also includes
the right to freely associate with others for
expressive purposes. Freeman v. City of
Santa Ana, 68 F.9d 1180, 1188 (9th Cir.
1995). Protected speech includes conduct
designed to express and convey ideas.
New Orleans S.S. Ass’n v. General Long-
shore Workers, 626 F.2d 455, 462 (5th
Cir. 1980), aff’d. Jacksonville Bulk Termi-
nals, Inc. v. International Longshoremen’s
Ass’n, 457 U.S. 702 (1982). The rights
protected by the First Amendment include
both the right to speak freely and the right
to refrain from speaking at all. Wooley
v. Maynard, 430 U.S. 705, 714 (1977).
A First Amendment protection against
compelled speech, however, has been
found only in the context of governmen-
tal compulsion to disseminate a particu-
lar political or ideological message. See,
e.g., Miami Herald Publ’g Co. v. Tornillo,
418 U.S. 241 (1974) (holding unconstitu-
tional a state statute requiring newspapers
to publish the replies of political candi-
dates whom they had criticized); Wooley
v. Maynard, 430 U.S. 705 (1977) (holding
that a state may not require a citizen to dis-
play the state motto on his license plate).
Challenges to government-compelled dis-
closures that are based on the freedom of
association are determined on an “exact-
ing scrutiny” standard, which requires a
“substantial relation between the disclo-
sure requirement and a sufficiently import-
ant governmental interest.” Americans for
Prosperity Foundation v. Bonta, 594 U.S.
595 (2021) (quoting Doe v. Reed, 561 U.S.
186, 196 (2010) (internal quotation marks
omitted)).
The final regulations do not compel
political or ideological speech. Although
they do require disclosure of certain infor-
mation, they do not infringe on a taxpay-
er’s right to free association. Instead, the
final regulations merely require informa-
tion reporting for tax compliance pur-
poses, a sufficiently important governmen-
tal interest. See Collett v. United States,
781 F.2d 53, 55 (6th Cir. 1985) (rejecting
a taxpayer’s First Amendment challenge
to the imposition of a frivolous return
penalty under section 6702 and holding
that “the maintenance and viability of
the tax system is a sufficiently important
governmental interest to justify incidental
regulation upon speech and non-speech
communication”) (citing United States
v. Lee, 455 U.S. 252, 260 (1982)). The
information required from brokers with
respect to digital asset sales is similar to
the information required to be reported
by brokers with respect to other transac-
tions required to be reported, and the IRS
has an important interest in receiving this
information. The IRS gathers third-party
information about income received and
taxes withheld to verify self-reported
income and tax liability reported on Fed-
eral income tax returns. The use of reli-
able and objective third-party verification
of income increases the probability of tax
evasion being detected and increases the
cost of evasion to the taxpayers, thereby
decreasing the overall level of tax evasion
by taxpayers. Information reporting also
assists taxpayers receiving such reports to
prepare their Federal income tax returns
and helps the IRS determine whether such
returns are correct and complete. Accord-
ingly, the Treasury Department and the
IRS have concluded the final regulations
would pass muster under First Amend-
ment scrutiny.
2. Fourth Amendment
Multiple comments contended the
proposed regulations, if finalized, would
violate the Fourth Amendment’s prohibi-
tion on warrantless searches and seizures
of a person’s papers and effects because
they do not currently provide their bro-
kers with their personal information when
they transact in digital assets. Comments
asserted the proposed regulations would
violate the Fourth Amendment because
reporting information that would link an
individual’s identity to transaction ID
numbers and their digital asset addresses
would allow the government to see histor-
ical and prospective information about the
individual’s activities. Although the Trea-
sury Department and the IRS do not agree
that requiring the reporting of this infor-
mation would violate the Fourth Amend-
ment, the final regulations do not require
this information to be reported. Instead,
the final regulations require this informa-
tion to be retained by the broker to ensure
the IRS will have access to all the records
it needs if requested by IRS personnel as
part of an audit or other enforcement or
compliance effort.
The Fourth Amendment protects
against “unreasonable searches and sei-
zures.” U.S. CONST. Amend IV. The
Fourth Amendment’s protections extend
only to items or places in which a person
has a constitutionally protected reason-
able expectation of privacy. See Califor-
nia v. Ciraolo, 476 U.S. 207, 211 (1986).
Customers of digital asset brokers do not
have a reasonable expectation of privacy
with respect to the details of digital asset
sale transactions effectuated by brokers.
See United States v. Gratkowski, 964 F.3d
307, 311-12 (5th Cir. 2020) (rejecting the
defendant’s Fourth Amendment claim of
a reasonable expectation of privacy in
transactions recorded in a publicly avail-
able blockchain and in the records main-
tained by the virtual currency exchange
documenting those transactions, noting
that “the nature of the information and the
voluntariness of the exposure weigh heav-
ily against finding a privacy interest.”).
See also, Goldberger & Dublin, P.C.,
935 F.2d 501, 503 (2nd Cir. 1991) (citing
United States v. Miller, 425 U.S. 435, 444
(1976); Cal. Bankers Ass’n v. Shultz, 416
U.S. 21, 59-60 (1974)) (summarily reject-
ing a Fourth and Fifth Amendment chal-
lenge to information reporting require-
ments under section 6050I and noting that
similar “contentions relative to the Fourth
and Fifth Amendments have been rejected
consistently in cases under the Bank
Secrecy Act by both the Supreme Court
and this Court.”) (additional citations
omitted). Gains or losses from these sale

Bulletin No. 2024–31 231 July 29, 2024
transactions must be reflected on a Federal
income tax return. Customers of digital
asset brokers do not have a privacy inter-
est in shielding from the IRS the infor-
mation that the IRS needs to determine
tax compliance. Moreover, these taxable
transactions will be reported to the IRS
in due course anyway. To the extent the
digital asset sale transactions are recorded
on public ledgers, those transactions are
not private. Just because customers might
choose not to exchange identifying infor-
mation with brokers when engaging in
digital assets transactions does not ren-
der the underlying transactions private,
particularly when the customers choose
to engage in such transactions in a public
forum, such as a public blockchain. There-
fore, the Treasury Department and the IRS
have concluded that the final regulations
do not violate the Fourth Amendment.
3. Fifth Amendment and Assertions of
Vagueness
Some comments stated that the pro-
posed regulations, if finalized, would vio-
late the Fifth Amendment’s prohibition
on depriving any person of life, liberty,
or property without due process of law.
These comments based this assertion on
a variety of views, including that the pro-
posed regulations are unconstitutionally
vague and impossible to apply in prac-
tice, particularly rules relating to cus-
tomer identification and documentation.
Other comments stated the proposed reg-
ulations violate the Fifth Amendment due
process clause because the definitions of
broker, effect, and digital asset middle-
man are too vague to be applied fairly.
Some comments stated the proposed reg-
ulations violate the Fifth Amendment’s
protections against compelled self-in-
crimination.
The Due Process Clause of the Fifth
Amendment provides that “no person
shall . . . be deprived of life, liberty, or
property, without due process of law.”
This provision has been interpreted to
require that statutes, regulations, and
agency pronouncements define conduct
subject to penalty “with sufficient defi-
niteness that ordinary people can under-
stand what conduct is prohibited.” See
Kolender v. Lawson, 461 U.S. 352, 357
(1983). Although some comments stated
that digital asset users have not routinely
exchanged identifying information with
their brokers in the past, this does not
mean the requirement that brokers obtain
customers’ identifying information going
forward is vague – much less unconstitu-
tionally so. “The ‘void for vagueness’ doc-
trine is a procedural due process concept,”
United States v. Professional Air Traffic
Controllers Organization, 678 F.2d 1, 3
(1st Cir. 1982), but “[a]bsent a protectible
liberty or property interest, the protections
of procedural due process do not attach.”
United States v. Schutterle, 586 F.2d 1201,
1204-05 (8th Cir. 1978). There is no pro-
tectible liberty or property interest in the
information required to be disclosed under
the regulation. In any event, the relevant
test is that a “regulation is impermissibly
vague under the Due Process Clause of the
Fifth Amendment if it ‘fails to provide a
person of ordinary intelligence fair notice
of what is prohibited, or is so standardless
that it authorizes or encourages seriously
discriminatory enforcement.’” United
States v. Szabo, 760 F.3d 997, 1003 (9th
Cir. 2014) (quoting Holder v. Humanitar-
ian Law Project, 561 U.S. 1, 18 (2010)).
The regulation is not unconstitutionally
vague by this measure. To be sure, brokers
will have to obtain the identifying infor-
mation of users they may not have met
in person. However, online brokers have
successfully navigated this issue in other
contexts.
The Fifth Amendment also provides
that “[n]o person . . . shall be compelled
in any criminal case to be a witness
against himself.” U.S. CONST. Amend
V. The U.S. Supreme Court has held that
this right, properly understood, only pre-
vents the Government from “compel[ing]
incriminating communications . . . that are
‘testimonial’ in character.” United States
v. Hubbell, 530 U.S. 27, 34 (2000). The
Supreme Court has held that “the fact
that incriminating evidence may be the
byproduct of obedience to a regulatory
requirement, such as filing an income
tax return . . . [or] maintaining required
records . . . does not clothe such required
conduct with the testimonial privilege.”
Hubbell, 530 U.S. at 35.
Some comments specifically stated that
the definitions of broker, effect, and digi-
tal asset middleman are unconstitutionally
vague. As discussed in Part I.B.1. of this
Summary of Comments and Explanation
of Revisions, the final regulations apply
only to digital asset industry participants
that hold custody of their customers’ dig-
ital assets and the final regulations revise
and simplify the definition of a PDAP.
The Treasury Department and the IRS
continue to study the non-custodial indus-
try and intend to issue separate final reg-
ulations describing information reporting
rules for non-custodial industry partici-
pants. Therefore, any concerns regarding
the perceived vagueness of the definitions
as they apply to custodial industry partic-
ipants have been addressed in these final
regulations.
4. Privacy and Security Concerns
Comments expressed a variety of con-
cerns related to the privacy and safety
implications of requiring brokers to col-
lect financial data and social security
numbers. The Treasury Department and
the IRS considered the privacy and secu-
rity implications of the proposed regula-
tions. Section 80603 of the Infrastructure
Act made several changes to the broker
reporting provisions under section 6045
to clarify the rules regarding how digital
asset transactions should be reported by
brokers. The purpose behind information
reporting under section 6045 is to provide
information to assist taxpayers receiv-
ing the reports in preparing their Federal
income tax returns and to help the IRS
determine whether such returns are cor-
rect and complete. The customer’s name
and TIN are necessary to match informa-
tion on Federal income tax returns with
section 6045 reporting. Although this is
personally identifiable information that
customers may wish to keep private and
secure, the IRS interest in receiving this
information outweighs any privacy con-
cerns about requiring brokers to collect
and retain this information. The final reg-
ulations do not require brokers to report
the transaction ID numbers or digital asset
addresses. If brokers do not believe their
existing security measures are sufficient to
keep personally identifiable information
and tax information private and secure,
they can choose to implement new secu-
rity measures or choose to contract with
third parties with expertise in securing
confidential data.

July 29, 2024 232 Bulletin No. 2024–31
Comments said they were concerned
about brokers, especially smaller brokers,
being able to securely store customer
data and one comment requested that the
final regulations include requirements for
the IRS to monitor broker compliance
with security measures. Other comments
requested a reporting exception for small
digital asset brokers that would be based on
the value of assets traded during a calendar
year or a valuation of the broker’s business.
These comments were not adopted for
the final regulations. Traditional brokers,
including smaller brokers, have operated
online for many years and have imple-
mented their own online security policies
and protocols without specific security
regulations under section 6045. The final
regulations do not include a general de
minimis threshold that would exempt small
brokers from reporting; however, the Trea-
sury Department and the IRS are providing
penalty relief under certain circumstances
for transactions occurring during calendar
year 2025 and brokers can use this time to
improve existing security practices or put a
security system in place for the first time.
Some comments expressed concerns
about numerous third parties, such as mul-
tiple brokers, having access to customer
data and questioned the ability of brokers
to securely transfer customer data to third
parties. Comments also included concerns
about the IRS’s ability to securely store
customer data. The final regulations do not
require the information reported to be dis-
seminated to third parties, but as with many
other information returns, require filing the
complete information with the IRS and fur-
nishing a statement to the taxpayer which
can include a truncated TIN rather than the
entire TIN. The final regulations also pro-
vide a multiple broker rule, which require
only one broker to be responsible for
obtaining and reporting the financial and
identifying information of a person who
participated in a digital asset transaction.
Furthermore, and as more fully explained
in Part I.B.2. of this Summary of Comments
and Explanation of Revisions, the final reg-
ulations require PDAPs to file information
returns with respect to a buyer’s disposi-
tion of digital assets only if the processor
already may obtain customer identification
information from the buyer to comply with
AML obligations pursuant to an agreement
or arrangement with the buyer. The Trea-
sury Department and the IRS acknowledge
the concerns raised regarding the IRS’s
ability to securely store customer data and
the information reported on digital asset
transactions. The information on Forms
1099-DA will be subject to the same secu-
rity measures as other information reported
to the IRS. Generally, tax returns and return
information are confidential, as required
by section 6103 of the Code. Addition-
ally, the Privacy Act of 1974 (Public Law
93-679) affords individuals certain rights
with respect to records contained in the
IRS’s systems of records. One customer
asserted that any information collected on
the blockchain is public information, not
“return information” under section 6103
and is therefore subject to the Freedom
of Information Act (FOIA). Although the
blockchain itself is public, all information
reported on a Form 1099-DA and filed with
the IRS becomes protected in the hands of
the IRS under section 6103(b)(2) and is not
subject to FOIA.
Some comments express concerns about
TIN certification and predicted that individ-
uals would be confused when digital asset
brokers requested their TINs. Some com-
ments expressed fear that malicious actors
who were not brokers would try to trick
individuals into providing their personal
information. Some comments said that as
potential brokers, they were concerned
about having customer data and that data
being accessed by unauthorized individu-
als or entities. Concerns about malicious
actors tricking customers into providing
their personal information through online
scams such as phishing attacks, while
unfortunate, are not unique to digital asset
reporting. Digital asset brokers who have a
legitimate need for the TIN and other per-
sonal information of customers should pro-
vide their customers with an explanation
for their requests to ensure their customers
will not be confused or concerned. Addi-
tionally, brokers should act responsibly to
safely store any information required to be
reported on Form 1099-DA, Form 1099-S,
Form 1099-B, and Form 1099-K including
personal information of customers.
5. Authority for and Timing of
Regulations
Multiple comments expressed con-
cerns that the Treasury Department and
the IRS lacked authority to promulgate
the digital asset broker regulations or
asserted that the proposed regulations
were published too soon or without suf-
ficient development. For example, some
comments said the IRS should wait to
regulate digital assets until after con-
sulting with other Federal agencies or
that the proposed regulations addressed
issues that should first be addressed by
Congress or other agencies. Congress
enacted the Infrastructure Act in 2021
and section 80603 made several changes
to the broker reporting provisions under
section 6045 to clarify the rules regard-
ing how certain digital asset transactions
should be reported by brokers, and to
expand the categories of assets for which
basis reporting is required to include all
digital assets. Congress’s power to lay
and collect taxes extends to the require-
ment that brokers report information on
taxable digital asset transactions. The
proposed regulations were published
on August 29, 2023, and the final reg-
ulations are intended to implement the
Infrastructure Act; therefore, the IRS is
not attempting to regulate digital assets
without prior Congressional approval.
No inference is intended as to when a
sale of a digital asset occurs under any
other legal regime, including the Fed-
eral securities laws and the Commodities
Exchange Act, or to otherwise impact the
interpretation or applicability of those
or any other laws, which are outside the
scope of these final regulations.
Comments said the proposed regula-
tions exceeded the authority granted by
Congress. Section 80603 of the Infrastruc-
ture Act clarifies and expands the rules
regarding how digital assets should be
reported by brokers under sections 6045
and 6045A to improve IRS and taxpayer
access to gross proceeds and adjusted
basis information when taxpayers dispose
of digital assets in transactions involving
brokers. The Treasury Department and the
IRS are issuing these final regulations to
implement these statutory provisions. The
Treasury Department and the IRS disagree
that these final regulations preempt Con-
gressional action because as discussed in
Parts I.A.2. and I.B.1.b. of this Summary
of Comments and Explanation of Revi-
sions, the final regulations are consistent
with statutory language.

Bulletin No. 2024–31 233 July 29, 2024
Comments said the proposed regula-
tions are hostile and aggressively opposed
to digital asset technology and are not
technologically neutral. Third-party infor-
mation reporting addresses numerous
types of payments, regardless of whether
or not these payments are made online.
Section 6045(a) requires brokers to file
information returns, regardless of whether
or not the brokerage operates online. The
Infrastructure Act clarifies and expands
the rules regarding how digital assets
should be reported by brokers under sec-
tions 6045 and 6045A to improve IRS
and taxpayer access to gross proceeds and
adjusted basis information when taxpay-
ers dispose of digital assets in transactions
involving brokers. The final regulations
implement the Infrastructure Act and
require brokers to file information returns
that contain information similar to the
existing Form 1099-B. The Infrastructure
Act defines a digital asset broadly to mean
any digital representation of value which
is recorded on a cryptographically secured
distributed ledger or any similar technol-
ogy as specified by the Secretary; there-
fore, the final regulations that require this
additional reporting do not exceed statu-
tory authority.
Other comments raised a variety of
policy considerations including that the
proposed regulations could negatively
impact the growth of the digital asset
industry which offers a variety of ben-
efits. Information reporting assists tax-
payers receiving such reports to prepare
their Federal income tax returns and helps
the IRS determine whether such returns
are correct and complete. The legisla-
tion enacted by Congress confirming that
information reporting by digital asset
brokers is required represents a judgment
that tax administration concerns should
prevail over the policy considerations
raised by the comments. Furthermore,
information reporting from these regula-
tions may result in reduced costs for tax-
payers to monitor and track their digital
asset portfolios. These reduced costs and
the increased confidence potential digital
asset owners will gain as a result of bro-
kers being compliant with Federal tax laws
may increase the number of digital asset
owners and may increase existing owners’
digital asset trade volume. Digital asset
owners currently must closely monitor and
maintain records of all their transactions
to correctly report their tax liability at the
end of the year. This is a complicated and
time-consuming task that is prone to error.
Those potential digital asset owners who
have little experience with accounting for
digital assets may have been unwilling to
enter the market due to the high learning
and record maintenance costs. Eliminat-
ing these high entry costs will allow more
potential digital asset owners to enter
the market. In addition, these regulations
may ultimately mitigate some compliance
costs for brokers by providing clarity, cer-
tainty, and consistency on which types of
transactions and information are, and are
not, subject to reporting.
II. Final §§1.1001-7, 1.1012-1(h), and
1.1012-1(j)
A. Comments on the taxability of digital
asset-for-digital asset exchanges
A few comments questioned the
treatment, under the rules in proposed
§1.1001-7(b)(1) and (b)(1)(iii)(C), of an
exchange of one digital asset for another
digital asset, differing materially in kind
or in extent, as a taxable disposition. Such
treatment, a comment advised, would be
detrimental to taxpayers, because it would
ignore the virtual nature of digital assets
and volatile and drastic price swings in
this market and the potential adverse tax
consequences of having to recognize cap-
ital gains immediately but with allow-
able capital losses being limited in some
instances. Another comment stated the
proposed treatment would be administra-
tively impractical, because such a rule, the
comment argued, rests on the false pre-
sumption that an exchange of digital assets
is akin to an exchange of stocks/securities
and that, unlike those exchanges, taxpay-
ers have opportunities to engage in digi-
tal asset exchanges in a manner that may
go unnoticed by the IRS, and therefore,
untaxed. Another comment challenged the
proposed treatment, because digital assets,
the comment opined, are software that
do not encompass legal rights within the
meaning of Cottage Savings Association
v. Commissioner, 499 U.S. 554 (1991).
The final regulations do not adopt these
comments. The Treasury Department and
the IRS have determined that treating an
exchange of digital assets for digital assets
is a realization event, within the meaning
of section 1001(a) and existing prece-
dents. See, e.g., Cottage Savings Ass’n,
499 U.S. at 566 (“Under [the Court’s]
interpretation of [section] 1001(a), an
exchange of property gives rise to a real-
ization event so long as the exchanged
properties are ‘materially different’—that
is, so long as they embody legally distinct
entitlements”). Moreover, the Treasury
Department and the IRS have determined
that the treatment is consistent with long-
standing legal principles. Nor do the Trea-
sury Department and the IRS agree with
the comment’s assessment that digital
assets are only software that do not repre-
sent legally distinct entitlements. Accord-
ingly, final §1.1001-7(b)(1) and (b)(1)(iii)
(C) retain the rules in proposed §1.1001-
7(b)(1) and (b)(1)(iii)(C) treating such an
exchange as a realization event.
Alternatively, one comment criticized
treating an exchange of digital assets for
digital assets, differing materially either in
kind or in extent, as a taxable disposition,
without also providing guidance defin-
ing the factors necessary for determining
what are material differences. The absence
of such guidance, the comment believed,
would require taxpayers and brokers to
rely on decades-old case law to make such
determinations and would result in dis-
crepancies in information reporting for the
same types of transactions. Accordingly,
the comment recommended the final rules
include guidance on these factors. The
final regulations do not adopt this recom-
mendation. The Treasury Department and
the IRS have concluded that a determi-
nation of whether property is materially
different in kind or in extent is a factual
one, and, thus, beyond the scope of these
regulations.
B. Digital asset transaction costs
Proposed §1.1001-7(b)(2)(i) defined
the term digital asset transaction costs as
the amount in cash, or property (including
digital assets), to effect the disposition or
acquisition of a digital asset and includes
transaction fees, transfer taxes, and any
other commissions. By cross-reference
to proposed §1.1001-7(b)(2)(i), proposed
§1.1012-1(h)(2)(i) adopted the same
meaning for this term.

July 29, 2024 234 Bulletin No. 2024–31
Proposed §1.1001-7(b)(2)(ii) provided
rules for allocating digital asset transac-
tion costs to the disposition or acquisition
of a digital asset. Proposed §1.1001-7(b)
(2)(ii)(A) set forth the general rule for
allocating digital asset transaction costs
for purposes of determining the amount
realized. Proposed §1.1001-7(b)(2)(ii)(B)
included a special rule, in the case of dig-
ital assets received in exchange for other
digital assets that differ materially in kind
or extent, allocating one-half of the total
digital asset transaction costs paid by the
taxpayer to the disposition of the trans-
ferred digital asset for purposes of deter-
mining the amount realized.
Proposed §1.1012-1(h)(2)(ii) provided
rules for allocating digital asset transaction
costs to acquired digital assets. Proposed
§1.1012-1(h)(2)(ii)(A) included a general
rule requiring such costs to be allocated to
the basis of the digital assets received. As
a corollary to proposed §1.1001-7(b)(2)
(ii)(B), proposed §1.1012-1(h)(2)(ii)(B)
included a special rule in the case of dig-
ital assets received in exchange for other
digital assets that differ materially in kind
or extent, allocating one-half of the total
digital asset transaction costs paid by the
taxpayer to the acquisition of the received
digital assets for purposes of determining
the basis of those received digital assets.
1. Proposed Split Digital Asset
Transaction Cost Rule
The Treasury Department and the IRS
solicited comments on whether the pro-
posed split digital asset transaction cost
rule, as described in proposed §§1.1001-
7(b)(2)(ii)(B) and 1.1012-1(h)(2)(ii)(B),
would be administrable. The responses
to this inquiry varied widely. One com-
ment viewed the split digital asset trans-
action cost rule as administrable but only
if the digital assets used to pay the digital
asset transaction costs can be reasonably
valued and recognized at their acquisi-
tion cost. The final regulations do not
adopt this comment. The determination
of whether digital assets can be reason-
ably valued could be made differently by
different brokers and give rise to inconsis-
tent reporting. The sale or disposition of
digital assets giving rise to digital asset
transaction costs is subject to the rules of
final §§1.1001-7 and 1.1012-1(h), which
provide consistent rules for all digital
asset-for-digital asset transactions.
Another comment opined that the pro-
posed split digital asset transaction cost
rule would be administrable, but that its
application would pose an increased risk
of error and would not reflect current
industry practice. In contrast, several
comments expressed the view that the
proposed split digital asset transaction
cost rule, in fact, would not be adminis-
trable. These comments cited a variety of
reasons, including that the rule’s applica-
tion would be too burdensome, compli-
cated, or confusing for brokers and tax-
payers and would render oversimplified
allocations not reflective of the diverse
and complex nature of digital asset trans-
actions. Other comments opined that the
lack of administrability would derive, in
part, from the disparity of having a differ-
ent allocation rule for exchanged digital
assets than the allocation rules applied to
other asset classes, which, in their view,
would result in disparate tax treatment for
the latter type of costs. A few comments
advised that the administrability issues
would be caused in part, from the difficul-
ties the rule would create when later seek-
ing to reconcile transaction accounting
and transaction validation. One comment
shared the view that the proposed rule
would be difficult for decentralized dig-
ital asset trading platforms to administer
because it would require coordination of
multiple parties providing facilitative ser-
vices, and no such coordination currently
exists in the form of technological infra-
structure and standardized processes for
tracking and communicating cost-basis
information across these platforms.
Several comments noted that digital
asset transaction costs paid for effecting
an exchange of digital assets were gener-
ally low, with one comment opining that
such costs were generally less than 1 per-
cent of a transaction’s total value. These
comments often noted that the resulting
allocations from applying the proposed
split digital asset transaction cost rule
would result in no or minimal timing dif-
ferences in the associated income. Other
comments questioned whether the benefits
derived from having taxpayers and bro-
kers apply the proposed split digital asset
transaction cost rule would be commen-
surate with the additional administrative
burdens that would be placed on the par-
ties. A few comments shared the concern
that the proposed split digital asset trans-
action cost rule would impose additional
burdens and complexity, because such a
rule would require brokers to implement
or modify their existing accounting sys-
tems, develop new software, and retain
additional professional service providers
in order to comply. One comment also
noted the resulting allocations from the
proposed split digital asset transaction cost
rule would be inconsistent with the allo-
cations required by Generally Accepted
Accounting Principles and would produce
unnecessary book-tax differences. Some
comments expressed the concern that the
proposed split digital asset transaction
cost rule would produce arbitrary approx-
imations not necessarily reflecting the
economic reality of the particular trans-
actions. Additionally, one comment stated
that the proposed split digital asset trans-
action cost rule would pose litigation risks
for the IRS because such a rule would
override the parties’ contracted cost allo-
cations and thus impede their rights under
contract law. Another comment argued
that the proposed split digital asset trans-
action cost rule would impede the right of
taxpayers and brokers to determine which
party bears the economic burden of dig-
ital asset transaction costs. The Treasury
Department and the IRS have concluded
that the proposed split digital asset trans-
action cost rule would be overly burden-
some for taxpayers and brokers to admin-
ister. Accordingly, the final regulations do
not adopt the proposed rule.
2. Recommended Alternatives for the
Split Digital Asset Transaction Cost Rule
A few comments recommended the
adoption of a rule allocating digital asset
transaction costs based on the actual
amounts paid for the specific disposition
or acquisition, which some viewed as
promoting taxpayer equity. One comment
also recommended that this rule be cou-
pled with flexibility sufficient to accom-
modate different types of transactions
and technological solutions for ease of
administration. Several comments recom-
mended that the final regulations adopt
a discretionary rule allowing brokers to
decide how to allocate these costs (dis-

Bulletin No. 2024–31 235 July 29, 2024
cretionary allocation rule). Most of these
comments also recommended that brokers
be required to notify taxpayers of the cost
allocations and to apply the allocations
in a consistent manner. The cited ben-
efits for this recommendation included
that the resulting allocations would be
more consistent with the economics of
the actual fees charged by brokers, and
that the recommended rule would create
symmetry with the rules applied to trans-
actions involving other asset classes. In
addition to recommending adoption of a
discretionary allocation rule, a few com-
ments also recommended the inclusion
of safe harbors for brokers. In urging the
inclusion of safe harbors, one comment
suggested limiting their availability to
those brokers who maintain records docu-
menting the actual cost allocations. Of the
comments recommending a discretionary
allocation rule, most viewed such a rule
as comparable with the current rules for
allocating transactional costs incurred
in transactions with other asset classes.
One comment also recommended that the
discretionary allocation rule be extended
to cover taxpayers’ allocations of digital
asset transaction costs.
In addition to recommending a discre-
tionary allocation rule, many comments
also recommended that the final rules
provide an option, allowing brokers or
taxpayers to allocate digital asset trans-
action costs on a per-transaction basis.
This approach, in their view, was neces-
sary because of the diverse types of digi-
tal asset transactions. Comments claimed
that a “one-size-fits-all” approach would
not account for the inevitable variabil-
ity, and that the recommended approach
would promote fairness and administra-
bility. One comment recommended that
the final regulations include a de minimis
rule excluding digital asset transaction
costs under a specified threshold. Another
comment recommended that the split dig-
ital asset transaction cost rule be replaced
with rules requiring taxpayers to account
for digital asset transaction costs in accor-
dance with the principles of section 263(a)
of the Code, while permitting brokers to
allocate and report digital asset trans-
action costs either as a reduction in the
amount realized on the disposed digital
assets or as an additional amount paid for
the acquired digital assets so long as the
brokers’ reporting is consistently applied.
One comment recommended the inclusion
of a simplified reporting rule with less
emphasis on precise allocations of digital
asset transaction costs for smaller transac-
tions. The comment did not offer param-
eters for defining smaller transactions in
this context. The final regulations do not
adopt these recommendations. The Trea-
sury Department and the IRS have deter-
mined that the adoption of discretionary
allocation rules would place additional
administrative burdens on taxpayers, bro-
kers, and the IRS. Such rules would render
disparate treatment of such costs among
brokers and/or taxpayers with multiple
wallet or broker accounts, thus necessi-
tating the need for additional tracking and
coordination to avoid discrepancies. In
contrast, a uniform rule is less susceptible
to manipulation and avoids administrative
complexities.
3. Proposed 100 Percent Digital Asset
Transaction Cost Rule
The Treasury Department and the
IRS also solicited comments on whether
a rule requiring a 100 percent allocation
of digital asset transaction costs to the
disposed-of digital asset in an exchange
of one digital asset for a different digital
asset (100 percent digital asset transaction
cost rule) would be less burdensome.
Several comments agreed that the pro-
posed 100 percent digital asset transaction
cost rule would be less burdensome. Other
comments, however, did not share this
view for a variety of reasons. Some com-
ments stated that the resulting allocations
would not accurately reflect the economic
realities of the transactions, although one
comment expressed the view that these
allocations would more closely reflect eco-
nomic realities than the allocations result-
ing from the proposed split digital asset
transaction cost rule. One comment cited
the rule’s rigidity, which the comment
concluded would lead to increased poten-
tial disputes between the IRS and taxpay-
ers and expose both parties to additional
litigation and administrative burdens.
One comment cited the oversimplifying
effect the rule would have on diverse and
complex digital asset transactions, which
would, in the comment’s view, result in
inaccurate reporting of gains and losses
and other unintended tax consequences,
pose a potential disincentive for taxpay-
ers to engage in smaller transactions,
and disproportionately impact investors
engaged in certain investment strategies.
The Treasury Department and the IRS
do not agree that the resulting allocations
rendered by the 100 percent digital asset
transaction cost rule are inconsistent with
the economic realities of some digital
asset transactions. The 100 percent digital
asset transaction cost rule likely creates
minor timing differences, but such dif-
ferences do not outweigh the benefits, in
the form of clarity and certainty in deter-
mining the allocated costs. Further, the
Treasury Department and the IRS have
concluded that the 100 percent digital
asset transaction cost rule appropriately
balances concerns about administrability,
compliance burdens, manipulability, and
accuracy. Specifically, it alleviates the
burdens placed on brokers and taxpayers
from having to track the allocated costs
separately to ensure the amounts are accu-
rate. Additionally, the 100 percent digital
asset transaction cost rule, applied to both
unhosted wallets and accounts held in the
custody of a broker, is less burdensome
than the proposed split digital asset trans-
action cost rule and the recommended dis-
cretionary allocation rule.
One comment cited the current indus-
try consensus to treat an exchange of one
digital asset for another digital asset as
two separate transactions consisting of: a
sale of the disposed digital asset followed
by a purchase of the received digital asset.
Because of this industry consensus, the
comment recommended that these costs
be treated as selling expenses reducing
the amount realized on the disposed dig-
ital assets. The final regulations adopt
this comment. Final §1.1001-7(b)(2)
(ii) sets forth rules for allocating digital
asset transaction costs, as defined in final
§1.1001-7(b)(2)(i), by retaining the gen-
eral rule in proposed §1.1001-7(b)(2)(ii)
(A), and revising proposed §1.1001-7(b)
(2)(ii)(B). Final §1.1001-7(b)(2)(ii)(A)
replaces the split digital asset transaction
cost rule with the 100 percent digital asset
transaction cost rule. Under final §1.1001-
7(b)(2)(ii)(A), the total digital asset trans-
action costs, other than in the case of
certain cascading digital asset transaction
costs described in final §1.1001-7(b)(2)

July 29, 2024 236 Bulletin No. 2024–31
(ii)(B), are allocable to the disposed dig-
ital assets.
Final §1.1012-1(h)(2)(ii) also includes
corresponding rules to those in final
§1.1001-7(b)(2)(ii), for allocating digital
asset transaction costs, as defined in final
§1.1012-1(h)(2)(i). Final §1.1012-1(h)(2)
(ii) retains the general rule in proposed
§1.1012-1(h)(2)(ii)(A), and revises the
special rule in proposed §1.1012-1(h)(2)
(ii)(B), removing the split digital asset
transaction cost rule and allocating digi-
tal asset transaction costs paid to effect an
exchange of digital assets for other digi-
tal assets, differing materially in kind or
in extent, exclusively to the disposition
of digital assets. Under final §1.1012-
1(h)(2)(ii)(A), digital asset transaction
costs, other than those described in final
§1.1012-1(h)(2)(ii)(B) and (C), are allo-
cable to the digital assets received. Under
final §1.1012-1(h)(2)(ii)(B), if digital
asset transaction costs are paid to effect the
exchange of digital assets for other digital
assets, differing materially in kind or in
extent, then such costs are allocable exclu-
sively to the disposed digital assets. Final
§1.1012-1(h)(2)(ii) also adds special rules
in final §1.1012-1(h)(2)(ii)(C) for allocat-
ing certain cascading digital asset trans-
action costs, which are discussed in Part
II.B.4. of this Summary of Comments and
Explanation of Revisions. Final §1.1012-
1(h)(2)(ii) also states that any allocations
or specific assignments, other than those
in accordance with final §1.1012-1(h)(2)
(ii)(A) through (C), are disregarded.
Finally, final §1.1001-7(b)(2)(ii)(B)
adds a new special rule for cascading dig-
ital asset transaction costs. See Part II.B.4.
of this Summary of Comments and Expla-
nation of Revisions for a discussion of the
special rule in final §1.1001-7(b)(2)(ii)
(C) for allocating certain cascading digi-
tal asset transaction costs and the Treasury
Department’s and the IRS’s reasons for
adopting that rule.
4. Cascading Digital Asset Transaction
Costs
The Treasury Department and the IRS
solicited comments on whether cascad-
ing digital asset transaction costs, that is,
a digital asset transaction cost paid with
respect to the use of a digital asset to pay
for a digital asset transaction cost, should
be treated as digital asset transaction costs
associated with the original transaction.
A few comments agreed that cascad-
ing digital asset transaction costs should
be allocated to the original transaction.
Most comments, however, opposed allo-
cating such costs exclusively to the orig-
inal transaction, citing an array of rea-
sons. A few comments advised that such
an approach would improperly aggregate
economically distinct transactions and
would fail to accurately measure cost
basis and any gains or losses on the dis-
posed digital assets used to pay the sub-
sequent digital asset transaction costs.
These comments expressed the position
that the proposed approach would conflict
with existing tax jurisprudence and fail
to reflect economic reality. One comment
cited the oversimplifying effect of such
a rule, which would, in the comment’s
view, lead to inequitable tax treatment and
imposition of undue operational burdens.
A few comments cited the significant
operational burdens placed on both tax-
payers and brokers to implement such a
rule. One of these comments also cited the
complicating and potentially inequitable
effect such a rule would have on making
the allocation and tax calculations. Com-
ments recommended a variety of alterna-
tives for allocating cascading digital asset
transaction costs. Some comments recom-
mended that these costs be allocated to
each specific transaction giving rise to the
costs. In recommending this approach, one
comment noted that it would offer a more
nuanced and accurate reflection of the
financial realities of digital asset transac-
tions, thus ensuring “fairer” tax treatment,
“clearer” records, and “easier” audit trails,
while also acknowledging that it may
impose increased administrative burdens.
In addition to making the above recom-
mendation, one comment also offered an
alternative approach suggesting that such
costs be allocated proportionally based
on the significance of each transaction in
the cascading chain. This alternative rec-
ommendation, the comment noted, would
balance the needs for accurate cost report-
ing and accounting, and would reduce dis-
proportionately high tax burdens arising
from minor transaction costs, while the
comment acknowledged that it may be
complex to implement. Another comment
recommended allocating cascading digi-
tal asset transaction costs based on some
other factors, such as the complexity or
difficulty of each transaction and market
conditions. The final regulations do not
adopt these comments for allocating cas-
cading digital asset transaction costs. The
Treasury Department and the IRS have
determined that these costs should be
allocated in the same manner provided in
the general allocation rules with a limited
exception because this framework is less
burdensome, produces accurate tax deter-
minations, and reduces the potential for
errors and inconsistencies.
A few comments included a descrip-
tion of network fees, exchange fees, one
time access fees, and other service charges
and recommended that the final rules treat
these types of fees as cascading digital
asset transaction costs. Final §§1.1001-7
and 1.1012-1(h) do not adopt these rec-
ommendations. The Treasury Department
and the IRS have determined that whether
a type of transaction fee fits within the
definition of cascading digital asset trans-
action costs is a factual determination and
is beyond the scope of these regulations.
Final §1.1001-7(b)(2)(ii)(B) adopts a
modified special rule for allocating cer-
tain cascading digital asset transaction
costs for an exchange described in final
§1.1001-7(b)(1)(iii)(C) (an exchange of
digital assets for other digital assets dif-
fering materially in kind or in extent) and
for which digital assets acquired in the
exchange are withheld from digital assets
acquired in the original transaction to pay
the digital asset transaction costs to effect
the original transaction. For such trans-
actions, the total digital asset transaction
costs paid by the taxpayer, to effect the
original exchange and any dispositions
of the withheld digital assets, are alloca-
ble exclusively to the disposition of dig-
ital assets from the original exchange.
For all other transactions not otherwise
described in final §1.1001-7(b)(2)(ii)(B),
digital asset transaction costs are allocable
in accordance with the general allocation
rule set forth in final §1.1001-7(b)(2)(ii)
(A), that is, digital asset transaction costs
are allocable to the specific transaction
from which they arise.
Final §1.1012-1(h)(2)(ii) adds corre-
sponding special allocation rules for cer-
tain cascading digital asset transaction
costs paid to effect an exchange of one

Bulletin No. 2024–31 237 July 29, 2024
digital asset for another digital asset and
for which digital assets are withheld from
those received in the exchange to pay the
digital asset transaction costs to effect
such an exchange. For such transactions,
the total digital asset transaction costs
paid by the taxpayer to effect the exchange
and any dispositions of the withheld dig-
ital assets are allocable exclusively to the
digital assets disposed of in the original
exchange.
C. Basis
Final §1.1012-1(j) clarifies the scope of
the lot identification rules for digital assets
defined by cross-reference to §1.6045-
1(a)(19), except for digital assets the sale
of which is not reported by a broker as the
sale of a digital asset because the sale is a
sale of a dual classification asset described
in Part I.A.4.a. of this Summary of Com-
ments and Explanation of Revisions that is
cleared or settled on a limited-access reg-
ulated network subject to the coordination
rule in final §1.6045-1(c)(8)(iii), a dis-
position of contracts covered by section
1256(b) subject to the coordination rule
in final §1.6045-1(c)(8)(ii), or is a sale of
a dual classification asset that is an inter-
est in a money market fund subject to the
coordination rule in final §1.6045-1(c)(8)
(iv). Final §1.1012-1(j)(3) applies to dig-
ital assets held in the custody of a broker,
whereas the final rules in §1.1012-1(j)(1)
and (2) apply to digital assets not held in
the custody of a broker. Final §1.1012-1(j)
also defines the terms wallet, hosted wal-
let, unhosted wallet, and held in a wallet
by cross-reference to the definitions for
these terms in §1.6045-1(a)(25)(i) through
(iv).
1. Digital Assets Not Held in The
Custody of a Broker
For units not held in the custody of a
broker, such as in an unhosted wallet, pro-
posed §1.1012-1(j)(1) provided that if a
taxpayer sells, disposes of, or transfers less
than all the units of the same digital asset
held within a single wallet or account, the
units disposed of for purposes of deter-
mining basis and holding period are deter-
mined by a specific identification of the
units of the particular digital asset in the
wallet or account that the taxpayer intends
to sell, dispose of, or transfer. Under the
proposed regulations, for a taxpayer that
does not specifically identify the units to
be sold, disposed of, or transferred, the
units in the wallet or account disposed of
are determined in order of time from the
earliest purchase date of the units of that
same digital asset. For purposes of mak-
ing this determination, the dates the units
were transferred into the taxpayer’s wal-
let or account are disregarded. Proposed
§1.1012-1(j)(2) provided that a specific
identification of the units of a digital asset
sold, disposed of, or transferred is made if,
no later than the date and time of sale, dis-
position, or transfer, the taxpayer identi-
fies on its books and records the particular
units to be sold, disposed of, or transferred
by reference to any identifier, such as pur-
chase date and time or the purchase price
for the unit, that is sufficient to identify
the basis and holding period of the units
sold, disposed of, or transferred. A specific
identification could be made only if ade-
quate records are maintained for all units
of a specific digital asset held in a single
wallet or account to establish that a unit
is removed from the wallet or account for
purposes of subsequent transactions.
a. Methods and functionalities of
unhosted wallets
The Treasury Department and the IRS
solicited comments on whether there are
methods or functionalities that unhosted
wallets can provide to assist taxpayers
with the tracking of a digital asset upon
the transfer of some or all units between
custodial brokers and unhosted wallets.
In response, one comment stated that
unhosted wallets currently lack the func-
tionalities to allow taxpayers to make
specific identifications, as provided in
proposed §1.1012-1(j)(2), of their basis
and holding periods by the date and time
of a sale, disposition, or transfer from an
unhosted wallet even if taxpayers were to
employ transaction-aggregation tools. In
contrast, another comment advised that
existing transaction-aggregation tools
could provide the needed assistance for
tracking digital assets held in unhosted
wallets. The remaining comments sug-
gested that no methods or functionalities
are currently available or feasible that
would allow unhosted wallets to track
purchase dates, times, and/or the basis of
specific units. Noting that unhosted wal-
lets are open-source software created by
developers with limited resources, one
comment opined that any expectation that
such functionalities can be added to these
wallets before 2030 would be unreason-
able. Creating such functionalities, some
comments also stated, would require
the adoption of universal industry-wide
standards or methods for reliably track-
ing cost basis information across wallets
and transactions, yet existing technology
challenges and the complexity of some
transactions would serve as impediments
to their adoption. These comments also
stated that the addition of comprehensive
cost-basis tracking to unhosted wallets
would make such wallets prohibitively
risky for taxpayers, thus depriving them
of their privacy, security, and control ben-
efits.
The Treasury Department and the IRS
have determined that the final ordering
rules for digital assets not held in the
custody of a broker should strike a bal-
ance between the compliance burdens
placed on taxpayers and the necessity for
rules that will comply with the statutory
requirements of section 1012(c)(1) to
render accurate tax results. Accordingly,
notwithstanding existing technology lim-
itations, final §1.1012-1(j)(2) provides
that specific identification of the units of
a digital asset sold, disposed of, or trans-
ferred is made if, no later than the date
and time of the sale, disposition, or trans-
fer, the taxpayer identifies on its books
and records the particular units to be sold,
disposed of, or transferred by reference to
any identifier, such as purchase date and
time or the purchase price for the unit, that
is sufficient to identify the units sold, dis-
posed of, or transferred in order to deter-
mine the basis and holding period of such
units. Taxpayers can comply with these
rules by keeping books and records sepa-
rate from the data in the unhosted wallet.
A specific identification can be made only
if adequate records are maintained for the
unit of a specific digital asset not held in
the custody of a broker to establish that
a unit sold, disposed of, or transferred is
removed from the wallet. Taxpayers that
wish to simplify their record maintenance
tasks may adopt a standing rule in their
books and records that specifically iden-

July 29, 2024 238 Bulletin No. 2024–31
tifies a unit selected by an unhosted wal-
let for sale, disposition or transfer as the
unit sold, disposed of or transferred, if that
would be sufficient to establish which unit
is removed from the wallet.
b. Ordering rule for digital assets not held
in the custody of a broker
The Treasury Department and the IRS
also solicited comments on whether the
ordering rules of proposed §1.1012-1(j)
(1) and (2) for digital assets not held in
the custody of a broker should be applied
on a wallet-by-wallet basis, as proposed,
on a digital asset address-by-digital asset
address basis, or on some other basis. The
Treasury Department and the IRS received
a variety of responses to this inquiry.
A few comments recommended the
adoption of a universal or multi-wallet
rule for all digital assets held in unhosted
wallets, with one such comment opin-
ing that there is not a strong policy rea-
son for prohibiting this approach. The
final regulations do not adopt this rec-
ommendation because a wallet-by-wallet
approach is more consistent with the stat-
utory requirements in section 1012(c)(1),
which requires that regulations prescribe
an account-by-account approach for deter-
mining the basis of specified securities
that are sold, exchanged, or otherwise dis-
posed of.
One comment recommended that pro-
posed §1.1012-1(j)(1) be modified to
require taxpayers to determine the basis
of identical digital assets by averaging
the acquisition cost of each identical dig-
ital asset if it is acquired at separate times
during the same calendar day in execut-
ing a single trade order and the execut-
ing broker provides a single confirmation
that reports an aggregate total cost or an
average cost per share. The comment also
suggested that taxpayers be provided an
option to override the mandatory rule and
determine their basis by the actual cost
on a per-unit basis if the taxpayer notifies
the broker in writing of this intent by the
earlier of: the date of the sale of any of
such digital assets for which the taxpayer
received the confirmation or one year
after the date of the confirmation (with
the receiving broker having the option to
extend the one-year notification period, so
long as the extended period would end no
later than the date of sale of any of the dig-
ital assets). The comment noted a similar
rule exists for certain stock acquisitions,
citing §1.1012-1(c)(1)(ii). This comment
is not adopted. A key feature of the rules
provided in §1.1012-1(c)(1)(ii) is the
confirmation required by U.S. securities
laws to be sent from a security broker to
the customer shortly after the settlement
of a securities trade, which may report
the use of average basis for a single trade
order that is executed in multiple tranches.
Digital asset industry participants do not
necessarily issue equivalent confirmations
for digital asset purchases. As a result, a
customer would not know whether the
broker used average basis until the cus-
tomer received an information return from
the broker, even though the customer may
need to know whether the broker used
average basis sooner, such as when the
customer decides which units to dispose
of in a transaction.
One comment recommended that the
final rules adopt an address-based rule for
all digital assets held in unhosted wallets,
viewing this approach as posing less of
a compliance burden on taxpayers. The
statutory requirements of section 1012(c)
(1) require that in the case of the sale,
exchange, or other disposition of a spec-
ified security on or after the applicable
date for that security, the conventions pre-
scribed by the regulations must be applied
on an account-by-account basis. Accord-
ingly, the final regulations do not adopt
this recommendation.
A few comments expressed general
concerns about applying the proposed
ordering rules to digital assets held in
unhosted wallets, with one comment stat-
ing that the rules (1) would not align with
how taxpayers currently use unhosted wal-
lets; (2) would require complex tracing,
making accurate basis reporting infeasible
and unnecessarily complex; and (3) would
drive digital asset transactions to offshore
exchanges, recommending instead that the
ordering rules be applied on a per-trans-
action basis. Another comment recom-
mended a uniform wallet-based rule for
all digital assets held in unhosted wallets.
In contrast, a few comments viewed such
a rule as imposing administrative diffi-
culties because of technological differ-
ences in how different blockchains record
and track units, explaining that current
blockchains employ one of two types of
technology for this purpose: the unspent
transaction output (UTXO) model and the
account model. The UTXO model, com-
ments described, is similar to a collection
of transaction receipts or gift cards with
the inputs to a transaction being marked
as spent and any outputs remaining under
the control of the wallet after a transac-
tion’s execution as “unspent outputs”
or “UTXOs.” In contrast, comments
described the account model as aggre-
gating the taxpayer’s unspent units into a
cumulative balance. A relevant difference
between the two models, these comments
noted, is that units recorded/tracked by a
UTXO model are not divisible, whereas
those recorded/tracked by an account
model are divisible.
In light of these differences, a comment
recommended that the final rules include
separate ordering rules based on the type
of model used to record the particular
units. This comment recommended that
units of a digital asset recorded/tracked
with the UTXO model should be identified
by taxpayers using the specific identifica-
tion rule and applied on a wallet-by-wal-
let basis, defining wallet for this purpose
as a collection of logically related digital
asset addresses for which the wallet may
form transactions involving more than a
single address. This comment also recom-
mended that units recorded by the account
model should be identified by taxpayers
using the FIFO ordering rule and applied
on a digital asset address-by-digital asset
address basis. The final regulations do
not adopt these recommendations. As
explained later in this preamble, the final
rules adopt uniform basis identification
rules not tied to a specific technology. The
Treasury Department and the IRS have
concluded that the use of different rules
based on existing recording models would
limit the rules’ utility and render disparate
timing results of the associated gains or
losses. The final rules offer flexibility to
accommodate evolving recording models.
Moreover, as discussed earlier in this pre-
amble, the recommended address-based
rule for units recorded by the account
model would not conform to the statutory
requirements of section 1012(c)(1).
One comment assessed the benefits
and drawbacks of both the wallet-based
rule and the address-based rule. This

Bulletin No. 2024–31 239 July 29, 2024
comment viewed the wallet-based rule
as offering taxpayer simplicity and audit
efficiency but posing added complexity
and audit burdens in some instances, and
the address-based rule as providing more
granular tracking results, more accurately
reflecting a taxpayer’s intentions for a par-
ticular transaction but adding additional
administrative burdens and increasing the
risk of reporting errors. This comment
recommended that the final rules adopt a
discretionary rule allowing a taxpayer to
choose either rule based on the taxpayer’s
circumstances. The final regulations do
not adopt this recommendation because
the Treasury Department and the IRS have
determined that such a rule would increase
the possibility of manipulation and errors
in taxpayers’ calculations.
One comment rejected both a wal-
let-based rule and an address-based rule.
This comment stated that a wallet-based
rule would add complexity and admin-
istrative burdens to tracking basis and
would pose an increased risk for reporting
errors. This comment also stated that an
address-based rule would produce exces-
sive granular data, raise privacy concerns,
and present technical challenges. Instead,
this comment recommended two alterna-
tives, the first of which would be to apply
the ordering rules for unhosted wallets by
grouping digital asset addresses or wal-
lets, and the second of which would be to
allow taxpayers to identify or report only
transactions above a minimum balance
or transactional volume. The Treasury
Department and the IRS have determined
that both approaches would create undue
administrative burden. Additionally, the
Treasury Department and the IRS have
determined that the de minimis approach
would create an unnecessary disparity
between the ordering rules for digital
assets in unhosted wallets and the ordering
rules for digital assets held in the custody
of a broker as well as the ordering rules
applicable to other assets. Accordingly,
the final regulations do not adopt either of
these recommendations.
A few comments expressed concerns
that technology limitations would make
the proposed specific identification rule
unfeasible for all digital assets held in
unhosted wallets regardless of the model
used by the blockchain to record and
track units. Alternatively, a comment
recommended, if a uniform ordering rule
is desired for UTXO and account mod-
els, then the address-based rule should
be adopted but with an option allowing
taxpayers to identify related digital asset
addresses, subject to a burden-of-proof
showing of the relatedness. The comment
suggested that this alternative would be
easy to administer, provide a verifiable
audit trail and flexibility, and avoid poten-
tial tax reporting discrepancies. The final
regulations do not adopt these sugges-
tions. The Treasury Department and the
IRS have concluded that the suggested
approaches tied to current technology
would have limited usefulness since tech-
nology can be expected to change in the
future. Accordingly, the final regulations
adopt a uniform ordering rule for digital
assets not held in the custody of a broker
because this rule reduces the risk of errors
and simplifies taxpayers’ gain or loss cal-
culations.
One comment recommended, as an
alternative to the proposed ordering rules
for digital assets held in unhosted wallets,
that taxpayers be required to determine
their cost basis of a unit of a digital asset
by averaging their costs for all units of the
identical digital asset irrespective of their
holding periods. This comment suggested
that this approach would simplify deter-
mination of the basis of individual units
because it would eliminate the need to
track the acquisition details of each digi-
tal asset. This comment noted that certain
other countries employ variations of this
approach, suggesting, for example, that
its adoption would align future informa-
tion exchanges with other countries under
the CARF. The final regulations do not
adopt this recommendation because it is
inconsistent with sections 1222 and 1223
of the Code, which require taxpayers to
determine whether gains or losses with
respect disposed digital assets are long
term or short term, within the meaning
of section 1222, based on the taxpayer’s
holding period for the disposed asset as
determined under section 1223.
One comment recommended that the
proposed ordering rules be revised to
adopt the meaning of “substantially sim-
ilar or related” as the term is used in IRS
Tax Publication 550, Investment Income
and Expenses. The final regulations do not
adopt this recommendation. The Treasury
Department and the IRS have determined
that this term refers to special rules not
covered by these regulations. Accord-
ingly, the term would not serve as a rel-
evant benchmark by which to apply the
ordering rules for digital assets held in
unhosted wallets.
A comment requested guidance on
how taxpayers should comply with the
proposed specific identification rules for
digital assets held in unhosted wallets
when using tracking software that neither
provides a way to mark the units sold nor
incorporates these sold units into gain and
loss calculations. The final regulations
do not adopt this comment. The Treasury
Department and the IRS have determined
that additional guidance on how taxpay-
ers maintain their books and records to
meet their substantiation obligations is
not needed and is beyond the scope of
this project. The specific identification
rules should not apply differently simply
because currently available basis tracking
software may not have the ability to mark
specific units as sold or otherwise track
basis in a manner consistent with the spe-
cific identification rules.
The Treasury Department and the IRS
have determined that the final regulations
should include a uniform wallet-based
ordering rule for all digital assets held
in unhosted wallets rather than separate
rules based on existing technological dif-
ferences. The Treasury Department and
the IRS have determined that such a rule
best facilitates accurate tax determina-
tions. Moreover, such a rule satisfies the
statutory requirements of section 1012(c)
(1), which requires that the conventions
prescribed by regulations be applied on
an account-by-account basis in the case
of a sale, exchange, or other disposition of
a specified security, on or after the appli-
cable date as defined in section 6045(g).
Additionally, to conform with this deci-
sion, final §1.1012-1(j)(1) and (2) retain
the term held in a wallet as defined in final
§1.6045-1(a)(25), but no longer incorpo-
rate the term “account” to avoid confusion
with industry usage of the term to refer to
the account-based models used by block-
chains to record and track units of a digital
asset. The Treasury Department and the
IRS have determined that the term wallet,
as defined by §1.6045-1(a)(25), is suffi-
ciently broad to incorporate both wallets

July 29, 2024 240 Bulletin No. 2024–31
and accounts and the removal of the latter
term avoids confusion.
Finally, as discussed in Part VII. of this
Summary of Comments and Explanation
of Revisions, the final regulations under
§1.6045-1 are applicable beginning Jan-
uary 1, 2025. Accordingly, digital assets
constitute specified securities and are sub-
ject to these requirements beginning Jan-
uary 1, 2025.
2. Digital Assets Held in the Custody of
Brokers
For taxpayers that leave their digital
assets in the custody of a broker, unless
the taxpayer provides the broker with an
adequate identification of the units sold,
disposed of, or transferred, proposed
§1.1012-1(j)(3)(i) provided that the units
disposed of for purposes of determin-
ing the basis and holding period of such
units is determined in order of time from
the earliest units of that same digital
asset acquired in the taxpayer’s account
with the broker. Because brokers do not
have the purchase date information about
units purchased outside the broker’s cus-
tody and transferred into the taxpayer’s
account, proposed §1.6045-1 instead
required brokers to treat units of a partic-
ular digital asset that are transferred into
the taxpayer’s account as purchased as of
the date and time of the transfer (rather
than as of the date actually acquired as
proposed §1.1012-1(j)(3)(i) requires tax-
payers to do). The rule for units that are
transferred into the custody of a broker,
the comments received in response to this
rule, and the final decisions made after
considering those comments are discussed
in Part I.E.3.b. of this Summary of Com-
ments and Explanation of Revisions. See
also, final §§1.1012-1(j)(3)(i) and 1.6045-
1(d)(2)(ii)(B). Additionally, see Part
I.E.3.b. of this Summary of Comments and
Explanation of Revisions, for a discussion
of final §1.1012-1(j)(3)(ii) for how and
when a taxpayer can make an adequate
identification of the units sold, disposed
of, or transferred when the taxpayer leaves
multiple units of a type of digital asset in
the custody of a broker.
3. Transitional Guidance
The IRS published Virtual Currency
FAQs
5
explaining how longstanding Fed-
eral tax principles apply to virtual cur-
rency held by taxpayers as capital assets.
For example, FAQs 39-40 explain that
a taxpayer may specifically identify the
units of virtual currency deemed to be
sold, exchanged, or otherwise disposed
of either by referencing any identifier,
such as the private key, public key, or by
records showing the transaction infor-
mation for units of virtual currency held
in a single account, wallet, or address.
The information required by these FAQs
include: (1) the date and time each unit
was acquired; (2) the taxpayer’s basis
and the fair market value of each unit at
the time acquired; (3) the date and time
each unit was sold, exchanged, or other-
wise disposed of; and (4) the fair market
value of each unit when sold, exchanged,
or disposed of, and the amount of money
or the value of property received for each
unit. FAQ 41 further explains that if a
taxpayer does not identify specific units
of virtual currency, the units are deemed
to have been sold, exchanged, or other-
wise disposed of in chronological order
beginning with the earliest unit of the
virtual currency a taxpayer purchased or
acquired, that is, on a FIFO basis.
Comments expressed concern that
the proposed basis identification rules of
proposed §1.1012-1(j) would apply dif-
ferently from those in FAQs 39-41. Com-
ments also noted that many taxpayers
have interpreted FAQs 39-41 as permit-
ting, or at least not prohibiting, taxpay-
ers from specifically identifying units or
applying the FIFO rule on a “universal
or multi-wallet” basis. The comments
generally described this approach as one
in which a taxpayer holds units of a dig-
ital asset in a combination of unhosted
wallets or exchange accounts and sells,
disposes of, or transfers units from one
wallet or account, but either specifically
identifies units or applies the FIFO rule
to effectively treat the units sold, dis-
posed of, or transferred as coming from a
different wallet or account. For example,
assume D holds 50 units of digital asset
GH in D’s unhosted wallet, each of which
was acquired on March 1, Year 1, and has
a basis of $5. D also acquires 50 units
of digital asset GH through Exchange
FYZ, each of which was acquired on July
1, Year 1, and has a basis of $1. Using
the universal or multi-wallet approach,
D directs Exchange FYZ on December
1, Year 1, to sell 20 units of digital asset
GH on D’s behalf but specifically identi-
fies the 20 units sold as 20 units coming
from D’s unhosted wallet for purposes
of determining the basis. As a result of
the sale, D holds 30 units of GH with
Exchange FYZ and 50 units of GH in
D’s unhosted wallet. Of those 80 units,
D treats 30 units as having a basis of $1
and 50 units as having a basis of $5, with-
out regard to whether the units were pur-
chased through Exchange FYZ or in D’s
unhosted wallet. Whatever the merits of
the comments’ points, regulations imple-
menting section 1012(c)(1) are required
to adopt an account-by-account method
for determining basis and the universal or
multi-wallet approach does not conform
with the statutory requirements. See Part
II.C.1.b. of this Summary of Comments
and Explanation of Revisions.
These comments also expressed con-
cerns that taxpayers, who seek to transi-
tion either prospectively or retroactively
from the “universal or multi-wallet”
approach to the proposed basis identifi-
cation rules would experience, perhaps
unknowingly, ongoing discrepancies.
Some of the discrepancies, in their view,
may be exacerbated by the limitations of
current basis-tracking software. A com-
ment also noted that taxpayers often have
multiple numbers of different tokens and
multiple numbers of different blockchains,
both of which further enhance the signif-
icant complexity of basis tracking. These
complexities, in the comment’s view,
make it impractical for taxpayers to spe-
cifically identify digital assets as provided
in proposed §1.1012-1(j)(1) or to apply
the default identification rule in proposed
§1.1012-1(j)(2).
A comment requested that taxpayers
who previously made basis identifications
5
The IRS first published the Virtual Currency FAQs on October 9, 2019. Since that time, the FAQs have been revised and renumbered. References to FAQ numbers in this preamble are to the
numbering in the version of the FAQs as of June 6, 2024.

Bulletin No. 2024–31 241 July 29, 2024
or applied the FIFO rule on a universal or
multi-wallet basis consistently with FAQs
39-41 be exempt from the basis identifica-
tion rules of proposed §1.1012-1(j). The
final regulations do not adopt the request
to exempt previously acquired digital
assets from the proposed basis identifica-
tion rules because such a rule would cre-
ate significant complexity and confusion
if taxpayers used different methods for
determining basis for existing and newly
acquired digital assets. However, see this
Part II.C.3. of this Summary of Comments
and Explanation of Revisions for a discus-
sion of transitional guidance with respect
to these issues.
A few comments requested addi-
tional rules and examples, explaining
how taxpayers should transition from
the universal or multi-wallet approach to
specifically identify digital assets as pro-
vided in final §1.1012-1(j)(1) or apply
the default identification rule in final
§1.1012-1(j)(2). The Treasury Depart-
ment and the IRS have determined that
any basis adjustments necessary to com-
ply with these final rules is a factual
determination. However, to promote
taxpayer readiness to comply with the
rules in final §1.1012-1(j) beginning in
2025, Revenue Procedure 2024-28 is
being issued contemporaneously with
these final regulations, and will be pub-
lished in the Internal Revenue Bulletin,
to provide transitional relief. The tran-
sitional relief will take into account that
a transition from the universal approach
to the specific identification or default
identification rules involves evaluating
a taxpayer’s remaining digital assets and
pool of basis originally calculated under
the universal approach and may result,
unknowingly, in ongoing discrepancies
that could be exacerbated by the limita-
tions of currently available basis tracking
software. This relief applies to transac-
tions that occur on or after January 1,
2025. Additionally, the IRS will con-
tinue to work closely with taxpayers and
other stakeholders to ensure the smooth
implementation of final §1.1012-1(j),
including the mitigation of penalties in
the early stages of implementation for all
but particularly egregious cases. Accord-
ingly, final §1.1012-1(j) will apply to all
acquisitions and dispositions of digital
assets on or after January 1, 2025.
D. Comments requesting substantive
guidance on specific types of digital asset
transactions
A few comments requested that the
final rules address the tax treatment of
specific transactions such as wrapping,
burning, liquidity transactions, splitting
or combining digital assets into smaller or
larger units, and the character and source
of revenue-sharing agreements. These
regulations provide generally applicable
gross proceeds and basis determination
rules for digital assets and therefore are
not the proper forum to address those
issues. Therefore, the final regulations
do not adopt these recommendations. See
Part I.C.2. of this Summary of Comments
and Explanation of Revisions for a further
discussion of reporting on such transac-
tions.
E. Examples in proposed §1.1001-7(b)(5)
A few comments recommended revi-
sions to certain examples included in
proposed §1.1001-7(b)(5). One comment
stated that the transaction described in
proposed §1.1001-7(b)(5)(iii) (Example
3) is not realistic and should be revised.
Final §1.1001-7(b)(5)(iii) includes a mod-
ified example but does not incorporate the
comment’s recommendation. The Trea-
sury Department and the IRS have deter-
mined that the example in final §1.1001-
7(b)(5)(iii) illustrates the rules necessary
to assist taxpayers in determining amounts
realized and that the comment’s recom-
mended revisions would limit its useful-
ness. Another comment recommended
that proposed §1.1001-7(b)(5)(i) (Exam-
ple 1) be revised to address a transaction
in which the digital assets are recorded on
the blockchain using the UTXO model.
The final regulations do not adopt this rec-
ommendation. The Treasury Department
and the IRS have determined that the rec-
ommended revisions are not necessary to
highlight the general rules set forth herein.
F. Miscellaneous comments relating to
fair market value, amount realized, and
basis
A comment also recommended that the
proposed rules be coordinated with other
Federal agencies to harmonize the report-
ing and tax treatment of digital assets
across different jurisdictions and markets
and should include a uniform standard for
determining the fair market value, amount
realized, and basis of digital assets, and
should include a requirement that brokers
report the same information to the IRS
and to the customers on Form 1099-B.
Such a rule, the comment believed, could
be aligned with the requirements of other
Federal agencies, which would simplify
valuations and reduce the risk of errors
or disputes. The final regulations do not
adopt this recommendation. These regula-
tions concern Federal tax laws under the
Internal Revenue Code only. No inference
is intended with respect to any other legal
regime, including the Federal securities
laws and the Commodity Exchange Act,
which are outside the scope of these reg-
ulations.
A comment advised that the proposed
rules would produce results that would
not reflect economic reality or the pref-
erences of taxpayers, who may already
employ different methods and standards
for tracking their transactions and calcu-
lating their gains and losses. The comment
recommended that the final rules adopt
rules consistent with existing Federal tax
principles and guidance, such as Notice
2014-21, or allow more flexibility and
choice for taxpayers to use any reasonable
standards consistent with their records and
tax reporting. The final regulations do not
adopt these recommendations. The Trea-
sury Department and the IRS have deter-
mined that providing uniform rules will
ease the administrative burdens placed on
taxpayers, brokers, and the IRS. A com-
ment expressed concerns that applying
the cost allocation rules would require
meticulous record-keeping on the part
of taxpayers, which may be challenging
for some taxpayers, particularly those
engaged in high-frequency trading or
small-scale transactions. These issues are
also applicable to taxpayers who engage
in high-frequency trading of traditional
securities. The Treasury Department and
the IRS have determined that special rules
are not warranted for digital assets.
A few comments suggested that the
use of digital assets to pay for transac-
tion costs or certain other services should
not be taxable. These comments are not
adopted because the Treasury Department

July 29, 2024 242 Bulletin No. 2024–31
and the IRS have determined that treating
an exchange of digital assets for services
is a realization event, within the meaning
of section 1001(a) and existing prece-
dents. See Part II.A. of this Summary of
Comments and Explanation of Revisions
for a further discussion of digital asset dis-
positions as realization events.
III. Final §1.6045-4
In addition to reporting on dispositions
by real estate buyers of digital assets in
exchange for real estate, the proposed
regulations required real estate report-
ing persons to report on digital assets
received by sellers of real estate in real
estate transactions. One comment ques-
tioned the authority behind this change
because the Infrastructure Act did not
specifically reference reporting of digital
asset payments made in real estate trans-
actions. Section 6045(a) provides that a
broker must make a return showing “such
details regarding gross proceeds and such
other information as the Secretary may
by forms or regulations require.” Addi-
tionally, section 6045(e)(2) provides
that “[a]ny person treated as a real estate
reporting person. . . shall be treated as a
broker.” Accordingly, the statute gives
the Secretary explicit authority to require
real estate reporting persons to report on
digital asset payments made in real estate
transactions.
As discussed in Part I.B.4. of this Sum-
mary of Comments and Explanation of
Revisions, one comment raised the con-
cern that in some real estate transactions,
direct (peer to peer) payments of digital
assets from buyers to sellers may be paid
outside of closing and not reflected in
the real estate contract for sale. In such
transactions, the comment stated that the
real estate reporting person would not
ordinarily know that the buyer used dig-
ital assets to make payment. Instead, the
comment suggested that the buyer (or
buyer’s representative) would be closer to
the details of the transaction and should,
therefore, be the reporting party. Section
6045(e) provides authority for just one
person to report on the real estate trans-
action. Accordingly, the final regulations
do not make any changes to require a sec-
ond person to report on the digital asset
payment. The Treasury Department and
the IRS, however, have determined that
it is not appropriate to require reporting
by real estate reporting persons on dig-
ital asset payments received by the real
estate seller when the real estate report-
ing person does not know, or would not
ordinarily know, that digital assets were
used by the real estate buyer to make pay-
ment. Accordingly, these regulations add
final §1.6045-4(h)(3), which limits the
real estate reporting person’s obligation to
report on digital asset payments received
by the seller of real estate unless the real
estate reporting person has actual knowl-
edge, or ordinarily would know, that dig-
ital assets were received by the real estate
seller. Additionally, the regulations mod-
ify Example 10 at final §1.6045-4(r)(10)
to reflect this change. See Part I.B.4. of
this Summary of Comments and Explana-
tion of Revisions, for a discussion of the
application of this same standard for real
estate reporting persons reporting on the
buyer of real estate under final §1.6045-1.
Another comment recommended
against requiring reporting of digi-
tal asset addresses and transaction IDs
because that information is not relevant
to the seller’s gross proceeds or basis.
Although the requirement to report dig-
ital asset addresses and transaction IDs
was included in the proposed regula-
tions to determine if valuations of digital
assets and real estate were done properly,
the final regulations have removed the
requirement. See Part I.D.1. of this Sum-
mary of Comments and Explanation of
Revisions for a discussion of the rationale
behind removing the requirement to report
this information under final §1.6045-1.
One comment raised the concern that
reporting on digital assets would be bur-
densome for real estate reporting per-
sons because real estate transactions are
stand-alone transactions and not ongo-
ing account relationships. This comment
stated that valuations would be partic-
ularly burdensome in installment sale
transactions, where the real estate report-
ing person would need to report the fair
market value as of the time of closing of
digital assets to be paid later. Instead, this
comment recommended that a new check
box be added to Form 1099-S to indicate
that digital assets were received by the
transferor instead of reporting the gross
proceeds from the digital asset transfer.
The Treasury Department and the IRS
considered these comments. The final
regulations do not adopt this suggestion,
however, for several reasons. First, the
information reporting rules help to reduce
the overall income tax gap because they
provide information necessary for taxpay-
ers to prepare their Federal income tax
returns and reduce the number of inad-
vertent errors or intentional misstatements
shown on those returns. Information
reporting also provides information to the
IRS that identifies taxpayers who have
engaged in these digital asset transactions
and may not be reporting their income
appropriately. The fair market value of
digital assets used to purchase property
(including real property) is generally
equal to the value of the property. The real
estate reporting person has several ways it
can ascertain the value of real estate. For
example, the agreed upon price of the real
estate could be detailed in the contract of
sale. To the extent this agreed upon price
influences, for example, the commissions
due to real estate agents or the taxes due
at closing, this amount may already need
to be shared with the real estate reporting
person. Additionally, depending on the
digital assets, the valuation could be rel-
atively easy to determine if, for example,
the digital asset is one that tracks the U.S.
dollar or is otherwise widely traded. Also,
the real estate reporting person could also
ask both the buyer and seller whether they
had agreed upon the value of the digital
assets paid. Finally, if all these avenues to
determine the value of digital assets paid
are not successful, the regulations permit
the real estate reporting person to report
the value as undeterminable.
One comment requested that the exam-
ples involving closing attorneys that are
real estate reporting persons be revised to
refer to closing agents instead to reflect
the more common and more general term.
This comment has been adopted.
Finally, unrelated to transactions
involving digital assets, the proposed reg-
ulations updated the rules to reflect the
section 6045(e)(5) exception from report-
ing for gross income up to $250,000 of
gain on the sale or exchange of a principal
residence if certain conditions are met. As
part of this update, proposed §1.6045-4(b)
(1) modified an illustration included in the
body of the rule of a transaction that is

Bulletin No. 2024–31 243 July 29, 2024
treated as a sale or exchange even though
it may not be currently taxable so that it
specifically references this exception (that
is, a sale of a principal residence giving
rise to gain up to $250,000 or $500,000 in
the case of married persons filing jointly)
to the reporting rule. One comment ques-
tioned whether the example should reflect
the actual dollars in the reporting excep-
tion rule or if the example should, instead,
reference the “prescribed amount”
because the actual prescribed amounts
could change in the future. The final reg-
ulations do not adopt this change because
referencing “prescribed amounts” could
be confusing, and the amounts referenced
are merely included in an example and not
in any operative rule.
IV. Final §§1.6045A-1 and 1.6045B-1
The proposed regulations did not pro-
vide guidance or otherwise implement the
changes made by the Infrastructure Act
that require transfer statement reporting
in the case of digital asset transfers under
section 6045A(a) or broker information
reporting under section 6045A(d) for
digital asset transfers that are not sales or
are not transfers to accounts maintained
by persons that the transferring broker
knows or has reason to know are also bro-
kers. Additionally, it was unclear whether
brokers had systems in place to provide
transfer statements under section 6045A
or whether issuers had procedures in place
to report information about certain orga-
nizational actions (like stock splits, merg-
ers, or acquisitions) that affect basis under
section 6045B for assets that qualify both
as digital assets and specified securities
under the existing rules. Accordingly, the
proposed regulations provided that any
specified security of a type that would
have been a covered security under sec-
tion 6045A pursuant to the pre-2024 final
regulations under section 6045 (that is,
described in §1.6045-1(a)(14)(i) through
(iv) of the pre-2024 final regulations)
that is also a digital asset is exempt from
transfer statement reporting under sec-
tion 6045A and similarly proposed to
exempt issuers from reporting under sec-
tion 6045B on any such specified security
that is also a digital asset. The proposed
regulations also provided penalty relief
to transferors and issuers that voluntarily
provide these transfer statements and
issuer reporting statements.
One comment raised the concern that
the decision to delay transfer statements
for digital assets under section 6045A
will mean that brokers will not receive the
important information regarding basis that
would be included on those transfer state-
ments. Another comment recommended
that the section 6045A rules remain appli-
cable to transfers of securities that are also
digital assets.
The Treasury Department and the IRS
have determined that specified securities
that are digital assets should generally
be exempt from the section 6045A trans-
fer reporting requirements because it
is unclear at this point how digital asset
brokers would be able to provide the nec-
essary information to make basis report-
ing work efficiently for digital assets that
are broadly tradeable. While brokers may
more readily be able to provide transfer
statements for tokenized securities, the
transfer of such assets on a distributed
ledger may not necessarily accommo-
date the provision of transfer statements.
Brokers who wish voluntarily to provide
transfer statements for digital assets may
do so and will not be subject to penalties
for failure to furnish the information cor-
rectly under section 6722. Accordingly,
the final regulations do not make any
broadly applicable changes to the regula-
tions under section 6045A in response to
these comments. The final regulations do,
however, revise the language in proposed
§1.6045A-1(a)(1)(vi) to limit the transfer
statement exemption only to those speci-
fied securities, the sale of which would be
reportable as a digital asset after the appli-
cation of the coordination rules in final
§1.6045-1(c)(8). See Part I.A.4.a. of this
Summary of Comments and Explanation
of Revisions, for a discussion of the new
coordination rule in final §1.6045-1(c)(8)
(iii) treating sales of dual classification
assets that are digital assets solely because
the sale of such assets are cleared or set-
tled on a limited-access regulated network
as sales of securities or commodities and
not sales of digital assets. Additionally,
until the Treasury Department and the
IRS determine the information that will
be required on transfer statements with
respect to digital assets, final §1.6045A-
1(a)(1)(vi) limits the penalty relief for
voluntarily provided transfer statements
to those dual classification assets that are
tokenized securities under final §1.6045-
1(c)(8)(i)(D). See Part I.A.4.a. of this
Summary of Comments and Explanation
of Revisions, for a discussion of the new
coordination rule in final §1.6045-1(c)(8)
(i)(D) regarding tokenized securities.
One comment agreed with the proposal
to exempt issuers from reporting under
section 6045B on any specified security
that is also a digital asset and recom-
mended delaying the application of sec-
tion 6045B until after the IRS provides
guidance under substantive tax law on
which corporate actions affect the basis in
specified securities that are digital assets.
Another comment recommended against
delaying issuer statements under section
6045B because that will hinder the abil-
ity of brokers to make basis adjustments
related to covered digital assets. Another
comment recommended against exempt-
ing issuers from reporting on any security
that is also a digital asset because toke-
nized funds, which are 1940 Act Funds,
are already subject to section 6045B
reporting, and this reporting provides
critical information to institutional inves-
tors that are otherwise exempt from Form
1099 reporting if they are corporations.
The Treasury Department and the IRS
agree that issuers that are already pro-
viding issuer statements should continue
to do so. The ability of an issuer of tra-
ditional securities to provide information
about organizational events should not be
affected by whether those securities are
sold on a cryptographically secured dis-
tributed ledger, because issuers may pro-
vide the information by posting it on their
website. Accordingly, final §1.6045B-1(a)
(6) provides that an issuer of specified
securities that was subject to the issuer
statement requirements before the appli-
cation of these final regulations (legacy
specified securities) should continue to be
subject to those rules notwithstanding that
such specified securities are also digital
assets. Additionally, final §1.6045B-1(a)
(6) provides that an issuer of specified
securities that are digital assets and not
legacy specified securities is permitted, but
not required, to file an issuer return under
section 6045B. An issuer that chooses to
provide this reporting and furnish state-
ments for a specified security under sec-

July 29, 2024 244 Bulletin No. 2024–31
tion 6045B will not be subject to penalties
under section 6721 or 6722 for failure to
report or furnish this information cor-
rectly. Finally, the final regulations do not
make any changes to address the comment
requesting guidance under substantive tax
law on which corporate actions affect the
basis in specified securities that are digi-
tal assets because the comment addresses
questions of substantive tax law that are
outside the scope of these regulations.
V. Final §1.6050W-1
Prior to the issuance of the proposed
regulations, several digital asset brokers
reported sales of digital assets under sec-
tion 6050W. The proposed regulations did
not take a position regarding the appro-
priateness of treating payments of cash
for digital assets, or payments of one dig-
ital asset in exchange for a different dig-
ital asset as reportable payments under
the 2010 final regulations under section
6050W. Instead, to the extent these trans-
actions would be reportable under the
proposed section 6045 broker reporting
rules, the proposed regulations added a
tie-breaker rule that generally provided
that section 6045 (and not section 6050W)
would apply to these transactions. Thus,
when a payor makes a payment using
digital assets as part of a third party net-
work transaction involving the exchange
of the payor’s digital assets for goods or
services and that payment constitutes a
sale of digital assets by the payor under
the broker reporting rules under section
6045, the amount paid by the payee in set-
tlement of that exchange would be subject
to the broker reporting rules (including
any exemptions from these rules) and not
section 6050W. Additionally, when goods
or services provided by a payee are dig-
ital assets, and the exchange is a sale of
digital assets by the payee under the bro-
ker reporting rules under section 6045,
the payment to the payee in settlement of
that exchange would be reportable under
the broker reporting rules (including any
exemptions from these rules) and not sec-
tion 6050W.
As discussed in Part I.B.1. of this Sum-
mary of Comments and Explanation of
Revisions, the final regulations reserve
and do not finalize rules on the treatment
of decentralized exchanges and certain
unhosted digital asset wallet providers as
brokers. Because these entities will not be
subject to reporting on the sales of digital
assets as brokers under final §1.6045-1,
the final regulations have been revised to
apply the tie-breaker rule only to payors
that are brokers under final §1.6045-1(a)
(1) that effected the sale of such digital
assets. Accordingly, the tie-breaker rule
will not apply to decentralized exchanges,
unhosted digital asset wallet providers, or
any other industry participant not subject
to these final regulations to the extent they
are already subject to reporting under sec-
tion 6050W.
The proposed regulations also included
an example at proposed §1.6050W-1(c)
(5)(ii)(C) (Example 3) illustrating the tie-
breaker rule in the case of a third party
network transaction undertaken by CRX,
a third party settlement organization.
In the example, CRX effects a payment
using an NFT buyer’s digital assets that
have been deposited with CRX to a par-
ticipating payee (J) that is a seller of NFTs
representing digital artwork. The NFTs
that J sells have also been deposited with
CRX. Although the payment from buyer
to J would have otherwise been reportable
under section 6050W because the transac-
tion constitutes the settlement of a report-
able payment transaction by CRX, the
example concludes that because it is also
a sale under proposed §1.6045-1(a)(9)
(ii), CRX must file an information return
under section 6045 and not under section
6050W.
A comment recommended against
treating all NFTs as goods and services
but instead recommended a case by case
determination be made based on the
underlying asset or rights referenced by
the NFT. To address this comment, the
final regulations revise the analysis in
§1.6050W-1(c)(5)(ii)(C) (Example 3) of
the proposed regulations, redesignated as
final §1.6050W-1(c)(5)(ii)(B) (Example
2) in the final regulations, to make it clear
that the example applies only to NFTs
that represent goods or services such as
the NFT in the example, which represents
unique digital artwork. The comment also
asserted that NFTs representing digital art-
work cannot be a good or a service because
it cannot be seen, weighed, measured, felt,
touched, or otherwise perceived by the
senses. The Treasury Department and the
IRS have determined that the definition of
a good or a service should not be limited
in the way suggested by this comment and
the final regulations do not do so. One
comment requested that the final regu-
lations provide a bright line test or other
safe harbor guidance for classifying NFTs
that represent more than one asset or right
as a good or a service. The final regula-
tions do not adopt this comment because
it involves determinations about NFTs
that are outside the scope of these regu-
lations. Another comment requested that
the final regulations under section 6050W
be revised to define goods or services and
what it means to guarantee payments,
which are components of the definition of
a third party payment network transaction
subject to reporting under section 6050W.
The final regulations do not adopt this
comment because it addresses definitions
under section 6050W and is thus outside
the scope of these regulations.
The proposed regulations also clarified
that in the case of a third party settlement
organization that has the contractual obli-
gation to make payments to participat-
ing payees, a payment in settlement of a
reportable payment transaction includes
the submission of an instruction to a pur-
chaser to transfer funds directly to the
account of the participating payee for pur-
poses of settling the reportable payment
transaction. One comment suggested that
a settlement organization that provides
instructions to a purchaser to transfer
funds should not be treated as making
or guaranteeing payment. The Treasury
Department and the IRS do not agree with
this suggestion and no changes are made
to this clarification. Section 6050W(b)
(3) provides that a third party settlement
organization is a type of payment settle-
ment entity that is a central organization
which has the contractual obligation to
make payment to participating payees in
settlement of third party network trans-
actions. The section 6050W regulations
already provided in §1.6050W-1(a)(2)
that a payment settlement entity is mak-
ing a payment in settlement of a report-
able transaction if the payment settlement
entity submits the instruction to transfer
funds to the account of the participating
payee. The final regulations merely clar-
ify these instructions may be made to the
purchaser. They do not affect any of the

Bulletin No. 2024–31 245 July 29, 2024
other factors that make a third party a third
party settlement organization, such as the
existence of an agreement or arrangement
that, among other things, guarantees per-
sons providing goods or services pursuant
to such agreement or arrangement that
such persons will be paid for providing
those goods and services, as provided in
section 6050W(d)(3)(C).
Another comment recommended that
the tie-breaker rule be reversed so that
transactions involving digital assets would
remain reportable under section 6050W
rather than under section 6045 because
the information reportable under sec-
tion 6045 is generally for sales of capital
assets, whereas the information reportable
under section 6050W is for both sales of
property and payments for services. This
comment also suggested that, since mar-
ketplaces that list unique or collectible
NFTs resemble well-known marketplaces
for tangible goods which are subject to
section 6050W reporting, that these NFT
marketplaces should report NFT transac-
tions in the same matter as the established
marketplaces. Another comment raised
the concern that NFT artists find it diffi-
cult to calculate their tax under the exist-
ing information reporting rules.
The final regulations do not adopt the
comment recommending that the tie-
breaker rule be reversed because section
6045 was affirmatively amended by Con-
gress to regulate the information reporting
of digital asset transactions. Additionally,
as a broad statutory provision, section
6045 is better suited for reporting on NFTs,
the uses for which continue to evolve in
ways that the use of goods and services
traditionally subject to section 6050W
reporting do not. Moreover, broadly appli-
cable information reporting rules help to
reduce the overall income tax gap because
it provides necessary information to tax-
payers, as explained by one comment stat-
ing that the existing rules are not sufficient
for artists to prepare their Federal income
tax returns (and reduce the number of
inadvertent errors or intentional misstate-
ments shown on those returns) from NFT
transactions. Information reporting also
provides information to the IRS that iden-
tifies taxpayers who have engaged in these
transactions. One comment suggested that
a payee statement reflecting the informa-
tion provided on a Form 1099-K would be
easier for taxpayers to reconcile to Federal
their income tax return because the trans-
actions are reported in a single aggregate
form. The final regulations do not adopt
this comment because, as discussed in
Part I.D.3. of this Summary of Comments
and Explanation of Revisions, the final
regulations already allow brokers to report
sales of specified NFTs under an optional
aggregate reporting method. Another
comment recommended that reporting by
brokers on Form 1099-DA for NFT sales
should distinguish between sales by NFT
creators or minters (primary sales) and
sales by NFT resellers (secondary sales).
As discussed in Part I.D.3. of this Sum-
mary of Comments and Explanation of
Revisions, the final regulations adopt this
comment by requiring brokers that report
under the optional reporting method for
specified NFTs to indicate the portion of
the aggregate gross proceeds reported that
is attributable to the specified NFT cre-
ator’s or minter’s first sale to the extent
ordinarily known by the broker.
Finally, a comment requested that
guidance be provided regarding the char-
acter of the percentage payments made to
the original NFT creator or minter after a
secondary sale of that same NFT because
this determination would impact whether
these payments are reportable as a royalty
(with a $10 de minimis threshold) or as a
payment reportable under section 6045
or some other information reporting pro-
vision. Additionally, the character of the
payment could impact the source of the
payment income for purposes of with-
holding under chapter 3 of the Code and
application of treaty benefits (if applica-
ble). The final regulations do not adopt
this comment as it is outside the scope of
these regulations.
VI. Final §§31.3406(b)(3)-2, 31.3406(g)-
1, 31.3406(g)-2, 31.3406(h)-2
Section 3406 and the regulations there-
under require certain payors of reportable
payments, including payments of gross
proceeds required to be reported by a
broker under section 6045, to deduct and
withhold a tax on a payment at the stat-
utory backup withholding rate (currently
24 percent) if the payee fails to provide a
TIN, generally on a Form W-9, along with
a certification under penalties of perjury
that the TIN furnished is correct (certified
TIN), or if the payee provides an incorrect
TIN. See §31.3406(b)(3)-2(a) (Report-
able barter exchanges and gross proceeds
of sales of securities or commodities by
brokers). The proposed regulations added
digital assets to the title of §31.3406(b)
(3)-2 of the 2002 final regulations but
did not make any substantive changes to
the rules therein because these rules were
considered broad enough to cover digi-
tal asset transactions that are reportable
under section 6045. Additionally, pro-
posed §31.3406(g)-2(e) provided that a
real estate reporting person must withhold
under section 3406 and, pursuant to the
rules under §31.3406(b)(3)-2 of the 2002
final regulations, on a reportable payment
made in a real estate transaction with
respect to a purchaser that exchanges dig-
ital assets for real estate to the extent that
the exchange is treated as a sale of digital
assets subject to reporting under proposed
§1.6045-1.
A. Digital assets sales for cash
Many comments recommended that
the final regulations apply the backup
withholding rules only to reportable pay-
ments associated with digital assets that
are sold for cash. One comment explained
that brokers that exchange customers’
digital assets for cash are regulated under
Federal law as MSBs and under State law
as money transmitters. As a result, these
brokers already have programs in place
to comply with applicable AML and cus-
tomer identification requirements. This
comment suggested that because these
brokers already have the infrastructure
in place to collect proper tax documen-
tation from customers, they can use their
existing systems to deduct and withhold
backup withholding taxes on payments of
cash made in exchange for digital assets.
Other comments requested that the Trea-
sury Department and the IRS provide suf-
ficient time to allow these brokers to con-
tact existing customers to collect certified
TINs on Forms W-9. In response to these
comments, the Treasury Department and
the IRS have concluded that it is appro-
priate to provide temporary relief on the
imposition of backup withholding for
these transactions to give brokers the time
they need to build and implement backup

July 29, 2024 246 Bulletin No. 2024–31
withholding systems for these types of
transactions. See Part VI.D. of this Sum-
mary of Comments and Explanation of
Revisions for a description of the transi-
tional relief that will be provided.
B. Digital asset sales for non-cash
property
Section 3406 requires payors to deduct
and withhold the backup withholding tax
on the payment made to the payee. When
reportable payments made to the payee
are made in property (other than money),
§31.3406(h)-2(b)(2)(i) provides that the
payor (broker) must withhold 24 percent
of the fair market value of the property
determined immediately before or on
the date of payment. As with all backup
withholding, the payor is liable for the
amount required to be withheld regard-
less of whether the payor withholds from
such property. Under the general rule,
payors are prohibited from withholding
from any alternative source maintained
by the payor other than the source with
respect to which the payor has a with-
holding liability. §31.3406(h)-2(b)(1).
Exceptions from this general rule are pro-
vided in §31.3406(h)-2(b)(2) for certain
payments made in (non-cash) property.
Specifically, under these rules, instead of
withholding from the property payment
itself, §31.3406(h)-2(b)(2)(i) provides
that a payor may withhold “from the
principal amount being deposited with
the payor or from another source main-
tained by the payee with the payor.” The
regulation cross-references to an exam-
ple illustrating methods of withhold-
ing permitted for payments constituting
prizes, awards, and gambling winnings
paid in property other than cash. See
§31.3406(h)-2(b)(2)(i) (cross-reference
to §31.3402(q)-1(d) (Example 5) later
redesigned as §31.3402(q)-1(f) (Example
4) by TD 9824, 82 FR 44925 (Septem-
ber 27, 2017)). This example illustrates
that payors making payments in property
may either gross up the overall payment
with cash to pay the withholding tax (plus
the withholding tax on that grossed-up
payment) or have the payee pay the with-
holding tax to the payor. For a payor that
cannot locate an alternative source of cash
from which to withhold, §31.3406(h)-2(b)
(2)(ii) permits the payor to defer its obli-
gation to withhold (except for reportable
payments made with prizes, awards, or
gambling winnings) until the earlier of the
date sufficient cash to satisfy the withhold-
ing obligation is deposited into the pay-
ee’s account maintained with the payor or
the close of the fourth calendar year after
the obligation arose. If no cash becomes
available in these other sources by the
close of the fourth calendar year after the
obligation arose, however, the payor is lia-
ble for the backup withholding tax.
Several comments requested that the
final regulations clarify how the backup
withholding rules apply to sales of dig-
ital assets for different digital assets and
other non-cash property. One comment
requested that the final regulations pro-
vide added flexibility to allow brokers
to meet their withholding obligations.
First, to the extent that these comments
assumed that non-cash property proceeds
cannot be subdivided, it should be noted
that some digital assets do allow for sub-
division and, when they do, the payor can
satisfy backup withholding obligations by
liquidating a portion of those proceeds.
Additionally, depending on contractual
relationships with their customers, bro-
kers may be permitted to liquidate alterna-
tive sources that are comprised of digital
assets to satisfy their withholding obliga-
tions. Accordingly, brokers effecting sales
of digital assets for different digital assets
in many cases may have the ability to sat-
isfy their withholding obligations from the
digital assets received in the transaction
(that is, from the reportable payment) or
from an alternative source of digital assets
maintained by the payee with the payor.
Another comment asked if brokers
are permitted to withhold from digital
assets being disposed of instead of the
digital assets received in the exchange
when market considerations would make
that approach less costly. The Treasury
Department and the IRS have determined
that withholding from disposed-of digital
assets is analogous to having the payee
pay the withholding tax to the payor as
illustrated in the example of permitted
withholding methods for prizes, awards,
and gambling winnings. §31.3402(q)-1(f)
(Example 4). Accordingly, whether a bro-
ker can withhold from digital assets being
disposed of is a matter for brokers and
customers to determine based on the legal
or other arrangements between them. No
changes are made to the final regulations
to address this comment. The Treasury
Department and the IRS intend to study
the rules under §31.3406(h)-2(b) further
and may issue guidance providing brokers
a greater ability to liquidate alternative
sources of digital assets to satisfy backup
withholding obligations. Additionally,
such guidance may address the four-year
deferral rule in fact patterns where digital
assets are maintained by the payee with
the payor.
One comment recommended that the
withholding rate be reduced for disposi-
tions of digital assets for different digital
assets or other non-cash property. The final
regulations do not adopt these suggestions
because the withholding rate is set by stat-
ute in section 3406(a)(1). Another com-
ment recommended that the rules permit
a delay in the payment of withheld taxes
to the later of 180-days or until the end
of the calendar year to allow customers to
provide their tax documentation. As dis-
cussed in Part VI.D. of this Summary of
Comments and Explanation of Revisions,
the final regulations address this comment
by delaying the application of the backup
withholding rules.
Although a few comments expressed
the view that brokers have the ability to
administer backup withholding on dispo-
sitions of digital assets for certain types of
non-cash property, numerous other com-
ments raised concerns with the logistics of
withholding on sales of digital assets for
different digital assets, particularly when
the price of the digital assets received in
the exchange (received digital asset) fluc-
tuates between the time of transaction and
the time the received digital assets are liq-
uidated into U.S. dollars for deposit with
the Treasury Department. These com-
ments noted that, even for received digital
assets that do not experience large fluctua-
tions in value, it is not operationally possi-
ble for brokers to be certain that they can
liquidate 24 percent of the received digital
assets at the same valuation price as applies
to the underlying transaction giving rise to
the withholding obligation. Accordingly,
these comments questioned whether the
withholding tax payment would be defi-
cient if the liquidated value of the with-
held digital assets falls below the value of
24 percent of the received digital assets at

Bulletin No. 2024–31 247 July 29, 2024
the time of the underlying transaction and
requested relief to the extent the liquidated
value is deficient. Another comment ques-
tioned if any excess value must be paid to
the Treasury Department when the liqui-
dated value of the withheld digital assets
is greater than 24 percent of the received
digital assets at the time of the underly-
ing transaction. Another comment stated
that some brokers do not have processes
in place to liquidate received digital assets
daily to make required backup withhold-
ing deposits in U.S. dollars and requested
that deposits to the Treasury Department
be permitted in digital assets.
Section 3406 provides that if a payee
fails to provide a TIN or certain other
conditions are satisfied, the payor shall
deduct and withhold from the reportable
payment a tax equal to a rate that is cur-
rently 24 percent. The responsibility for
ensuring that sufficient withholding tax
is withheld is by statute a payor respon-
sibility. Moreover, brokers are in the best
position to mitigate any volatility risks
associated with disposing of digital assets
received in an exchange of digital assets.
For example, brokers may be able to mini-
mize or eliminate their risk by implement-
ing systems to shorten the time between
the initial transaction and the liquidation
of the withheld digital asset. Accordingly,
the Treasury Department and the IRS
have determined that it is not appropriate
for the Federal government to accept the
market risk of a customer’s withheld digi-
tal asset. Instead, the risk should be borne
in the first instance by the broker offering
digital asset transactions to its customers.
Accordingly, the final regulations do not
adopt the suggestion to pass the price vol-
atility risk of withheld digital assets onto
the Federal government. However, see
Part VI.D. of this Summary of Comments
and Explanation of Revisions regarding
temporary penalty relief for backup with-
holding, which is based in part on the risk
of payment shortfalls due to the volatility
of some digital assets.
The Treasury Department and the
IRS understand that a broker may shift
the withholding liability risk associated
with price volatility to a customer who
has invested in the withheld digital asset
and has not provided a TIN under penal-
ties of perjury. For example, as suggested
by one comment, brokers could mandate
that their customers who have not pro-
vided a certified TIN maintain with the
broker cash margin accounts or digital
asset accounts with relatively stable dig-
ital assets (such as stablecoins) for bro-
kers to use to satisfy their backup with-
holding obligations. Brokers could also
require their customers to agree to allow
the brokers to sell for cash 24 percent of
the disposed digital assets at the time of
the transaction. In addition, brokers could
remind customers that fail to provide their
TINs as requested that the customer may
be liable for penalties under section 6723
of the Code. Finally, brokers could man-
date that their customers provide accurate
tax documentation to avoid backup with-
holding obligations altogether. Because
any such arrangement would be a com-
mercial arrangement between the broker
and its customer, these final regulations
do not address such arrangements.
Several comments requested guidance
(with examples) setting forth operational
solutions to avoid broker liability with
respect to this price fluctuation risk and
additional time to put those solutions in
place. The final regulations do not include
specific examples because there appears
to be many solutions brokers could adopt
that are industry and business specific.
However, the Treasury Department and
the IRS intend to study these rules further
and may issue additional guidance.
One comment recommended that the
final regulations be revised to prevent the
application of cascading backup withhold-
ing in a sale of digital assets for different
digital assets when the broker sells 24
percent of the received digital assets to
pay the backup withholding tax on the ini-
tial transaction. For example, a customer
exchanges 1 unit of digital asset AB for
100 units of digital asset CD (first trans-
action), and to apply backup withholding,
the broker sells 24 percent (or 24 units) of
digital asset CD for cash (second transac-
tion). The comment recommended that the
sale of the 24 units of CD in the second
transaction not be subject to backup with-
holding if that sale is effected by the broker
to satisfy its backup withholding obliga-
tions with respect to a sale of digital assets
in exchange for different assets and the
cash sale was effected by the broker on or
prior to the date that the broker is required
to deposit the backup withholding tax lia-
bility with respect to the underlying digital
asset exchange. The Treasury Department
and the IRS have determined that a lim-
ited backup withholding exception should
apply in the case of cascading backup
withholding obligations. To address this
cascading backup withholding problem,
the final regulations except certain sales
for cash of withheld digital assets from the
definition of sales required to be reported
if the sale is undertaken immediately after
the underlying sale to satisfy the broker’s
obligation under section 3406 to deduct
and withhold a tax with respect to the
underlying transaction. If that condition is
met, the sale will be excepted from bro-
ker reporting and backup withholding will
not apply. See final §1.6045-1(c)(3)(ii)
(D). The special rule for the identification
of units withheld from a transaction, dis-
cussed in Part I.E.3.a. of this Summary of
Comments and Explanation of Revisions,
also ensures that the excepted sale of the
withheld units does not give rise to any
additional gain or loss.
Numerous comments requested an
exception from backup withholding for
transactions in which digital assets are
exchanged for property (other than rela-
tively liquid digital assets), such as tradi-
tional financial assets, real estate, goods,
services, or different digital assets that
cannot be fractionalized, such as NFTs
and tokenized financial instruments (illiq-
uid property), when there is insufficient
cash in the customer’s account. Backup
withholding is an essential enforcement
tool to ensure that complete and accu-
rate information returns can be filed by
payors with respect to payments made to
payees. Accurate TINs and other infor-
mation provided by payors are critical to
matching such information with income
reported on a payee’s Federal income tax
return. A complete exception from backup
withholding or an exception for sales of
digital assets for illiquid property would
increase the likelihood that customers will
not provide correct TINs to their brokers.
Such an exception would also raise factual
questions about whether certain property
received in a transaction is truly illiquid.
For example, one broker might assert that
a stored-value card in a fixed amount is
illiquid if the broker cannot withhold 24
percent of the value of the card or if the
resale market for those cards does not

July 29, 2024 248 Bulletin No. 2024–31
facilitate full face value payments. On
the other hand, a different broker might
decide to require the payee to send back
cash in an amount representing 24 percent
of the of the value of the card. Moreover,
brokers have some ability to minimize
their backup withholding in these circum-
stances by taking steps to ensure that the
customer pays the backup withholding tax
instead of the broker. For example, bro-
kers could remind customers that failure
to provide their TINs as requested may
result in customers being liable for penal-
ties under section 6723. Brokers also may
be able to require customers that refuse
to provide accurate tax documentation to
maintain cash accounts or other digital
asset accounts with the broker. Accord-
ingly, subject to the transition relief dis-
cussed in Part VI.D. of this Summary of
Comments and Explanation of Revisions,
the final regulations do not provide an
exception to backup withholding for sales
of digital assets in exchange for illiquid
property.
One comment requested relief from
backup withholding when the fair mar-
ket value of the received digital asset is
not readily ascertainable. This comment
also requested that the final regulations
provide guidance clarifying what the bro-
ker must do to conclude that the value
of received digital assets is not readily
ascertainable. The final regulations do
not adopt this comment because the fact
pattern is not unique to digital asset trans-
actions. Moreover, the final regulations
provide rules, at final §1.6045-1(d)(5)(ii)
(A)(1) through (3), that brokers can use to
determine the fair market value of gross
proceeds received by a customer in a dig-
ital asset transaction. For example, in the
case of a customer that receives a unique
NFT in exchange for other digital assets,
the broker can look to the value of the dis-
posed digital assets and use that value for
the NFT.
Several comments requested an exemp-
tion from backup withholding for any sale
of a qualifying stablecoin (whether for
cash, another digital asset, or other prop-
erty) because of the low likelihood that
these stablecoin sales will give rise to sig-
nificant gains or losses. Backup withhold-
ing on these transactions is a necessary
tool to ensure that customers provide their
tax documentation in accordance with reg-
ulatory requirements and to allow for cor-
rect income tax reporting of the gains and
losses that do occur. Brokers that request
customer TINs in accordance with regula-
tory requirements are not liable for infor-
mation reporting penalties with respect to
customers who refuse to comply. Backup
withholding, therefore, is the only way to
ensure that either the broker’s customers
will provide their TINs and the IRS will
receive the information reporting required
or that a tax is collected from those cus-
tomers who do not want the IRS to learn
about their activities. Additionally, and as
discussed in Part I.D.2. of this Summary of
Comments and Explanation of Revisions,
the Treasury Department and the IRS have
concluded that information about cer-
tain qualifying stablecoin transactions is
essential to the IRS gaining visibility into
previously unreported digital asset trans-
actions. Accordingly, the final regulations
do not adopt this comment. However, it
should be noted, as discussed in Part I.D.1.
of this Summary of Comments and Expla-
nation of Revisions, if a broker reports
information on designated qualifying sta-
blecoin sales under the optional method of
reporting, sales of non-designated qual-
ifying stablecoins will not be reported.
As such, final §31.3406(b)(3)-2(b)(6)(i)
(B)(1) provides that these non-designated
sales of qualifying stablecoins will not be
subject to backup withholding.
As discussed in Part I.D.2.a. of this
Summary of Comments and Explanation
of Revisions, there may be circumstances
in which a digital asset loses its peg during
a calendar year and therefore does not sat-
isfy the conditions required to be a quali-
fying stablecoin. To give brokers time to
learn about such de-pegging events and
turn on backup withholding for non-des-
ignated sales, final §31.3406(b)(3)-2(b)(6)
(i)(B)(2) provides a grace period before
withholding is required. Specifically, in
the case of a digital asset that would have
satisfied the definition of a non-designated
sale of a qualifying stablecoin under final
§1.6045-1(d)(10)(i)(C) for a calendar year
but for a non-qualifying event during that
year, a broker is not required to with-
hold under section 3406 on such sale if
it occurs no later than the end of the day
that is 30 days after the first non-quali-
fying event with respect to such digital
asset during such year. For this purpose, a
non-qualifying event is defined as the first
date during a calendar year on which the
digital asset no longer satisfies all three
conditions described in final §1.6045-1(d)
(10)(ii)(A) through (C) to be a qualify-
ing stablecoin. Finally, final §31.3406(b)
(3)-2(b)(6)(i)(B)(2) also provides that the
date on which a non-qualifying event has
occurred with respect to a digital asset and
the date that is no later than 30 days after
such non-qualifying event must be deter-
mined using UTC. As discussed in Part
I.D.2.b. of this Summary of Comments
and Explanation of Revisions, UTC time
was chosen for this purpose to ensure that
the same digital assets will or will not be
subject to backup withholding for all bro-
kers regardless of the time zone in which
such broker keeps its books and records.
One comment recommended that the
final regulations provide a de minimis
threshold, similar to the $600 threshold for
income subject to reporting under section
6041, before backup withholding would be
required for dispositions of digital assets
for different digital assets or other non-
cash property. Under section 3406(b)(4)
and (6), unless the payment is of a kind
required to be shown on a return required
under sections 6041(a) or 6041A(a), the
determination of whether any payment is
of a kind required to be shown on a return
must be made without regard to any mini-
mum amount which must be paid before a
return is required. While the Secretary may
have the authority to apply a threshold that
is established by regulation when deter-
mining whether any payment is of a kind
that must be shown on a required return for
backup withholding purposes, the Treasury
Department and the IRS have determined
that the application of these thresholds to
the backup withholding rules would not be
appropriate. Accordingly, although the final
regulations provide de minimis thresholds
for reporting payment transaction sales and
designated sales of qualifying stablecoins
and specified NFTs, the transactions that
fall below the applicable gross proceeds
thresholds are nonetheless potentially tax-
able transactions that taxpayers must report
on their Federal income tax returns. The
Treasury Department and the IRS have
concluded that customers that have not pro-
vided tax documentation to their brokers
are less likely to report their digital asset
transactions on their Federal income tax

Bulletin No. 2024–31 249 July 29, 2024
returns than customers who comply with
the documentation requirements. Accord-
ingly, the Treasury Department and the IRS
have determined it is important to impose
backup withholding on gross proceeds
that fall below these thresholds. Therefore,
under the final regulations, gross proceeds
that are not required to be reported due to
the application of the $600 threshold for
payment transaction sales, the $10,000
threshold for designated sales of qualifying
stablecoins, or the $600 threshold for sales
of specified NFTs are nonetheless report-
able payments for purposes of backup
withholding.
See Part VI.D. of this Summary of Com-
ments and Explanation of Revisions for a
discussion of certain transitional relief from
backup withholding under section 3406.
C. Other backup withholding issues
The proposed regulations requested
comments addressing short sales of digi-
tal assets and whether any changes should
be made to the backup withholding rules
under §31.3406(b)(3)-2(b)(3) and (4). In
response, one comment requested that
the final regulations clarify how gains or
losses from short sales of digital assets are
to be treated and what, if any, withholding
is required for short sales of digital assets.
Another comment requested that any
backup withholding rules for short sales of
digital assets take into account factors like
holding periods, borrowed assets, and sale
conditions. After considering the requests,
as discussed in Part I.C. of this Summary
of Comments and Explanation of Revi-
sions, the Treasury Department and the
IRS have determined that the substantive
issues raised by these comments require
further study. Accordingly, the final regu-
lations do not address these comments and
do not make any changes to these rules.
However, see Part VII. of this Summary of
Comments and Explanation of Revisions
for a discussion of guidance being pro-
vided along with these final regulations to
address reporting on certain transactions
requiring further study.
Another comment requested guidance
regarding how to apply the rules for mak-
ing timely deposits of tax withheld by
brokers that operate 24 hours a day. This
comment stated that brokers need to know
what time (and based on what time zone)
their day ends for purposes of making
timely deposits and whether timely depos-
its are measured based on days or by 24
hour rolling periods. Another comment
requested that the final regulations permit
brokers to report based on the broker’s
time zone provided that the time zone is
disclosed to the customer and is used con-
sistently for all reporting years. Many busi-
nesses have continuous operations across
several time zones. Because the proposed
regulations did not propose any changes
to the rules for making timely deposits of
tax withheld by digital asset brokers, the
final regulations do not provide a special
rule for digital asset brokers.
Another comment requested guid-
ance regarding the withholding rules for
cross-border transactions, including the
appropriate withholding rates under exist-
ing U.S. tax treaties. The final regulations
do not address this comment because the
withholding rules under chapter 3 of the
Code are outside the scope of these regu-
lations. See Part VI.D. of this Summary of
Comments and Explanation of Revisions
for a discussion of certain transitional
relief from backup withholding under sec-
tion 3406.
D. Applicability date for backup
withholding on digital asset sales
Several comments requested that the
imposition of backup withholding on
dispositions of digital assets for cash,
different digital assets, or other non-cash
property be delayed until brokers can
develop systems to implement withhold-
ing on these transactions. Other com-
ments advised that software currently
exists that can be embedded in any trading
platform’s user interface to help brokers
obtain proper tax document from custom-
ers. The Treasury Department and the IRS
have determined it is appropriate to pro-
vide temporary relief on the imposition
of backup withholding for these transac-
tions to give brokers the time they need to
build and implement backup withholding
systems for these types of transactions.
Accordingly, the notice discussed in Part
VI. of this Summary of Comments and
Explanation of Revisions will also provide
transitional relief from backup withhold-
ing under section 3406 for sales of digital
assets as follows:
1. Digital Asset Sales for Cash
The Treasury Department and the IRS
recognize that, although brokers engaging
in these cash transactions may be in a good
position to obtain proper tax documenta-
tion, they will need time to build systems
to collect and retain that documentation
and to obtain that documentation from
existing customers. Accordingly, to pro-
mote industry readiness to comply with
the backup withholding requirements,
Notice 2024-56 is being issued contem-
poraneously with these final regulations
to provide transitional relief from backup
withholding under section 3406 on these
sales. This notice, which will be published
in the Internal Revenue Bulletin, provides
that the effective date for backup withhold-
ing date is postponed to January 1, 2026,
for potential backup withholding obliga-
tions imposed under section 3406 for pay-
ments required to be reported on Forms
1099-DA for sale transactions. Addition-
ally, for sale transactions effected in 2026
for customers that have opened accounts
with the broker prior to January 1, 2026,
the notice further provides that backup
withholding will not apply with respect
to any payee that furnishes a TIN to the
broker, whether or not on a Form W-9 in
the manner required in §§31.3406(d)-1
through 31.3406(d)-5, provided the broker
submits that payee’s TIN to the IRS’s TIN
matching program and receives a response
that the TIN furnished by the payee is
correct. See §601.601(d)(2). Transitional
relief also is being provided under these
final regulations for sales of digital assets
effected before January 1, 2027, that were
held in a preexisting account established
with a broker before January 1, 2026, if
the customer has not been previously clas-
sified as a U.S. person by the broker, and
the information the broker has for the cus-
tomer includes a residence address that is
not a U.S. address.
2. Sales of Digital Assets in Exchange
for Different Digital Assets (Other than
Nonfungible Tokens that Cannot be
Fractionalized)
As discussed in Part VI.B. of this Sum-
mary of Comments and Explanation of
Revisions, brokers are concerned with the
logistics of withholding on sales of digi-

July 29, 2024 250 Bulletin No. 2024–31
tal assets for different digital assets when
the price of the digital assets received in
the exchange fluctuates between time of
transaction and the time the received dig-
ital assets are liquidated into U.S. dollars
for deposit with the Treasury Department.
Although there are steps brokers can
take to diminish this price volatility risk
or transfer this risk entirely to the cus-
tomer, the Treasury Department and the
IRS recognize that brokers need time to
implement these procedures. Accordingly,
in addition to the delayed application of
the backup withholding rules provided for
digital assets sold for cash, Notice 2024-56
also provides that the IRS will not assert
penalties for a broker’s failure to deduct,
withhold, and pay any backup withhold-
ing tax that is caused by a decrease in the
value of received digital assets (other than
nonfungible tokens that the broker can-
not fractionalize) between the time of the
transaction giving rise to the backup with-
holding liability and the time the broker
liquidates 24 percent of the received digi-
tal assets, provided the broker undertakes
to effect that liquidation immediately after
the transaction giving rise to the backup
withholding liability.
One comment recommended that the
final regulations apply backup withhold-
ing to sales of digital assets other than sta-
blecoins in exchange for stablecoins under
the same rules as apply to sales of digital
assets for cash. The final regulations do not
adopt this comment. Although there may
be less price volatility risks in received
stablecoins than there is with other digital
assets, stablecoins are not cash and are not
treated as such by these regulations.
3. Sales of Digital Assets in Exchange for
Other Property
As discussed in Part VI.B. of this
Summary of Comments and Explana-
tion of Revisions, the final regulations
do not provide an exception to backup
withholding for sales of digital assets in
exchange for illiquid property. The Trea-
sury Department and the IRS, however,
understand that there are additional prac-
tical issues with requiring backup with-
holding on PDAP sales and sales effected
by real estate reporting persons because
these brokers typically cannot withhold
from the proceeds, which would typically
be the goods or services (or real estate)
purchased. Accordingly, in addition to
the delayed application of the backup
withholding rules provided for digital
assets sold for cash, Notice 2024-56 also
provides that the IRS will not apply the
backup withholding rules to any PDAP
sale or to any sale effected by a real estate
reporting person until further guidance is
issued.
VII. Applicability Dates and Penalty
Relief
The Treasury Department and the IRS
received and considered many comments
about the applicability dates contained in
the proposed regulations. Multiple com-
ments requested additional time beyond
the proposed applicability date for gross
proceeds reporting on transactions occur-
ring on or after January 1, 2025, and for
basis reporting for transactions occurring
on or after January 1, 2026. Comments
asked for time ranging from one to five
years after publication of the final rules
to prepare for reporting transactions,
with the most common suggestion being
an applicability date between 18 and 24
months after publication of the final regu-
lations. Several comments suggested that
broker reporting begin at the same time
as CARF reporting, either for all brokers
or for non-U.S. brokers. Multiple com-
ments requested that the final regulations
become applicable in stages, with many
suggesting that custodial industry partic-
ipants should be required to report during
the first stage but that non-custodial par-
ticipants should begin reporting a year or
more later. Comments generally pointed
to the time needed to build information
reporting systems and to adequately doc-
ument customers to support their recom-
mendation of later applicability dates.
They also cited concerns about fulfill-
ing backup withholding requirements
and adapting to filing a new information
return, the Form 1099-DA, and about the
IRS’s ability to receive and process a large
number of new forms.
Conversely, some comments indicated
that the proposed applicability dates were
appropriate. As one comment noted, some
digital asset brokers reported digital asset
transactions on Forms 1099-B before the
passage of the Infrastructure Act. Simi-
larly, another comment stated that brokers
that make payments to customers in the
form of staking rewards or income from
lending digital assets are already required
to file and furnish Forms 1099-MISC,
Miscellaneous Information, to those cus-
tomers. Accordingly, in the view of these
comments, those brokers have some
experience with documenting customers
and handling their personally identifiable
information. Finally, one comment stated
that if transaction ID, digital asset address,
and time of the transaction were not
required to be reported, then existing tra-
ditional financial reporting solutions could
be expanded relatively easily to include
reporting on dispositions of digital assets.
The Treasury Department and the IRS
agree that a phased-in or staged approach
to broker reporting is appropriate and have
determined that the proposed applicability
dates for gross proceeds and basis reporting
should be retained in the final regulations
for custodial industry participants. At least
some of these participants have experience
reporting transactions involving their cus-
tomers. Further, as described in Part I.D.
of this Summary of Comments and Expla-
nation of Revisions, under the final regula-
tions, these brokers will not be required to
report the time of the transaction, the dig-
ital asset address or the transaction ID on
Forms 1099-DA. Brokers will be required
to report basis for transactions occur-
ring on or after January 1, 2026, but only
with respect to digital assets the customer
acquired from, and held with, the same bro-
ker on or after January 1, 2026. Although
the proposed regulations required basis
reporting for assets acquired on or after
January 1, 2023, it is anticipated that mov-
ing the acquisition date to on or after Jan-
uary 1, 2026, and eliminating the need to
track basis retroactively will assist brokers
in preparing to report basis for transactions
that occur beginning in 2026. See Part I.F.
of this Summary of Comments and Expla-
nation of Revisions for a discussion of the
changes made to the basis reporting rules.
Finally, and as more fully described in Part
I.B.1.b. of this Summary of Comments and
Explanation of Revisions, the proposed
digital asset middleman rules that would
apply to non-custodial industry participants
are not being finalized with these final reg-
ulations. The Treasury Department and the
IRS intend to expeditiously issue separate

Bulletin No. 2024–31 251 July 29, 2024
final regulations describing information
reporting rules for non-custodial industry
participants with an appropriate, separate
applicability date.
The rules of final §1.1001-7 apply to
all sales, exchanges, and dispositions of
digital assets on or after January 1, 2025.
The rules of final §1.1012-1(h) apply
to all acquisitions and dispositions of
digital assets on or after January 1, 2025.
The rules of final §1.1012-1(j) apply to
all acquisitions and dispositions of digital
assets on or after January 1, 2025.
The rules of final §1.6045-1 apply to
sales of digital assets on or after January
1, 2025.
The amendments to the rules of final
§1.6045-4 apply to real estate transactions
with dates of closing occurring on or after
January 1, 2026.
The changes made in final §1.6045A-1
limit the application of the pre-2024 final
regulations in the case of digital assets.
Accordingly, these changes apply as of the
effective date of this Treasury decision.
The rules of final §1.6045B-1 apply
to organizational actions occurring on or
after January 1, 2025, that affect the basis
of digital assets that are also described in
one or more paragraphs of §1.6045-1(a)
(14)(i) through (iv).
The rules of final §1.6050W-1 apply to
payments made using digital assets on or
after January 1, 2025.
The rules of final §31.3406(b)(3)-2
apply to reportable payments by a broker
to a payee with respect to sales of digi-
tal assets on or after January 1, 2025, that
are required to be reported under section
6045.
The rules of final §31.3406(g)-1 apply
on or after January 1, 2025, and the rules
of final §31.3406(g)-2 apply to sales of
digital assets on or after January 1, 2026.
The rules of final §301.6721-1(h)(3)
(iii) apply to returns required to be filed on
or after January 1, 2026. The rules of final
§301.6722-1(e)(2)(viii) apply to payee
statements required to be furnished on or
after January 1, 2026.
Special Analyses
I. Regulatory Planning and Review
Pursuant to the Memorandum of Agree-
ment, Review of Treasury Regulations
under Executive Order 12866 (June 9,
2023), tax regulatory actions issued by the
IRS are not subject to the requirements of
section 6(b) of Executive Order 12866, as
amended. Therefore, a regulatory impact
assessment is not required.
II. Paperwork Reduction Act
In general, the collection of informa-
tion in the regulations is required under
section 6045. The collection of informa-
tion in these regulations with respect to
dispositions of digital assets is set forth in
final §1.6045-1 and the collection of infor-
mation with respect to dispositions of real
estate in consideration for digital assets
is set forth in final §1.6045-4. The IRS
intends that the collection of information
pursuant to final §1.6045-1 will be con-
ducted by way of Form 1099-DA and that
the collection of information pursuant to
final §1.6045-4 will be conducted through
a revised Form 1099-S.
The proposed regulations contained
burden estimates regarding the collection
of information with respect to the dispo-
sitions of digital assets and the collection
of information with respect to disposi-
tions of real estate in consideration for
digital assets. For the proposed regula-
tions, the Treasury Department and the
IRS estimated that approximately 600
to 9,500 brokers would be impacted by
the proposed regulations. The proposed
regulations also contained an estimate of
between 7.5 minutes and 10.5 minutes as
the average time to complete the required
Forms 1099 for each customer. And the
proposed regulations also contained an
estimate of 13 to 16 million customers
that would have transactions subject to
the proposed regulations. Taking the mid-
points of the ranges for the number of
brokers expected to be impacted by these
regulations, the number of taxpayers
expected to receive one or more Forms
1099 required by these regulations, and
the time to complete those required
forms (5,050 brokers, 14.5 million recip-
ients, and 9 minutes respectively), the
proposed regulations estimated the aver-
age broker would incur 425 hours of time
burden and $27,000 of monetized burden
for the ongoing costs per year. The pro-
posed regulations contained estimates of
2,146,250 total annual burden hours and
$136,350,000 in total monetized annual
burden.
The proposed regulations estimated
start-up costs to be between three to eight
times annual costs. Given that the Treasury
Department and the IRS expected per firm
annual estimated burden hours to be 425
hours and $27,000 of estimated monetized
burden, the proposed regulations esti-
mated per firm start-up aggregate burden
hours to range from 1,275 to 3,400 hours
and $81,000 to $216,000 of aggregate
monetized burden. Using the mid-points,
start-up total estimated aggregate burden
hours was 11,804,375 and total estimated
monetized burden is $749,925,000.
Regarding the Form 1099-DA, the
burden estimate must reflect the continu-
ing costs of collecting and reporting the
information required by these regulations
as well as the upfront or start-up costs
associated with creating the systems to
collect and report the information taking
into account all of the comments received,
as well as the changes made in these final
regulations that will affect the paperwork
burden. A reasonable burden estimate for
the average time to complete these forms
for each customer is 9 minutes (0.15
hours). The Treasury Department and the
IRS estimate that 13 to 16 million cus-
tomers will be impacted by these final
regulations (mid-point of 14.5 million
customers). The Treasury Department and
the IRS estimate that approximately 900
to 9,700 brokers will be impacted by these
final regulations (mid-point of 5,300 bro-
kers). The Treasury Department and the
IRS estimate the average broker to incur
approximately 425 hours of time burden
and $28,000 of monetized burden. The
total estimated aggregate annual burden
hours is 2,252,500 and the total estimated
monetized burden is $148,400,000.
Additionally, start-up costs are esti-
mated to be between five and ten times
annual costs. Given that we expect per firm
annual estimated burden hours to be 425
hours and $28,000 of estimated monetized
burden, the Treasury Department and the
IRS estimate per firm start-up aggregate
burden hours from 2,125 to 4,250 hours
and $140,000 to $280,000 of aggregate
monetized burden. Using the mid-points,
start-up total estimated aggregate burden
hours is 3,188 and total estimated mon-
etized burden is $210,000 per firm. The

July 29, 2024 252 Bulletin No. 2024–31
total estimated aggregate burden hours is
16,896,400 and total estimated monetized
burden is $1,113,000,000.
Based on the most recent OMB burden
estimate for the average time to complete
Form 1099-S, it was estimated that the
IRS received a total number of 2,563,400
Form 1099-S responses with a total esti-
mated time burden for those responses of
411,744 hours (or 9.6 minutes per Form).
Neither a material change in the average
time to complete the revised Form, nor a
material increase in the number of Forms
that will be filed is expected once these
final regulations are effective. No mate-
rial increase is expected in the start-up
costs and it is anticipated that less than
1 percent of Form 1099-S issuers will be
impacted by this change.
Numerous comments were received
on the estimates contained in the pro-
posed regulations. Many of these com-
ments asserted that the annual estimated
time and monetized burdens were too low.
Some comments recommended that the
estimates be recalculated using a total of
8 billion Forms 1099-DA filed and fur-
nished annually. The request to use this
number was based on a public statement
made by a former IRS employee. The
Treasury Department and the IRS do
not adopt this recommendation because
the reference to 8 billion returns was not
based on the requirements in the proposed
or final regulations. Some comments
attempted to calculate the monetized
burden for specific exchanges using the
average amounts used in the proposed
regulations. The Treasury Department
and the IRS also note that any attempts to
recalculate the monetized burden for spe-
cific exchanges will likely yield unrealis-
tic results. The monetized burden is based
on average costs, and it is expected that
smaller firms may experience lower costs
overall but higher costs on an average per
customer basis. This is because while the
ongoing costs of reporting information to
the IRS may be small, there will be larger
costs associated with the initial setup. It is
expected that the larger initial setup costs
will likely be amortized among more cus-
tomers for the larger exchanges. The Trea-
sury Department and the IRS anticipate
conducting a survey in the future to deter-
mine the actual costs of compliance with
these regulations; however, the estimates
used in these final regulations are based on
the best currently available information.
Multiple comments said that the esti-
mated number of brokers impacted by
the proposed regulations was too low.
One comment said the number of entities
affected should include everyone who
uses credit cards or travels in the United
States and should therefore be millions
of people. That comment also said the
number of entities affected should include
individual taxpayers since the proposed
regulations includes rules affecting indi-
vidual taxpayers. One comment said the
estimate was too low because it underesti-
mated the impact on decentralized auton-
omous organizations, governance token
holders, operators of web applications,
and other similarly situated potential bro-
kers. The estimated number of brokers in
these final regulations was not increased
based on these comments because the
issues raised by these comments do not
impact the number of brokers subject
to the broker reporting requirements of
these final regulations. The definition of
a digital asset is not intended to apply to
the types of virtual assets that exist only
in a closed system and cannot be sold or
exchanged outside that system for fiat
currency; therefore, credit card points
are not digital assets subject to reporting
under these final regulations. The final
regulations include substantive rules for
computing the sale or other disposition of
digital assets, but because taxpayers are
already required to calculate and report
their tax liability under existing law, these
regulations do not impose an additional
reporting requirement on these individu-
als. Finally, the Treasury Department and
the IRS are not increasing the burden esti-
mates based on comments about decen-
tralized autonomous organizations or
operators of web applications because the
final regulations apply only to digital asset
industry participants that take possession
of the digital assets being sold by their
customers, namely operators of custodial
digital asset trading platforms, certain dig-
ital asset hosted wallet providers, certain
PDAPs, and digital asset kiosks, and to
certain real estate persons that are already
subject to the broker reporting rules.
The Treasury Department and the IRS
estimate that approximately 900 to 9,700
brokers, with a mid-point of 5,300, will be
impacted by these final regulations. The
lower bound of this estimate was derived
using Form 1099 issuer data through 2022
and statistics on the number of exchanges
from CoinMarketCap.com. Because
the Form 1099 issuer data and statistics
from CoinMarketCap do not distinguish
between centralized and decentralized
exchanges, this estimate likely overesti-
mates the number of brokers that will be
impacted by these final regulations. The
upper bound of this estimate is based on
IRS data for brokers with nonzero revenue
who may deal in digital assets, specifically
the number of issuers with North Ameri-
can Classification System (NAICS) codes
for Securities Brokerage (52312), Com-
modity Contracts Dealing (52313) and
Commodity Contracts Brokerage (52314).
The proposed regulations estimated
the average time to complete these
Forms for each customer as between 7.5
minutes and 10.5 minutes, with a mid-
point of 9 minutes (or 0.15 hours). Some
comments said the 9-minute average
time to complete these Forms for each
customer is too low, with one comment
stating it underestimated time to com-
plete by at least two orders of magnitude.
Another comment said considering the
complexity and specificity of the pro-
posed reporting, including the require-
ment to report the time of transactions,
the average time should be 15 minutes.
The final regulations remove the require-
ment to report the time of the transac-
tion. The final regulations also remove
the obligation to report transaction ID
and digital asset addresses. Addition-
ally, the final regulations include a de
minimis rule for PDAPs and an optional
alternative reporting method for sales of
certain NFTs and qualifying stablecoins
to allow for aggregate reporting instead
of transaction reporting, with a de mini-
mis annual threshold below which no
reporting is required, which the Trea-
sury Department and the IRS anticipate
will further reduce the reporting burden.
Given the final regulations more stream-
lined reporting requirements, the Trea-
sury Department and the IRS have con-
cluded that the original estimate for the
average time to complete these Forms
was reasonable and retain the estimated
average time to complete these Forms
for each customer of between 7.5 min-

Bulletin No. 2024–31 253 July 29, 2024
utes and 10.5 minutes, with a mid-point
of 9 minutes (or 0.15 hours).
The proposed regulations estimated
that 13 to 16 million customers will be
impacted by these proposed regulations.
Some comments asserted that the esti-
mated number of customers was too low.
One comment said the estimate was too
low because it assumes that each of the
affected taxpayers would generate a single
Form 1099-DA, but that this is incorrect
because brokers generally are required to
submit separate reports for each sale by
each customer. That comment also said
that if substitute annual Forms 1099 and
payee statements were permissible, the
average affected taxpayer likely would
generate between 40 to 50 information
returns per year. That comment also
asserted that the estimate of 14.5 million
customers is too low because 40 to 50
million Americans currently own digital
assets and 75 million may transact in dig-
ital assets this year. Some comments said
the estimated number of customers should
be 8 billion based on a statement from a
former IRS official.
The Treasury Department and the IRS
have not updated the estimated number
of customers impacted by these final
regulations based on these comments.
The burden estimate is based on the
number of taxpayers who will receive
Forms 1099-DA rather than the number
of Forms 1099-DA that each taxpayer
receives because the primary broker bur-
den is related to the system design and
implementation required by these final
regulations, including the requirements to
confirm or obtain customer identification
information. The burden associated with
each additional Form 1099-DA required
per customer is expected to be marginal
compared with the cost of implementing
the reporting system. While comments
indicated more taxpayers own and trans-
act in digital assets than estimated in
the proposed regulations, the Treasury
Department and the IRS have concluded
that information included on information
returns filed with the IRS and tax returns
signed under penalties of perjury is the
most accurate information currently
available for the purpose of estimating
the number of affected taxpayers. The
Treasury Department and the IRS esti-
mate the number of customers impacted
by these final regulations will be between
13 million and 16 million with a midpoint
of 14,500,000. The estimate is based on
the number of taxpayers who received
one or more Forms 1099 reporting digital
asset activity in tax year 2021, plus the
number of taxpayers who responded yes
to the digital asset question on their Form
1040 for tax year 2021.
The proposed regulations used a $63.53
per hour estimate to monetize the burden.
The proposed regulations used wage and
compensation data from the Bureau of
Labor Statistics (BLS) that capture the
wage, benefit, and overhead costs of a typ-
ical tax preparer to estimate the average
broker’s monetized burden. Some com-
ments said that the monetized burden in
the proposed regulations was too low. One
comment said the wage and compensation
rate used in the proposed regulations was
too low because these compliance costs
capture the cost of a typical tax preparer
and not the atypical digital asset-specific
tax and legal expertise needed to com-
ply with these rules. Another comment
said the wage and compensation rate was
underestimated because of the higher
labor cost per hour given the specialized
nature of the reporting, the volume of data
and cross-functional effort required and
similar factors. The Treasury Department
and the IRS do not accept the comments
that the monetization rate is too low and
have concluded that the methodology to
determine the rate is correct given the
information available about broker report-
ing costs. The final regulations use an
average monetization rate of $65.49. This
updated estimate is based on survey data
collected from filers of similar informa-
tion returns with NAICS codes for Securi-
ties Brokerage (52312), Commodity Con-
tracts Dealing (52313) and Commodity
Contracts Brokerage (52314), adjusted
for inflation. A lower bound is set at the
Federal minimum wage plus employment
taxes. The upper bound is set using rates
from the BLS Occupational Employment
Statistics (OES) and the BLS Employer
Costs for Employee Compensation from
the National Compensation Survey. Spe-
cifically, the estimate uses the 90
th
percen-
tile for accountants and auditors from the
OES and the ratio of total compensation to
wages and salaries from the private indus-
try workers (management, professional,
and related occupations) to account for
fringe benefits.
The proposed regulations esti-
mated that initial start-up costs would
be between three to eight times annual
costs. Some comments said these costs
were underestimated because many bro-
kers are newer companies with limited
funding and resources. Other comments
stated the start-up costs of compliance
would hurt innovation. Another comment
said the multiple applied was too low and
that using a multiplier for start-up costs
between five to ten times annual costs
would yield a more reasonable estimate
of the start-up costs for such a com-
plex reporting regime and would more
closely align with prior outcomes for sim-
ilar regimes that are currently subject to
reporting. Because start-up costs are diffi-
cult to measure, the Treasury Department
and the IRS use a multiplier of annual
costs to estimate the start-up costs. To fur-
ther acknowledge the difficulty of estimat-
ing these cases, the Treasury Department
and the IRS have accepted the comment
to revise the burden estimate to reflect that
start-up costs would be between five and
ten times annual costs.
In summary, the Treasury Department
and the IRS estimate that 13 to 16 million
customers will be impacted by these final
regulations (mid-point of 14.5 million
customers). A reasonable burden estimate
for the average time to complete these
forms for each customer is 9 minutes (0.15
hours). The Treasury Department and the
IRS estimate that approximately 900 to
9,700 brokers will be impacted by these
final regulations (mid-point of 5,300 bro-
kers). The Treasury Department and the
IRS estimate the average time burden per
broker will be approximately 425 hours.
The Treasury Department and the IRS use
an estimate that the cost of compliance
will be $65.49 per hour, so the total mon-
etized burden is estimated at $28,000 per
broker.
Additionally, start-up costs are esti-
mated to be between five and ten times
annual costs. Given the expected per-firm
annual burden estimates of 425 hours
and $28,000, the Treasury Department
and the IRS estimate per-firm start-up
burdens as between 2,125 to 4,250 hours
and $140,000 to $280,000 of aggregate
monetized burden. Using the mid-points,

July 29, 2024 254 Bulletin No. 2024–31
start-up total estimated aggregate burden
hours is 3,188 hours and total estimated
monetized burden is $210,000 per firm.
An agency may not conduct or sponsor,
and a person is not required to respond to,
a collection of information unless it dis-
plays a valid control number assigned by
the Office of Management and Budget.
On April 22, 2024, the IRS released and
invited comments on the draft Form 1099-
DA. The draft Form 1099-DA is available
on https://www.irs.gov. Also on April 22,
2024, the IRS published in the Federal
Register (89 FR 29433) a Notice and
request for comments on the collection
of information requirements related to the
broker regulations with a 60-day comment
period. There will be an additional 30-day
comment period beginning on the date a
second Notice and request for comments
on the collection of information require-
ments related to the broker regulations
is published in the Federal Register.
The OMB Control Number for the Form
1099-S is 1545-0997. The Form 1099-S
will be updated for real estate reporting,
which applies to transactions occurring on
or after January 1, 2026.
Books or records relating to a collec-
tion of information must be retained as
long as their contents may become mate-
rial in the administration of any internal
revenue law. Generally, tax returns and
tax return information are confidential, as
required by section 6103.
III. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA)
(5 U.S.C. chapter 6) requires agencies to
“prepare and make available for public
comment an initial regulatory flexibility
analysis,” which will “describe the impact
of the rule on small entities.” 5 U.S.C.
603(a). Unless an agency determines that
a proposal will not have a significant eco-
nomic impact on a substantial number
of small entities, section 603 of the RFA
requires the agency to present a final reg-
ulatory flexibility analysis (FRFA) of the
final regulations. The Treasury Depart-
ment and the IRS have not determined
whether these final regulations will likely
have a significant economic impact on
a substantial number of small entities.
This determination requires further study.
Because there is a possibility of significant
economic impact on a substantial number
of small entities, a FRFA is provided in
these final regulations.
The expected number of impacted issu-
ers of information returns under these final
regulations is between 900 to 9,700 bro-
kers (mid-point of 5,300). Small Business
Administration regulations provide small
business size standards by NAICS Indus-
try. See 13 CFR 121.201. The NAICS
includes virtual currency exchange ser-
vices in the NAICS code for Commodity
Contracts Dealing (52313). According to
the Small Business Administration regula-
tions, the maximum annual receipts for a
concern and its affiliates to be considered
small in this NAICS code is $41.5 million.
Based on tax return data, only 200 of the
9,700 firms identified as impacted issu-
ers in the upper bound estimate exceed
the $41.5 million threshold. This implies
there could be 700 to 9,500 impacted
small business issuers under the Small
Business Administration’s small business
size standards.
Pursuant to section 7805(f) of the
Code, the notice of proposed rulemaking
was submitted to the Chief Counsel for
Advocacy of the Small Business Adminis-
tration for comment on its impact on small
business, and no comments were received.
A. Need for and objectives of the rule
Information reporting is essential to the
integrity of the tax system. The IRS esti-
mated in its 2019 tax gap analysis that net
misreporting as a percent of income for
income with little to no third party infor-
mation reporting is 55 percent. In compar-
ison, misreporting for income with some
information reporting, such as capital
gains, is 17 percent, and for income with
substantial information reporting, such as
dividend and interest income, is just five
percent.
Prior to these final regulations, many
transactions involving digital assets were
outside the scope of information reporting
rules. Digital assets are treated as prop-
erty for Federal income tax purposes. The
regulations under section 6045 require
brokers to file information returns for
customers that sell certain types of prop-
erty providing gross proceeds and, in
some cases, adjusted basis. However, the
existing regulations do not specify digi-
tal assets as a type of property for which
information reporting is required. Section
6045 also requires information returns for
real estate transactions, but the existing
regulations do not require reporting of
amounts received in digital assets. Section
6050W requires information reporting
by payment settlement entities on certain
payments made with respect to payment
card and third-party network transac-
tions. However, the existing regulations
are silent as to whether certain exchanges
involving digital assets are reportable pay-
ments under section 6050W.
Information reporting by brokers and
real estate reporting persons under section
6045 with respect to certain digital asset
dispositions and digital asset payments
received by real estate transferors will
lead to higher levels of taxpayer compli-
ance because the income earned by tax-
payers engaging in transactions involving
digital assets will be made more transpar-
ent to both the IRS and taxpayers. Clear
information reporting rules that require
reporting of gross proceeds and, in some
cases, adjusted basis for taxpayers who
engage in digital asset transactions will
help the IRS identify taxpayers who have
engaged in these transactions, and thereby
help to reduce the overall tax gap. These
final regulations are also expected to facil-
itate the preparation of tax returns (and
reduce the number of inadvertent errors or
intentional misstatements shown on those
returns) by and for taxpayers who engage
in digital asset transactions.
B. Affected small entities
As discussed above, we anticipate
9,500 of the 9,700 (or 98 percent) impacted
issuers in the upper bound estimate could
be small businesses.
1. Impact of the Rules
As previously stated in the Paperwork
Reduction Act section of this preamble, the
Form 1099-DA prescribed by the Secretary
for reporting sales of digital assets pursuant
to final §1.6045-1(d) of these final regula-
tions is expected to create an average esti-
mated per customer burden on brokers of
between 7.5 and 10.5 minutes, with a mid-
point of 9 minutes (or 0.15 hours). In addi-
tion, the form is expected to create an aver-

Bulletin No. 2024–31 255 July 29, 2024
age estimated per firm start-up aggregated
burden of between 2,125 to 4,250 hours in
start-up costs to build processes to comply
with the information reporting requirements.
The revised Form 1099-S prescribed by the
Secretary for reporting gross proceeds from
the payment of digital assets paid to real
estate transferors as consideration in a real
estate transaction pursuant to final §1.6045-
4(i) of these final regulations is not expected
to change overall costs to complete the
revised form. Because we expect that filers
of revised Form 1099-S will already be filers
of the form, we do not expect them to incur a
material increase in start-up costs associated
with the revised form.
Although small businesses may engage
tax reporting services to complete, file,
and furnish information returns to avoid
the start-up costs associated with building
an internal information reporting system
for sales of digital assets, it remains dif-
ficult to predict whether the economies of
scale efficiencies of using these services
will offset the somewhat more burden-
some ongoing costs associated with using
third party contractors.
2. Alternatives Considered for Small
Businesses
The Treasury Department and the IRS
considered alternatives to these final regu-
lations that would have created an excep-
tion to reporting, or a delayed applicabil-
ity date, for small businesses but decided
against such alternatives for several rea-
sons. As discussed above, we anticipate
that 9,500 of the 9,700 (or 98 percent)
impacted issuers in the upper bound esti-
mate could be small businesses. First, one
purpose of these regulations is to elimi-
nate the overall tax gap. Any exception or
delay to the information reporting rules
for small business brokers, which may
comprise the vast majority of impacted
issuers, would reduce the effectiveness of
these final regulations. In addition, such
an exception or delay could have the unin-
tended effect of incentivizing taxpayers
to move their business to excepted small
businesses, thus thwarting IRS efforts to
identify taxpayers engaged in digital asset
transactions. Additionally, because the
information reported on statements fur-
nished to customers will likely be an aid
to tax return preparation by those custom-
ers, small business brokers will be able
to offer their customers the same amount
of useful information as their larger com-
petitors. Finally, to the extent investors in
digital asset transactions are themselves
small businesses, these final regulations
will help these businesses with their own
tax preparation efforts.
3. Duplicate, Overlapping, or Relevant
Federal Rules
These final regulations do not overlap
or conflict with any relevant Federal rules.
As discussed above, the multiple broker
rule ensures, in certain instances, that
duplicative reporting is not required.
IV. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates
Reform Act of 1995 requires that agencies
assess anticipated costs and benefits and
take certain other actions before issuing a
final rule that includes any Federal man-
date that may result in expenditures in any
one year by a State, local, or Tribal gov-
ernment, in the aggregate, or by the pri-
vate sector, of $100 million in 1995 dol-
lars, updated annually for inflation. This
rule does not include any Federal mandate
that may result in expenditures by State,
local, or Tribal governments, or by the pri-
vate sector in excess of that threshold.
V. Executive Order 13132: Federalism
Executive Order 13132 (entitled
“Federalism”) prohibits an agency from
publishing any rule that has federalism
implications if the rule either imposes
substantial, direct compliance costs on
State and local governments, and is not
required by statute, or preempts State law,
unless the agency meets the consultation
and funding requirements of section 6 of
the Executive order. This final rule does
not have federalism implications, does
not impose substantial direct compliance
costs on State and local governments, and
does not preempt State law within the
meaning of the Executive order.
VI. Congressional Review Act
Pursuant to the Congressional Review
Act (5 U.S.C. 801 et seq.), the Office of
Information and Regulatory Affairs desig-
nated this rule as a major rule as defined
by 5 U.S.C. 804(2).
Statement of Availability of IRS
Documents
IRS Revenue Procedures, Revenue
Rulings, Notices and other guidance cited
in this document are published in the Inter-
nal Revenue Bulletin and are available
from the Superintendent of Documents,
U.S. Government Publishing Office,
Washington, DC 20402, or by visiting the
IRS website at https://www.irs.gov.
Drafting Information
The principal authors of these regula-
tions are Roseann Cutrone, Office of the
Associate Chief Counsel (Procedure and
Administration) and Alexa Dubert, Office
of the Associate Chief Counsel (Income
Tax and Accounting). However, other per-
sonnel from the Treasury Department and
the IRS, including Jessica Chase, Office of
the Associate Chief Counsel (Procedure
and Administration), Kyle Walker, Office
of the Associate Chief Counsel (Income
Tax and Accounting), John Sweeney and
Alan Williams, Office of Associate Chief
Counsel (International), and Pamela Lew,
Office of Associate Chief Counsel (Finan-
cial Institutions and Products), partici-
pated in their development.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and record-
keeping requirements.
26 CFR Part 31
Employment taxes, Income taxes,
Penalties, Pensions, Railroad retirement,
Reporting and recordkeeping require-
ments, Social security, Unemployment
compensation.
26 CFR Part 301
Employment taxes, Estate taxes,
Excise taxes, Gift taxes, Income taxes,
Penalties, Reporting and recordkeeping
requirements.

July 29, 2024 256 Bulletin No. 2024–31
Amendments to the Regulations
Accordingly, 26 CFR parts 1, 31, and
301 are amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 continues to read in part as fol-
lows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.1001-1 is amended by
adding a sentence at the end of paragraph
(a) to read as follows:
§1.1001-1 Computation of gain or loss.
(a)* * * For rules determining the
amount realized for purposes of computing
the gain or loss upon the sale, exchange,
or other disposition of digital assets, as
defined in §1.6045-1(a)(19), other than a
digital asset not required to be reported as
a digital asset pursuant to §1.6045-1(c)(8)
(ii), (iii), or (iv), see §1.1001-7.
* * * * *
Par. 3. Section 1.1001-7 is added to
read as follows:
§1.1001-7 Computation of gain or loss
for digital assets.
(a) In general. This section provides
rules to determine the amount realized
for purposes of computing the gain or
loss upon the sale, exchange, or other
disposition of digital assets, as defined in
§1.6045-1(a)(19) other than a digital asset
not required to be reported as a digital
asset pursuant to §1.6045-1(c)(8)(ii), (iii),
or (iv).
(b) Amount realized in a sale, exchange,
or other disposition of digital assets for
cash, other property, or services--(1) Com-
putation of amount realized--(i) In general.
If digital assets are sold or otherwise dis-
posed of for cash, other property differing
materially in kind or in extent, or services,
the amount realized is the excess of:
(A) The sum of:
(1) Any cash received;
(2) The fair market value of any prop-
erty received or, in the case of a debt
instrument described in paragraph (b)(1)
(iv) of this section, the amount determined
under paragraph (b)(1)(iv) of this section;
and
(3) The fair market value of any ser-
vices received; reduced by
(B) The amount of digital asset transac-
tion costs, as defined in paragraph (b)(2)
(i) of this section, allocable to the sale or
disposition of the transferred digital asset,
as determined under paragraph (b)(2)(ii)
of this section.
(ii) Digital assets used to pay digital
asset transaction costs. If digital assets are
used or withheld to pay digital asset trans-
action costs, as defined in paragraph (b)(2)
(i) of this section, such use or withholding
is a disposition of the digital assets for ser-
vices.
(iii) Application of general rule to
certain sales, exchanges, or other dispo-
sitions of digital assets. The following
paragraphs (b)(1)(iii)(A) through (C) of
this section apply the rules of this section
to certain sales, exchanges, or other dispo-
sitions of digital assets.
(A) Sales or other dispositions of dig-
ital assets for cash. The amount realized
from the sale of digital assets for cash is
the sum of the amount of cash received
plus the fair market value of services
received as described in paragraph (b)(1)
(ii) of this section, reduced by the amount
of digital asset transaction costs allocable
to the disposition of the transferred digital
assets, as determined under paragraph (b)
(2)(ii) of this section.
(B) Exchanges or other dispositions of
digital assets for services, or certain prop-
erty. The amount realized on the exchange
or other disposition of digital assets for
services or property differing materially in
kind or in extent, other than digital assets
or debt instruments described in para-
graph (b)(1)(iv) of this section, is the sum
of the fair market value of such property
and services received (including services
received as described in paragraph (b)(1)
(ii) of this section), reduced by the amount
of digital asset transaction costs allocable
to the disposition of the transferred digital
assets, as determined under paragraph (b)
(2)(ii) of this section.
(C) Exchanges of digital assets. The
amount realized on the exchange of one
digital asset for another digital asset dif-
fering materially in kind or in extent is
the sum of the fair market value of the
digital asset received plus the fair market
value of services received as described
in paragraph (b)(1)(ii) of this section,
reduced by the amount of digital asset
transaction costs allocable to the dispo-
sition of the transferred digital asset, as
determined under paragraph (b)(2)(ii) of
this section.
(iv) Debt instrument issued in exchange
for digital assets. For purposes of this
section, if a debt instrument is issued in
exchange for digital assets and the debt
instrument is subject to §1.1001-1(g), the
amount attributable to the debt instrument
is determined under §1.1001-1(g) (in
general, the issue price of the debt instru-
ment).
(2) Digital asset transaction costs--(i)
Definition. The term digital asset transac-
tion costs means the amounts paid in cash
or property (including digital assets) to
effect the sale, disposition or acquisition
of a digital asset. Digital asset transaction
costs include transaction fees, transfer
taxes, and commissions.
(ii) Allocation of digital asset transac-
tion costs. This paragraph (b)(2)(ii) pro-
vides the rules for allocating digital asset
transaction costs to the sale or disposition
of a digital asset. Accordingly, any other
allocation or specific assignment of digital
asset transaction costs is disregarded.
(A) In general. Except as provided in
paragraph (b)(2)(ii)(B) of this section, the
total digital asset transaction costs paid by
the taxpayer in connection with the sale
or disposition of digital assets are alloca-
ble to the sale or disposition of the digital
assets.
(B) Special rule for allocation of cer-
tain cascading digital asset transaction
costs. This paragraph (b)(2)(ii)(B) pro-
vides a special rule in the case of a trans-
action described in paragraph (b)(1)(iii)
(C) of this section (original transaction)
and for which digital assets are withheld
from digital assets acquired in the original
transaction to pay the digital asset transac-
tion costs to effect the original transaction.
The total digital asset transaction costs
paid by the taxpayer to effect both the
original transaction and any disposition
of the withheld digital assets are allocable
exclusively to the disposition of digital
assets in the original transaction.
(3) Time for determining fair market
value of digital assets. Generally, the fair
market value of a digital asset is deter-
mined as of the date and time of the sale
or disposition of the digital asset.

Bulletin No. 2024–31 257 July 29, 2024
(4) Special rule when the fair market
value of property or services cannot be
determined. If the fair market value of
the property (including digital assets) or
services received in exchange for digital
assets cannot be determined with reason-
able accuracy, the fair market value of such
property or services must be determined
by reference to the fair market value of
the digital assets transferred as of the date
and time of the exchange. This paragraph
(b)(4), however, does not apply to a debt
instrument described in paragraph (b)(1)
(iv) of this section.
(5) Examples. The following examples
illustrate the application of paragraphs
(b)(1) through (3) of this section. Unless
the facts specifically state otherwise, the
transactions described in the following
examples occur after the applicability date
set forth in paragraph (c) of this section.
For purposes of the examples under this
paragraph (b)(5), assume that TP is a dig-
ital asset investor, and each unit of digital
asset A, B, and C is materially different in
kind or in extent from the other units. See
§1.1012-1(h)(4) for examples illustrating
the determination of basis of digital assets.
(i) Example 1: Exchange of digital assets for
services—(A) Facts. TP owns a total of 20 units of
digital asset A, and each unit has an adjusted basis
of $0.50. X, an unrelated person, agrees to perform
cleaning services for TP in exchange for 10 units of
digital asset A, which together have a fair market
value of $10. The fair market value of the services
performed by X also equals $10. X then performs the
services, and TP transfers 10 units of digital asset A
to X. Additionally, TP pays $1 in cash of transaction
fee to dispose of digital asset A.
(B) Analysis. Under paragraph (b)(1) of this sec-
tion, TP has a disposition of 10 units of digital asset
A for services received. Under paragraphs (b)(2)(i)
and (b)(2)(ii)(A) of this section, TP has digital asset
transaction costs of $1, which must be allocated to
the disposition of digital asset A. Under paragraph
(b)(1)(i) of this section, TP’s amount realized on the
disposition of the units of digital asset A is $9, which
is the fair market value of the services received,
$10, reduced by the digital asset transaction costs
allocated to the disposition of digital asset A, $1. TP
recognizes a gain of $4 on the exchange ($9 amount
realized reduced by $5 adjusted basis in 10 units).
(ii) Example 2: Digital asset transaction costs
paid in cash in an exchange of digital assets—(A)
Facts. TP owns a total of 10 units of digital asset A,
and each unit has an adjusted basis of $0.50. TP uses
BEX, an unrelated third party, to effect the exchange
of 10 units of digital asset A for 20 units of digital
asset B. At the time of the exchange, each unit of
digital asset A has a fair market value of $2 and
each unit of digital asset B has a fair market value
of $1. BEX charges $2 per transaction, which BEX
requires its customers to pay in cash. At the time of
the transaction, TP pays BEX $2 in cash.
(B) Analysis. Under paragraph (b)(2)(i) of this
section, TP has digital asset transaction costs of $2.
Under paragraph (b)(2)(ii)(A) of this section, TP
must allocate such costs ($2) to the disposition of the
10 units of digital asset A. Under paragraphs (b)(1)(i)
and (b)(3) of this section, TP’s amount realized from
the exchange is $18, which is the fair market value of
the 20 units of digital asset B received ($20) as of the
date and time of the transaction, reduced by the digi-
tal asset transaction costs allocated to the disposition
of digital asset A ($2). TP recognizes a gain of $13
on the exchange ($18 amount realized reduced by $5
adjusted basis in the 10 units of digital asset A).
(iii) Example 3: Digital asset transaction costs
paid with other digital assets—(A) Facts. The facts
are the same as in paragraph (b)(5)(ii)(A) of this
section (the facts in Example 2), except that BEX
requires its customers to pay transaction fees using
units of digital asset C. TP has an adjusted basis in
each unit of digital asset C of $0.50. TP transfers 2
units of digital asset C to BEX to effect the exchange
of digital asset A for digital asset B. TP also pays to
BEX an additional unit of digital asset C for services
rendered by BEX to effect the disposition of digital
asset C for payment of the transaction costs. The fair
market value of each unit of digital asset C is $1.
(B) Analysis. TP disposes of 3 units of digital
asset C for services described in paragraph (b)(1)(ii)
of this section. Therefore, under paragraph (b)(2)(i)
of this section, TP has digital asset transaction costs
of $3. Under paragraph (b)(2)(ii)(A) of this section,
TP must allocate $2 of such costs to the disposition
of the 10 units of digital asset A. TP must also allo-
cate $1 of such costs to the disposition of the 3 units
of digital asset C. None of the digital asset transac-
tion costs are allocable to the acquired units of digi-
tal asset B. Under paragraphs (b)(1)(i) and (b)(3) of
this section, TP’s amount realized on the disposition
of digital asset A is $18, which is the excess of the
fair market value of the 20 units of digital asset B
received ($20) as of the date and time of the transac-
tion over the allocated digital asset transaction costs
($2). Also, under paragraphs (b)(1)(i) and (b)(3) of
this section, TP’s amount realized on the disposition
of the 3 units of digital asset C is $2, which is the
excess of the gross proceeds determined as of the
date and time of the transaction over the allocated
digital asset transaction costs of $1. TP recognizes a
gain of $13 on the disposition of 10 units of digital
asset A ($18 amount realized over $5 adjusted basis)
and a gain of $0.50 on the disposition of the 3 units
of digital asset C ($2 amount realized over $1.50
adjusted basis).
(iv) Example 4: Digital asset transaction costs
withheld from the transferred digital assets in an
exchange of digital assets—(A) Facts. The facts are
the same as in paragraph (b)(5)(ii)(A) of this section
(the facts in Example 2), except that BEX requires
its payment be withheld from the units of the digital
asset transferred. At the time of the transaction, BEX
withholds 1 unit of digital asset A. TP exchanges the
remaining 9 units of digital asset A for 18 units of
digital asset B.
(B) Analysis. The withholding of 1 unit of digital
asset A is a disposition of a digital asset for services
within the meaning of paragraph (b)(1)(ii) of this
section. Under paragraph (b)(2)(i) of this section, TP
has digital asset transaction costs of $2. Under para-
graph (b)(2)(ii)(A) of this section, TP must allocate
such costs to the disposition of the 10 units of digital
asset A. Under paragraphs (b)(1)(i) and (b)(3) of this
section, TP’s amount realized on the 10 units of digi-
tal asset A is $18, which is the excess of the fair mar-
ket value of the 18 units of digital asset B received
($18) and the fair market value of services received
($2) as of the date and time of the transaction over
the allocated digital asset transaction costs ($2). TP
recognizes a gain on the 10 units of digital asset A
transferred of $13 ($18 amount realized reduced by
$5 adjusted basis in the 10 units).
(v) Example 5: Digital asset transaction fees
withheld from the acquired digital assets in an
exchange of digital assets—(A) Facts. The facts are
the same as in paragraph (b)(5)(iv)(A) of this section
(the facts in Example 4), except that BEX requires
its payment be withheld from the units of the digital
asset acquired. At the time of the transaction, BEX
withholds 3 units of digital asset B, 2 units of which
effect the exchange of digital asset A for digital asset
B and 1 unit of which effects the disposition of dig-
ital asset B for payment of the transaction fees. TP
does not make an identification to BEX identifying
other units of B as the units disposed.
(B) Analysis. The withholding of 3 units of digital
asset B is a disposition of digital assets for services
within the meaning of paragraph (b)(1)(ii) of this
section. Under paragraph (b)(2)(i) of this section, TP
has digital asset transaction costs of $3. Under para-
graph (b)(2)(ii)(B) of this section, TP must allocate
such costs to the disposition of the 10 units of digital
asset A in the original transaction. Under paragraphs
(b)(1)(i) and (b)(3) of this section, TP’s amount real-
ized on the 10 units of digital asset A is $17, which
is the excess of the fair market value of the 20 units
of digital asset B received ($20) as of the date and
time of the transaction over the allocated digital asset
transaction costs ($3). TP’s amount realized on the
disposition of the 3 units of digital asset B used to
pay digital asset transaction costs is $3, which is the
fair market value of services received at the time of
the transaction. TP recognizes a gain on the 10 units
of digital asset A transferred of $12 ($17 amount
realized reduced by $5 adjusted basis in the 10 units).
TP recognizes $0 in gain or loss on the 3 units of dig-
ital asset B withheld ($3 amount realized reduced by
$3 (adjusted basis in the 3 units)). See §1.1012-1(j)
(3)(iii) for the special rule for identifying the basis
and holding period of the 3 units withheld.
(c) Applicability date. This section
applies to all sales, exchanges, and dispo-
sitions of digital assets on or after January
1, 2025.
Par. 4. Section 1.1012-1 is amended by
adding paragraphs (h) through (j) to read
as follows:
§1.1012-1 Basis of property.
* * * * *
(h) Determination of basis of digital
assets--(1) Overview and general rule.
This paragraph (h) provides rules to

July 29, 2024 258 Bulletin No. 2024–31
determine the basis of digital assets, as
defined in §1.6045-1(a)(19) other than a
digital asset not required to be reported
as a digital asset pursuant to §1.6045-1(c)
(8)(ii), (iii), or (iv), received in a purchase
for cash, a transfer in connection with the
performance of services, an exchange
for digital assets or other property dif-
fering materially in kind or in extent, an
exchange for a debt instrument described
in paragraph (h)(1)(v) of this section,
or in a part sale and part gift transfer
described in paragraph (h)(1)(vi) of this
section. Except as provided in paragraph
(h)(1)(ii), (v), and (vi) of this section, the
basis of digital assets received in a pur-
chase or exchange is generally equal to
the cost thereof at the date and time of the
purchase or exchange, plus any allocable
digital asset transaction costs as deter-
mined under paragraph (h)(2)(ii) of this
section.
(i) Basis of digital assets purchased for
cash. The basis of digital assets purchased
for cash is the amount of cash used to pur-
chase the digital assets plus any allocable
digital asset transaction costs as deter-
mined under paragraph (h)(2)(ii)(A) of
this section.
(ii) Basis of digital assets received in
connection with the performance of ser-
vices. For rules regarding digital assets
received in connection with the perfor-
mance of services, see §§1.61-2(d)(2) and
1.83-4(b).
(iii) Basis of digital assets received in
exchange for property other than digital
assets. The basis of digital assets received
in exchange for property differing materi-
ally in kind or in extent, other than digi-
tal assets or debt instruments described in
paragraph (h)(1)(v) of this section, is the
cost as described in paragraph (h)(3) of
this section of the digital assets received
plus any allocable digital asset transaction
costs as determined under paragraph (h)
(2)(ii)(A) of this section.
(iv) Basis of digital assets received
in exchange for other digital assets.
The basis of digital assets received in an
exchange for other digital assets differing
materially in kind or in extent is the cost as
described in paragraph (h)(3) of this sec-
tion of the digital assets received.
(v) Basis of digital assets received
in exchange for the issuance of a debt
instrument. If a debt instrument is issued
in exchange for digital assets, the cost of
the digital assets attributable to the debt
instrument is the amount determined
under paragraph (g) of this section, plus
any allocable digital asset transaction
costs as determined under paragraph (h)
(2)(ii)(A) of this section.
(vi) Basis of digital assets received
in a part sale and part gift transfer. To
the extent digital assets are received in a
transfer, which is in part a sale and in part
a gift, see §1.1012-2.
(2) Digital asset transaction costs--(i)
Definition. The term digital asset transac-
tion costs under this paragraph (h) has the
same meaning as in §1.1001-7(b)(2)(i).
(ii) Allocation of digital asset trans-
action costs. This paragraph (h)(2)(ii)
provides the rules for allocating digital
asset transaction costs, as defined in para-
graph (h)(2)(i) of this section, for transac-
tions described in paragraph (h)(1) of this
section. Any other allocation or specific
assignment of digital asset transaction
costs is disregarded.
(A) Allocation of digital asset trans-
action costs on a purchase or exchange
for digital assets. Except as provided in
paragraphs (h)(2)(ii)(B) and (C) of this
section, the total digital asset transaction
costs paid by the taxpayer in connection
with an acquisition of digital assets are
allocable to the digital assets received.
(B) Special rule for the allocation of
digital asset transaction costs paid to effect
an exchange of digital assets for other
digital assets. Except as provided in para-
graph (h)(2)(ii)(C) of this section, the total
digital asset transaction costs paid by the
taxpayer, to effect an exchange described
in paragraph (h)(1)(iv) of this section are
allocable exclusively to the disposition of
the transferred digital assets.
(C) Special rule for allocating certain
cascading digital asset transaction costs.
This paragraph (h)(2)(ii)(C) provides a
special rule for an exchange described
in paragraph (h)(1)(iv) of this section
(original transaction) and for which digi-
tal assets are withheld from digital assets
acquired in the original transaction to pay
the digital asset transaction costs to effect
the original transaction. The total digital
asset transaction costs paid by the tax-
payer, to effect both the original transac-
tion and any disposition of the withheld
digital assets, are allocable exclusively to
the disposition of digital assets in the orig-
inal transaction.
(3) Determining the cost of the digital
assets received. In the case of an exchange
described in either paragraph (h)(1)(iii) or
(iv) of this section, the cost of the digital
assets received is the same as the fair mar-
ket value used in determining the amount
realized on the sale or disposition of the
transferred property for purposes of sec-
tion 1001 of the Code. Generally, the cost
of a digital asset received is determined at
the date and time of the exchange. The spe-
cial rule in §1.1001-7(b)(4) also applies in
this section for purposes of determining
the fair market value of a received digital
asset when it cannot be determined with
reasonable accuracy.
(4) Examples. The following examples
illustrate the application of paragraphs
(h)(1) through (3) of this section. Unless
the facts specifically state otherwise, the
transactions described in the following
examples occur after the applicability date
set forth in paragraph (h)(5) of this sec-
tion. For purposes of the examples under
this paragraph (h)(4), assume that TP is
a digital asset investor, and that digital
assets A, B, and C are materially different
in kind or in extent from each other. See
§1.1001-7(b)(5) for examples illustrating
the determination of the amount realized
and gain or loss in a sale or disposition of
a digital asset for cash, other property dif-
fering materially in kind or in extent, or
services.
(i) Example 1: Transaction fee paid in cash—
(A) Facts. TP uses BEX, an unrelated third party, to
exchange 10 units of digital asset A for 20 units of
digital asset B. At the time of the exchange, a unit
of digital asset A has a fair market value of $2, and
a unit of digital asset B has a fair market value of
$1. BEX charges TP a transaction fee of $2, which
TP pays to BEX in cash at the time of the exchange.
(B) Analysis. Under paragraph (h)(2)(i) of this
section, TP has digital asset transaction costs of $2.
Under paragraph (h)(2)(ii)(B) of this section, TP
allocates the digital asset transaction costs ($2) to the
disposition of the 10 units of digital asset A. Under
paragraphs (h)(1)(iv) and (h)(3) of this section, TP’s
basis in the 20 units of digital asset B received is $20,
which is the sum of the fair market value of the 20
units of digital asset B received ($20).
(ii) Example 2: Transaction fee paid in other
property—(A) Facts. The facts are the same as in
paragraph (h)(4)(i)(A) of this section (the facts in
Example 1), except that BEX requires its customers
to pay transaction fees using units of digital asset C.
TP pays the transaction fees using 2 units of digital
asset C that TP holds. At the time TP pays the trans-
action fees, each unit of digital asset C has a fair mar-

Bulletin No. 2024–31 259 July 29, 2024
ket value of $1. TP acquires 20 units of digital asset
B with a fair market value of $20 in the exchange.
(B) Analysis. Under paragraph (h)(2)(i) of this
section, TP has digital asset transaction costs of $2.
Under paragraph (h)(2)(ii)(B) of this section, TP
must allocate the digital asset transaction costs ($2)
to the disposition of the 10 units of digital asset A.
Under paragraphs (h)(1)(iv) and (h)(3) of this sec-
tion, TP’s basis in the 20 units of digital asset B is
$20, which is the sum of the fair market value of the
20 units of digital asset B received ($20).
(iii) Example 3: Digital asset transaction costs
withheld from the transferred digital assets—(A)
Facts. The facts are the same as in paragraph (h)(4)
(i)(A) of this section (the facts in Example 1), except
that BEX withholds 1 unit of digital asset A in pay-
ment of the transaction fees and TP receives 18 units
of digital asset B.
(B) Analysis. Under paragraph (h)(2)(i) of this
section, TP has digital asset transaction costs of $2.
Under paragraph (h)(2)(ii)(B) of this section, TP
must allocate the digital asset transaction costs ($2)
to the disposition of the 10 units of digital asset A.
Under paragraphs (h)(1)(iv) and (h)(3) of this sec-
tion, TP’s total basis in the digital asset B units is
$18, which is the sum of the fair market value of the
18 units of digital asset B received ($18).
(5) Applicability date. This paragraph
(h) is applicable to all acquisitions and
dispositions of digital assets on or after
January 1, 2025.
(i) [Reserved]
(j) Sale, disposition, or transfer of dig-
ital assets. Paragraphs (j)(1) and (2) of
this section apply to digital assets not held
in the custody of a broker, such as digital
assets that are held in an unhosted wallet.
Paragraph (j)(3) of this section applies to
digital assets held in the custody of a bro-
ker. For the definitions of the terms wallet,
hosted wallet, unhosted wallet, and held in
a wallet or account, as used in this para-
graph (j), see §1.6045-1(a)(25)(i) through
(iv). For the definition of the term broker,
see §1.6045-1(a)(1). For the definition of
the term digital asset, see §1.6045-1(a)
(19); however, a digital asset not required
to be reported as a digital asset pursuant
to §1.6045-1(c)(8)(ii), (iii), or (iv) is not
subject to the rules of this section.
(1) Digital assets not held in the cus-
tody of a broker. If a taxpayer sells, dis-
poses of, or transfers less than all units
of the same digital asset not held in the
custody of the broker, such as in a single
unhosted wallet or in a hosted wallet pro-
vided by a person other than a broker, the
basis and holding period of the units sold,
disposed of, or transferred are determined
by making a specific identification of the
units in the wallet that are sold, disposed
of, or transferred, as provided in para-
graph (j)(2) of this section. If a specific
identification is not made, the basis and
holding period of the units sold, disposed
of, or transferred are determined by treat-
ing the units not held in the custody of a
broker as sold, disposed of, or transferred
in order of time from the earliest date
on which units of the same digital asset
not held in the custody of a broker were
acquired by the taxpayer. For purposes of
the preceding sentence, the date any units
were transferred into the taxpayer’s wallet
is disregarded.
(2) Specific identification of digital
assets not held in the custody of a broker.
A specific identification of the units of a
digital asset sold, disposed of, or trans-
ferred is made if, no later than the date
and time of the sale, disposition, or trans-
fer, the taxpayer identifies on its books
and records the particular units to be
sold, disposed of, or transferred by ref-
erence to any identifier, such as purchase
date and time or the purchase price for
the unit, that is sufficient to identify the
units sold, disposed of, or transferred. A
specific identification can be made only
if adequate records are maintained for the
unit of a specific digital asset not held in
the custody of a broker to establish that
a unit sold, disposed of, or transferred is
removed from the wallet.
(3) Digital assets held in the custody
of a broker. This paragraph (j)(3) applies
to digital assets held in the custody of a
broker.
(i) Unit of a digital asset sold, disposed
of, or transferred. Except as provided in
paragraph (j)(3)(iii) of this section, where
multiple units of the same digital asset are
held in the custody of a broker, as defined
in §1.6045-1(a)(1), and the taxpayer does
not provide the broker with an adequate
identification of which units are sold, dis-
posed of, or transferred by the date and
time of the sale, disposition, or transfer,
as provided in paragraph (j)(3)(ii) of this
section, the basis and holding period of
the units sold, disposed of, or transferred
are determined by treating the units held
in the custody of the broker as sold, dis-
posed of, or transferred in order of time
from the earliest date on which units of the
same digital asset held in the custody of a
broker were acquired by the taxpayer. For
purposes of the preceding sentence, the
date any units were transferred into the
custody of the broker is disregarded.
(ii) Adequate identification of units
held in the custody of a broker. Except
as provided in paragraph (j)(3)(iii) of this
section, where multiple units of the same
digital asset are held in the custody of a
broker, as defined in §1.6045-1(a)(1), an
adequate identification occurs if, no later
than the date and time of the sale, dispo-
sition, or transfer, the taxpayer specifies
to the broker having custody of the digi-
tal assets the particular units of the digi-
tal asset to be sold, disposed of, or trans-
ferred by reference to any identifier, such
as purchase date and time or purchase
price, that the broker designates as suffi-
ciently specific to identify the units sold,
disposed of, or transferred. The taxpayer
is responsible for maintaining records to
substantiate the identification. A standing
order or instruction for the specific iden-
tification of digital assets is treated as an
adequate identification made at the time of
sale, disposition, or transfer. In addition,
a taxpayer’s election to use average basis
for a covered security for which average
basis reporting is permitted and that is also
a digital asset is also an adequate identi-
fication. In the case of a broker offering
only one method of making a specific
identification, such method is treated as a
standing order or instruction.
(iii) Special rule for the identification
of certain units withheld. Notwithstanding
paragraph (j)(3)(i) or (ii) of this section,
in the case of a transaction described in
paragraph (h)(1)(iv) of this section (dig-
ital assets exchanged for different digital
assets) and for which the broker withholds
units of the same digital asset received
for either the broker’s backup withhold-
ing obligations under section 3406 of the
Code, or for payment of services described
in §1.1001-7(b)(1)(ii) (digital asset trans-
action costs), the taxpayer is deemed to
have made an adequate identification,
within the meaning of paragraph (j)(3)
(ii) of this section, for such withheld units
regardless of any other adequate identifi-
cation within the meaning of paragraph
(j)(3)(ii) of this section designating other
units of the same digital asset as the units
sold, disposed of, or transferred.
(4) Method for specifically identify-
ing units of a digital asset. A method
of specifically identifying the units

July 29, 2024 260 Bulletin No. 2024–31
of a digital asset sold, disposed of, or
transferred under this paragraph (j), for
example, by the earliest acquired, the
latest acquired, or the highest basis, is
not a method of accounting. Therefore,
a change in the method of specifically
identifying the digital asset sold, dis-
posed of, or transferred, for example,
from the earliest acquired to the latest
acquired, is not a change in method of
accounting to which sections 446 and
481 of the Code apply.
(5) Examples. The following examples
illustrate the application of paragraphs (j)
(1) through (j)(3) of this section. Unless
the facts specifically state otherwise, the
transactions described in the following
examples occur after the applicability date
set forth in paragraph (j)(6) of this sec-
tion. For purposes of the examples under
this paragraph (j)(5), assume that TP is a
digital asset investor and that the units of
digital assets in the examples are the only
digital assets owned by TP.
(i) Example 1: Identification of digital assets
not held in the custody of a broker—(A) Facts. On
September 1, Year 2, TP transfers two lots of digital
asset DE to a new digital asset address generated
and controlled by an unhosted wallet, as defined in
§1.6045-1(a)(25)(iii). The first lot transferred into
TP’s wallet consists of 10 units of digital asset DE,
with a purchase date of January 1, Year 1, and a
basis of $2 per unit. The second lot transferred into
TP’s wallet consists of 20 units of digital asset DE,
with a purchase date of January 1, Year 2, and a
basis of $5 per unit. On September 2, Year 2, when
the DE units have a fair market value of $10 per
unit, TP purchases $100 worth of consumer goods
from Merchant M. To make payment, TP transfers
10 units of digital asset DE from TP’s wallet to CPP,
a processor of digital asset payments as defined in
§1.6045-1(a)(22), that then pays $100 to M, in a
transaction treated as a sale by TP of the 10 units
of digital asset DE. Prior to making the transfer to
CPP, TP keeps a record that the 10 units of DE sold
in this transaction were from the second lot of units
transferred into TP’s wallet.
(B) Analysis. Under the facts in paragraph (j)(5)
(i)(A) of this section, TP’s notation in its records on
the date of sale, prior to the time of the sale, speci-
fying that the 10 units sold were from the 20 units
TP acquired on January 1, Year 2, is a specific iden-
tification within the meaning of paragraph (j)(2) of
this section. TP’s notation is sufficient to identify
the 10 units of digital asset DE sold. Accordingly,
TP has identified the units disposed of for purposes
of determining the basis ($5 per unit) and holding
period (one year or less) of the units sold in order to
purchase the merchandise.
(ii) Example 2: Identification of digital assets not
held in the custody of a broker—(A) Facts. The facts
are the same as in paragraph (j)(5)(i)(A) of this sec-
tion (the facts in Example 1), except in making the
transfer to CPP, TP did not keep a record at or prior to
the time of the sale of the specific 10 units of digital
asset DE that TP intended to sell.
(B) Analysis. TP did not make a specific iden-
tification within the meaning of paragraph (j)(2) of
this section for the 10 units of digital asset DE that
were sold. Pursuant to the ordering rule provided in
paragraph (j)(1) of this section, the units disposed
of are determined by treating the units held in the
unhosted wallet as disposed of in order of time from
the earliest date on which units of the same digi-
tal asset held in the unhosted wallet were acquired
by the taxpayer. Accordingly, TP must treat the 10
units sold as the 10 units with a purchase date of
January 1, Year 1, and a basis of $2 per unit, trans-
ferred into the wallet.
(iii) Example 3: Identification of digital assets
held in the custody of a broker—(A) Facts. On
August 1, Year 1, TP opens a custodial account at
CRX, a broker within the meaning of §1.6045-1(a)
(1), and purchases through CRX 10 units of digital
asset DE for $9 per unit. On January 1, Year 2, TP
opens a custodial account at BEX, an unrelated bro-
ker, and purchases through BEX 20 units of digital
asset DE for $5 per unit. On August 1, Year 3, TP
transfers the digital assets TP holds with CRX into
TP’s custodial account with BEX. BEX has a policy
that purchase or transfer date and time, if necessary,
is a sufficiently specific identifier for customers to
determine the units sold, disposed of, or transferred.
On September 1, Year 3, TP directs BEX to sell 10
units of digital asset DE for $10 per unit and specifies
that BEX sell the units that were purchased on Janu-
ary 1, Year 2. BEX effects the sale.
(B) Analysis. No later than the date and time of
the sale, TP specified to BEX the particular units of
digital assets to be sold. Accordingly, under para-
graph (j)(3)(ii) of this section, TP provided an ade-
quate identification of the 10 units of digital asset DE
sold. Accordingly, the 10 units of digital asset DE
that TP sold are the 10 units that TP purchased on
January 1, Year 2.
(iv) Example 4: Identification of digital assets
held in the custody of a broker—(A) Facts. The facts
are the same as in paragraph (j)(5)(iii)(A) of this sec-
tion (the facts in Example 3) except that TP directs
BEX to sell 10 units of digital asset DE but does not
make any identification of which units to sell. Addi-
tionally, TP does not provide purchase date informa-
tion to BEX with respect to the units transferred into
TP’s account with BEX.
(B) Analysis. Because TP did not specify to
BEX no later than the date and time of the sale
the particular units of digital assets to be sold, TP
did not make an adequate identification within the
meaning of paragraph (j)(3)(ii) of this section.
Thus, the ordering rule provided in paragraph (j)
(3)(i) of this section applies to determine the units
of digital asset DE sold. Pursuant to this rule, the
units sold must be determined by treating the units
held in the custody of the broker as disposed of in
order of time from the earliest date on which units
of the same digital asset held in the custody of a
broker were acquired by the taxpayer. The 10 units
of digital asset DE sold must be attributed to the
10 units of digital asset DE acquired on August 1,
Year 1, which are the earliest units of digital asset
DE acquired by TP that are held in TP’s account
with BEX. In addition, because TP did not provide
to BEX customer-provided acquisition information
as defined in §1.6045-1(d)(2)(ii)(B)(4) with respect
to the units transferred into TP’s account with BEX
(or adopt a standing order to follow the ordering
rule applicable to BEX under §1.6045-1(d)(2)(ii)
(B)(2)), the units determined as sold by BEX under
§1.6045-1(d)(2)(ii)(B)(1) and that BEX will report
as sold under §1.6045-1 are not the same units
that TP must treat as sold under this section. See
§1.6045-1(d)(2)(vii)(C) (Example 3).
(v) Example 5: Identification of the digital asset
used to pay certain digital asset transaction costs—
(A) Facts. On January 1, Year 1, TP purchases 10
units of digital asset AB and 30 units of digital asset
CD in a custodial account with DRX, a broker within
the meaning of §1.6045-1(a)(1). DRX has a policy
that purchase or transfer date and time, if necessary,
is a sufficiently specific identifier by which its cus-
tomers may identify the units sold, disposed of, or
transferred. On June 30, Year 2, TP directs DRX to
purchase 10 additional units of digital asset AB with
10 units of digital asset CD. DRX withholds one unit
of the digital asset AB received for transaction fees.
TP does not make any identification of the 1 unit of
digital asset AB withheld by DRX. TP engages in no
other transactions.
(B) Analysis. DRX’s withholding of 1 unit of
digital asset AB from the 10 units acquired by TP is
a disposition by TP of the 1 unit as of June 30, Year
2. See §§1.1001-7 and 1.1012-1(h) for determining
the amount realized and basis of the disposed unit,
respectively. Despite TP not making an adequate
identification, within the meaning of paragraph (j)
(3)(ii) of this section to DRX of the 1 unit withheld,
under the special rule of paragraph (j)(3)(iii) of this
section, the withheld unit of AB must be attributed to
the units of AB acquired on June 30, Year 2 and held
in TP’s account with DRX.
(vi) Example 6: Identification of the digital asset
used to pay certain digital asset transaction costs—
(A) Facts. The facts are the same as in paragraph
(j)(5)(v)(A) of this section (the facts in Example 5)
except that TP has a standing order with BEX to treat
the earliest unit purchased in TP’s account as the unit
sold, disposed of, or transferred.
(B) Analysis. The transaction is an exchange
of digital assets for different digital assets and for
which the broker withholds units of the same digi-
tal asset received in order to pay digital asset trans-
action costs. Accordingly, although TP’s standing
order to treat the earliest unit purchased in TP’s
account (that is, the units purchased by TP on Janu-
ary 1, Year 1) as the units sold is an adequate identi-
fication under paragraph (j)(3)(ii) of this section, TP
is deemed to have made an adequate identification
for such withheld units pursuant to paragraph (j)
(3)(iii) of this section regardless of TP’s adequate
identification designating other units as the units
sold. Thus, the results are the same as provided in
paragraph (j)(5)(v)(B) of this section (the analysis
in Example 5).
(6) Applicability date. This paragraph
(j) is applicable to all acquisitions and dis-
positions of digital assets on or after Jan-
uary 1, 2025.
Par. 5. Section 1.6045-0 is added to
read as follows:

Bulletin No. 2024–31 261 July 29, 2024
§1.6045-0 Table of contents.
In order to facilitate the use of §1.6045-
1, this section lists the paragraphs con-
tained in §1.6045-1.
§1.6045-1 Returns of information of
brokers and barter exchanges.
(a) Definitions.
(1) Broker.
(2) Customer.
(i) In general.
(ii) Special rules for payment transac-
tions involving digital assets.
(3) Security.
(4) Barter exchange.
(5) Commodity.
(6) Regulated futures contract.
(7) Forward contract.
(8) Closing transaction.
(9) Sale.
(i) In general.
(ii) Sales with respect to digital assets.
(A) In general.
(B) Dispositions of digital assets for
certain property.
(C) Dispositions of digital assets for
certain services.
(D) Special rule for sales effected by
processors of digital asset payments.
(10) Effect.
(i) In general.
(ii) Actions relating to certain options
and forward contracts.
(11) Foreign currency.
(12) Cash.
(13) Person.
(14) Specified security.
(15) Covered security.
(i) In general.
(ii) Acquired in an account.
(iii) Corporate actions and other events.
(iv) Exceptions.
(16) Noncovered security.
(17) Debt instrument, bond, debt obli-
gation, and obligation.
(18) Securities futures contract.
(19) Digital asset.
(i) In general.
(ii) No inference.
(20) Digital asset address.
(21) Digital asset middleman.
(i) In general.
(ii) [Reserved]
(iii) Facilitative service.
(A) [Reserved]
(B) Special rule involving sales of dig-
ital assets under paragraphs (a)(9)(ii)(B)
through (D) of this section.
(22) Processor of digital asset pay-
ments.
(23) Stored-value card.
(24) Transaction identification.
(25) Wallet, hosted wallet, unhosted
wallet, and held in a wallet or account.
(i) Wallet.
(ii) Hosted wallet.
(iii) Unhosted wallet.
(iv) Held in a wallet or account.
(b) Examples.
(c) Reporting by brokers.
(1) Requirement of reporting.
(2) Sales required to be reported.
(3) Exceptions.
(i) Sales effected for exempt recipients.
(A) In general.
(B) Exempt recipient defined.
(C) Exemption certificate.
(1) In general.
(2) Limitation for corporate customers.
(3) Limitation for U.S. digital asset
brokers.
(ii) Excepted sales.
(iii) Multiple brokers.
(A) In general.
(B) Special rule for sales of digital
assets.
(iv) Cash on delivery transactions.
(v) Fiduciaries and partnerships.
(vi) Money market funds.
(A) In general.
(B) Effective/applicability date.
(vii) Obligor payments on certain obli-
gations.
(viii) Foreign currency.
(ix) Fractional share.
(x) Certain retirements.
(xi) Short sales.
(A) In general.
(B) Short sale closed by delivery of a
noncovered security.
(C) Short sale obligation transferred to
another account.
(xii) Cross reference.
(xiii) Short-term obligations issued on
or after January 1, 2014.
(xiv) Certain redemptions.
(4) Examples.
(5) Form of reporting for regulated
futures contracts.
(i) In general.
(ii) Determination of profit or loss from
foreign currency contracts.
(iii) Examples.
(6) Reporting periods and filing groups.
(i) Reporting period.
(A) In general.
(B) Election.
(ii) Filing group.
(A) In general.
(B) Election.
(iii) Example.
(7) Exception for certain sales of agri-
cultural commodities and commodity cer-
tificates.
(i) Agricultural commodities.
(ii) Commodity Credit Corporation
certificates.
(iii) Sales involving designated ware-
houses.
(iv) Definitions.
(A) Agricultural commodity.
(B) Spot sale.
(C) Forward sale.
(D) Designated warehouse.
(8) Special coordination rules for
reporting digital assets that are dual clas-
sification assets.
(i) General rule for reporting dual clas-
sification assets as digital assets.
(ii) Reporting of dual classification
assets that constitute contracts covered by
section 1256(b) of the Code.
(iii) Reporting of dual classification
assets cleared or settled on a limited-ac-
cess regulated network.
(A) General rule.
(B) Limited-access regulated network.
(iv) Reporting of dual classification assets
that are interests in money market funds.
(v) Example: Digital asset securities.
(d) Information required.
(1) In general.
(2) Transactional reporting.
(i) Required information.
(A) General rule for sales described in
paragraph (a)(9)(i) of this section.
(B) Required information for digital
asset transactions.
(C) Exception for certain sales effected
by processors of digital asset payments.
(D) Acquisition information for sales
of certain digital assets.
(ii) Specific identification of specified
securities.
(A) In general.
(B) Identification of digital assets sold,
disposed of, or transferred.
(1) No identification of units by cus-
tomer.

July 29, 2024 262 Bulletin No. 2024–31
(2) Adequate Identification of units by
customer.
(3) Special rule for the identification of
certain units withheld from a transaction.
(4) Customer-provided acquisition
information for digital assets.
(iii) Penalty relief for reporting infor-
mation not subject to reporting.
(A) Noncovered securities.
(B) Gross proceeds from digital assets
sold before applicability date.
(iv) Information from other parties and
other accounts.
(A) Transfer and issuer statements.
(v) Failure to receive a complete trans-
fer statement for securities.
(vi) Reporting by other parties after a
sale of securities.
(A) Transfer statements.
(B) Issuer statements.
(C) Exception.
(vii) Examples.
(3) Sales between interest payment
dates.
(4) Sale date.
(i) In general.
(ii) Special rules for digital asset sales.
(5) Gross proceeds.
(i) In general.
(ii) Sales of digital assets.
(A) Determining gross proceeds.
(1) Determining fair market value.
(2) Consideration value not readily
ascertainable.
(3) Reasonable valuation method for
digital assets.
(B) Digital asset data aggregator.
(iii) Digital asset transactions effected
by processors of digital asset payments.
(iv) Definition and allocation of digital
asset transaction costs.
(A) Definition.
(B) General allocation rule.
(C) Special rule for allocation of cer-
tain cascading digital asset transaction
costs.
(v) Examples.
(6) Adjusted basis.
(i) In general.
(ii) Initial basis.
(A) Cost basis for specified securities
acquired for cash.
(B) Basis of transferred securities.
(1) In general.
(2) Securities acquired by gift.
(C) Digital assets acquired in exchange
for property.
(1) In general.
(2) Allocation of digital asset transac-
tion costs.
(iii) Adjustments for wash sales.
(A) Securities in the same account or
wallet.
(1) In general.
(2) Special rules for covered securities
that are also digital assets.
(B) Covered securities in different
accounts or wallets.
(C) Effect of election under section
475(f)(1).
(D) Reporting at or near the time of
sale.
(iv) Certain adjustments not taken into
account.
(v) Average basis method adjustments.
(vi) Regulated investment company and
real estate investment trust adjustments.
(vii) Treatment of de minimis errors.
(viii) Examples.
(ix) Applicability date.
(x) Examples.
(7) Long-term or short-term gain or loss.
(i) In general.
(ii) Adjustments for wash sales.
(A) Securities in the same account or
wallet.
(1) In general.
(2) Special rules for covered securities
that are also digital assets.
(B) Covered securities in different
accounts or wallets.
(C) Effect of election under section
475(f)(1).
(D) Reporting at or near the time of
sale.
(iii) Constructive sale and mark-to-
market adjustments.
(iv) Regulated investment company
and real estate investment trust adjust-
ments.
(v) No adjustments for hedging trans-
actions or offsetting positions.
(8) Conversion into United States dol-
lars of amounts paid or received in foreign
currency.
(i) Conversion rules.
(ii) Effect of identification under
§1.988-5(a), (b), or (c) when the taxpayer
effects a sale and a hedge through the
same broker.
(iii) Example.
(9) Coordination with the reporting
rules for widely held fixed investment
trusts under §1.671-5.
(10) Optional reporting methods for
qualifying stablecoins and specified non-
fungible tokens.
(i) Optional reporting method for qual-
ifying stablecoins.
(A) In general.
(B) Aggregate reporting method for
designated sales of qualifying stablecoins.
(C) Designated sale of a qualifying sta-
blecoin.
(D) Examples.
(ii) Qualifying stablecoin.
(A) Designed to track certain other cur-
rencies.
(B) Stabilization mechanism.
(C) Accepted as payment.
(D) Examples.
(iii) Optional reporting method for
specified nonfungible tokens.
(A) In general.
(B) Reporting method for specified
nonfungible tokens.
(C) Examples.
(iv) Specified nonfungible token.
(A) Indivisible.
(B) Unique.
(C) Excluded property.
(D) Examples.
(v) Joint accounts.
(11) Collection and retention of addi-
tional information with respect to the sale
of a digital asset.
(e) Reporting of barter exchanges.
(1) Requirement of reporting.
(2) Exchanges required to be reported.
(i) In general.
(ii) Exemption.
(iii) Coordination rules for exchanges of
digital assets made through barter exchanges.
(f) Information required.
(1) In general.
(2) Transactional reporting.
(i) In general.
(ii) Exception for corporate member or
client.
(iii) Definition.
(3) Exchange date.
(4) Amount received.
(5) Meaning of terms.
(6) Reporting period.
(g) Exempt foreign persons.
(1) Brokers.
(2) Barter exchanges.
(3) Applicable rules.
(i) Joint owners.
(ii) Special rules for determining who
the customer is.

Bulletin No. 2024–31 263 July 29, 2024
(iii) Place of effecting sale.
(A) Sale outside the United States.
(B) Sale inside the United States.
(iv) Special rules where the customer
is a foreign intermediary or certain U.S.
branches.
(4) Rules for sales of digital assets.
(i) Definitions.
(A) U.S. digital asset broker.
(B) [Reserved]
(ii) Rules for U.S. digital asset brokers.
(A) Place of effecting sale.
(B) Determination of foreign status.
(iii) [Reserved]
(iv) Rules for non-U.S. digital asset
brokers not conducting activities as money
services businesses.
(A) [Reserved]
(B) Sale treated as effected at an office
inside the United States.
(1) [Reserved]
(2) U.S. indicia.
(C) Consequences of treatment as sale
effected at an office inside the United
States.
(v) [Reserved]
(vi) Rules applicable to brokers that
obtain or are required to obtain documenta-
tion for a customer and presumption rules.
(A) In general.
(1) Documentation of foreign status.
(2) Presumption rules.
(i) In general.
(ii) Presumption rule specific to U.S.
digital asset brokers.
(iii) [Reserved]
(3) Grace period to collect valid docu-
mentation in the case of indicia of a for-
eign customer.
(4) Blocked income.
(B) Reliance on beneficial ownership
withholding certificates to determine for-
eign status.
(1) Collection of information other
than U.S. place of birth.
(i) In general.
(ii) [Reserved]
(2) Collection of information showing
U.S. place of birth.
(C) [Reserved]
(D) Joint owners.
(E) Special rules for customer that is
a foreign intermediary, a flow-through
entity, or certain U.S. branches.
(1) Foreign intermediaries in general.
(i) Presumption rule specific to U.S.
digital asset brokers.
(ii) [Reserved]
(2) Foreign flow-through entities.
(3) U.S. branches that are not beneficial
owners.
(F) Transition rule for obtaining docu-
mentation to treat a customer as an exempt
foreign person.
(vii) Barter exchanges.
(5) Examples.
(h) Identity of customer.
(1) In general.
(2) Examples.
(i) [Reserved]
(j) Time and place for filing; cross-ref-
erences to penalty and magnetic media fil-
ing requirements.
(k) Requirement and time for furnish-
ing statement; cross-reference to penalty.
(1) General requirements.
(2) Time for furnishing statements.
(3) Consolidated reporting.
(4) Cross-reference to penalty.
(l) Use of magnetic media or electronic
form.
(m) Additional rules for option trans-
actions.
(1) In general.
(2) Scope.
(i) In general.
(ii) Delayed effective date for certain
options.
(iii) Compensatory option.
(3) Option subject to section 1256.
(4) Option not subject to section 1256.
(i) Physical settlement.
(ii) Cash settlement.
(iii) Rules for warrants and stock rights
acquired in a section 305 distribution.
(iv) Examples.
(5) Multiple options documented in a
single contract.
(6) Determination of index status.
(n) Reporting for debt instrument
transactions.
(1) In general.
(2) Debt instruments subject to January
1, 2014, reporting.
(i) In general.
(ii) Exceptions.
(iii) Remote or incidental.
(iv) Penalty rate.
(3) Debt instruments subject to January
1, 2016, reporting.
(4) Holder elections.
(i) Election to amortize bond premium.
(ii) Election to currently include
accrued market discount.
(iii) Election to accrue market discount
based on a constant yield.
(iv) Election to treat all interest as
OID.
(v) Election to translate interest income
and expense at the spot rate.
(5) Broker assumptions and customer
notice to brokers.
(i) Broker assumptions if the customer
does not notify the broker.
(ii) Effect of customer notification of
an election or revocation.
(A) Election to amortize bond pre-
mium.
(B) Other debt elections.
(iii) Electronic notification.
(6) Reporting of accrued market dis-
count.
(i) Sale.
(ii) Current inclusion election.
(7) Adjusted basis.
(i) Original issue discount.
(ii) Amortizable bond premium.
(A) Taxable bond.
(B) Tax-exempt bonds.
(iii) Acquisition premium.
(iv) Market discount.
(v) Principal and certain other pay-
ments.
(8) Accrual period.
(9) Premium on convertible bond.
(10) Effect of broker assumptions on
customer.
(11) Additional rules for certain holder
elections.
(i) In general.
(A) Election to treat all interest as
OID.
(B) Election to accrue market discount
based on a constant yield.
(ii) [Reserved]
(12) Certain debt instruments treated as
noncovered securities.
(i) In general.
(ii) Effective/applicability date.
(o) [Reserved]
(p) Electronic filing.
(q) Applicability dates.
(r) Cross-references.
Par. 6. Section 1.6045-1 is amended by:
1. Revising and republishing paragraphs
(a), (b), (c)(3) and (4), and (c)(5)(i);
2. Adding paragraph (c)(8);
3. Revising and republishing paragraph
(d)(2) and revising paragraphs (d)(4) and
(5);

July 29, 2024 264 Bulletin No. 2024–31
4. Revising and republishing para-
graphs (d)(6)(i) and (ii), (d)(6)(iii)(A) and
(B), and (d)(6)(v);
5. Adding paragraph (d)(6)(x);
6. Revising and republishing para-
graphs (d)(7)(i), (d)(7)(ii)(A) and (B), and
(d)(9);
7. Adding paragraphs (d)(10) and (11)
and (e)(2)(iii);
8. Revising and republishing paragraph
(g);
9. Revising paragraphs (j) and (m)(1);
10. Adding paragraph (m)(2)(ii)(C);
11. Revising and republishing para-
graphs (n)(6)(i) and (q); and
12. Adding paragraph (r).
The revisions, republications, and
additions read as follows:
§1.6045-1 Returns of information of
brokers and barter exchanges.
(a) Definitions. The following defini-
tions apply for purposes of this section
and §§1.6045-2 and 1.6045-4.
(1) Broker. The term broker means
any person (other than a person who is
required to report a transaction under sec-
tion 6043 of the Code), U.S. or foreign,
that, in the ordinary course of a trade or
business during the calendar year, stands
ready to effect sales to be made by oth-
ers. A broker includes an obligor that
regularly issues and retires its own debt
obligations, a corporation that regularly
redeems its own stock, or a person that
regularly offers to redeem digital assets
that were created or issued by that per-
son. A broker also includes a real estate
reporting person under §1.6045-4(e) who
(without regard to any exceptions pro-
vided by §1.6045-4(c) and (d)) would be
required to make an information return
with respect to a real estate transac-
tion under §1.6045-4(a). However, with
respect to a sale (including a redemption
or retirement) effected at an office out-
side the United States under paragraph
(g)(3)(iii) of this section (relating to
sales other than sales of digital assets), a
broker includes only a person described
as a U.S. payor or U.S. middleman in
§1.6049-5(c)(5). In the case of a sale of
a digital asset, a broker includes only a
U.S. digital asset broker as defined in
paragraph (g)(4)(i)(A)(1) of this section.
In addition, a broker does not include an
international organization described in
§1.6049-4(c)(1)(ii)(G) that redeems or
retires an obligation of which it is the
issuer.
(2) Customer--(i) In general. The term
customer means, with respect to a sale
effected by a broker, the person (other
than such broker) that makes the sale, if
the broker acts as—
(A) An agent for such person in the
sale;
(B) A principal in the sale;
(C) The participant in the sale responsi-
ble for paying to such person or crediting
to such person’s account the gross pro-
ceeds on the sale; or
(D) A digital asset middleman, as
defined in paragraph (a)(21) of this sec-
tion, that effects the sale of a digital asset
for such person.
(ii) Special rules for payment trans-
actions involving digital assets. In addi-
tion to the persons defined as customers
in paragraph (a)(2)(i) of this section, the
term customer includes:
(A) The person who transfers digital
assets in a sale described in paragraph
(a)(9)(ii)(D) of this section to a proces-
sor of digital asset payments that has an
agreement or other arrangement with such
person for the provision of digital asset
payment services that provides that the
processor of digital asset payments may
verify such person’s identity or other-
wise comply with anti-money laundering
(AML) program requirements under 31
CFR part 1010, or any other AML pro-
gram requirements, as are applicable to
that processor of digital asset payments.
For purposes of the previous sentence, an
agreement or other arrangement includes
any arrangement under which, as part of
customary onboarding procedures, such
person is treated as having agreed to gen-
eral terms and conditions.
(B) The person who transfers digital
assets or directs the transfer of digital
assets—
(1) In exchange for property of a type
the later sale of which, if effected by such
broker, would constitute a sale of that
property under paragraph (a)(9) of this
section; or
(2) In exchange for the acquisition of
services performed by such broker; and
(C) In the case of a real estate reporting
person under §1.6045-4(e) with respect
to a real estate transaction as defined in
§1.6045-4(b)(1), the person who transfers
digital assets or directs the transfer of digi-
tal assets to the transferor of real estate (or
the seller’s nominee or agent) to acquire
such real estate.
(3) Security. The term security means:
(i) A share of stock in a corporation
(foreign or domestic);
(ii) An interest in a trust;
(iii) An interest in a partnership;
(iv) A debt obligation;
(v) An interest in or right to purchase
any of the foregoing in connection with
the issuance thereof from the issuer or an
agent of the issuer or from an underwriter
that purchases any of the foregoing from
the issuer;
(vi) An interest in a security described
in paragraph (a)(3)(i) or (iv) of this section
(but not including executory contracts that
require delivery of such type of security);
(vii) An option described in paragraph
(m)(2) of this section; or
(viii) A securities futures contract.
(4) Barter exchange. The term barter
exchange means any person with mem-
bers or clients that contract either with
each other or with such person to trade or
barter property or services either directly
or through such person. The term does not
include arrangements that provide solely
for the informal exchange of similar ser-
vices on a noncommercial basis.
(5) Commodity. The term commodity
means:
(i) Any type of personal property or
an interest therein (other than securi-
ties as defined in paragraph (a)(3) of this
section), the trading of regulated futures
contracts in which has been approved by
or has been certified to the Commodity
Futures Trading Commission (see 17 CFR
40.3 or 40.2);
(ii) Lead, palm oil, rapeseed, tea, tin, or
an interest in any of the foregoing; or
(iii) Any other personal property or an
interest therein that is of a type the Sec-
retary determines is to be treated as a
commodity under this section, from and
after the date specified in a notice of such
determination published in the Federal
Register.
(6) Regulated futures contract. The
term regulated futures contract means
a regulated futures contract within the
meaning of section 1256(b) of the Code.

Bulletin No. 2024–31 265 July 29, 2024
(7) Forward contract. The term for-
ward contract means:
(i) An executory contract that requires
delivery of a commodity in exchange for
cash and which contract is not a regulated
futures contract;
(ii) An executory contract that requires
delivery of personal property or an inter-
est therein in exchange for cash, or a cash
settlement contract, if such executory
contract or cash settlement contract is of
a type the Secretary determines is to be
treated as a forward contract under this
section, from and after the date specified
in a notice of such determination pub-
lished in the Federal Register; or
(iii) An executory contract that—
(A) Requires delivery of a digital asset
in exchange for cash, stored-value cards,
a different digital asset, or any other prop-
erty or services described in paragraph (a)
(9)(ii)(B) or (C) of this section; and
(B) Is not a regulated futures contract.
(8) Closing transaction. The term clos-
ing transaction means a lapse, expiration,
settlement, abandonment, or other termi-
nation of a position. For purposes of the
preceding sentence, a position includes a
right or an obligation under a forward con-
tract, a regulated futures contract, a secu-
rities futures contract, or an option.
(9) Sale--(i) In general. The term sale
means any disposition of securities, com-
modities, options, regulated futures con-
tracts, securities futures contracts, or for-
ward contracts, and includes redemptions
of stock, retirements of debt instruments
(including a partial retirement attributable
to a principal payment received on or after
January 1, 2014), and enterings into short
sales, but only to the extent any of these
actions are conducted for cash. In the case
of an option, a regulated futures contract,
a securities futures contract, or a forward
contract, a sale includes any closing trans-
action. When a closing transaction for a
contract described in section 1256(b)(1)
(A) involves making or taking delivery,
there are two sales, one resulting in profit
or loss on the contract, and a separate sale
on the delivery. When a closing transaction
for a contract described in section 988(c)
(5) of the Code involves making delivery,
there are two sales, one resulting in profit
or loss on the contract, and a separate sale
on the delivery. For purposes of the pre-
ceding sentence, a broker may assume that
any customer’s functional currency is the
U.S. dollar. When a closing transaction
in a forward contract involves making
or taking delivery, the broker may treat
the delivery as a sale without separating
the profit or loss on the contract from the
profit or loss on the delivery, except that
taking delivery for U.S. dollars is not a
sale. The term sale does not include enter-
ing into a contract that requires delivery
of personal property or an interest therein,
the initial grant or purchase of an option,
or the exercise of a purchased call option
for physical delivery (except for a contract
described in section 988(c)(5)). For pur-
poses of this section only, a constructive
sale under section 1259 of the Code and
a mark to fair market value under section
475 or 1296 of the Code are not sales.
(ii) Sales with respect to digital assets-
-(A) In general. In addition to the specific
rules provided in paragraphs (a)(9)(ii)(B)
through (D) of this section, the term sale
also includes:
(1) Any disposition of a digital asset in
exchange for cash or stored-value cards;
(2) Any disposition of a digital asset in
exchange for a different digital asset; and
(3) The delivery of a digital asset pur-
suant to the settlement of a forward con-
tract, option, regulated futures contract,
any similar instrument, or any other exec-
utory contract which would be treated as a
sale of a digital asset under this paragraph
(a)(9)(ii) if the contract had not been exec-
utory. In the case of a transaction involv-
ing a contract described in the previous
sentence, see paragraph (a)(9)(i) of this
section for rules applicable to determining
whether a sale has occurred and how to
report the making or taking delivery of the
underlying asset.
(B) Dispositions of digital assets for
certain property. Solely in the case of a
broker that is a real estate reporting per-
son defined in §1.6045-4(e) with respect
to real property or is in the business of
effecting sales of property for others,
which sales when effected would consti-
tute sales under paragraph (a)(9)(i) of this
section, the term sale also includes any
disposition of a digital asset in exchange
for such property.
(C) Dispositions of digital assets
for certain services. The term sale also
includes any disposition of a digital asset
in consideration for any services provided
by a broker that is a real estate report-
ing person defined in §1.6045-4(e) with
respect to real property or a broker that is
in the business of effecting sales of prop-
erty described in paragraph (a)(9)(i), para-
graphs (a)(9)(ii)(A) and (B), or paragraph
(a)(9)(ii)(D) of this section.
(D) Special rule for certain sales
effected by processors of digital asset
payments. In the case of a processor of
digital asset payments as defined in para-
graph (a)(22) of this section, the term
sale also includes the payment by one
party of a digital asset to a processor of
digital asset payments in return for the
payment of that digital asset, cash, or a
different digital asset to a second party.
If any sale of digital assets described in
this paragraph (a)(9)(ii)(D) would also be
subject to reporting under one of the defi-
nitions of sale described in paragraphs
(a)(9)(ii)(A) through (C) of this section
as a sale effected by a broker other than
as a processor of digital asset payments,
the broker must treat the sale solely as a
sale under such other paragraph and not
as a sale under this paragraph (a)(9)(ii)
(D).
(10) Effect--(i) In general. The term
effect means, with respect to a sale, to act
as—
(A) An agent for a party in the sale
wherein the nature of the agency is such
that the agent ordinarily would know the
gross proceeds from the sale;
(B) In the case of a broker described
in the second sentence of paragraph (a)(1)
of this section, a person that is an obligor
retiring its own debt obligations, a cor-
poration redeeming its own stock, or an
issuer of digital assets redeeming those
digital assets;
(C) A principal that is a dealer in such
sale; or
(D) A digital asset middleman as
defined in paragraph (a)(21) of this sec-
tion for a party in a sale of digital assets.
(ii) Actions relating to certain options
and forward contracts. For purposes of
paragraph (a)(10)(i) of this section, acting
as an agent, principal, or digital asset mid-
dleman with respect to grants or purchases
of options, exercises of call options, or
enterings into contracts that require deliv-
ery of personal property or an interest
therein is not of itself effecting a sale. A
broker that has on its books a forward con-

July 29, 2024 266 Bulletin No. 2024–31
tract under which delivery is made effects
such delivery.
(11) Foreign currency. The term for-
eign currency means currency of a foreign
country.
(12) Cash. The term cash means United
States dollars or any convertible foreign
currency that is issued by a government
or a central bank, whether in physical or
digital form.
(13) Person. The term person includes
any governmental unit and any agency or
instrumentality thereof.
(14) Specified security. The term speci-
fied security means:
(i) Any share of stock (or any interest
treated as stock, including, for example, an
American Depositary Receipt) in an entity
organized as, or treated for Federal tax
purposes as, a corporation, either foreign
or domestic (provided that, solely for pur-
poses of this paragraph (a)(14)(i), a security
classified as stock by the issuer is treated as
stock, and if the issuer has not classified the
security, the security is not treated as stock
unless the broker knows that the security is
reasonably classified as stock under gen-
eral Federal tax principles);
(ii) Any debt instrument described in
paragraph (a)(17) of this section, other
than a debt instrument subject to section
1272(a)(6) of the Code (certain interests
in or mortgages held by a real estate mort-
gage investment conduit (REMIC), cer-
tain other debt instruments with payments
subject to acceleration, and pools of debt
instruments the yield on which may be
affected by prepayments) or a short-term
obligation described in section 1272(a)(2)
(C);
(iii) Any option described in paragraph
(m)(2) of this section;
(iv) Any securities futures contract;
(v) Any digital asset as defined in para-
graph (a)(19) of this section; or
(vi) Any forward contract described in
paragraph (a)(7)(iii) of this section requir-
ing the delivery of a digital asset.
(15) Covered security. The term cov-
ered security means a specified security
described in this paragraph (a)(15).
(i) In general. Except as provided in
paragraph (a)(15)(iv) of this section, the
following specified securities are covered
securities:
(A) A specified security described
in paragraph (a)(14)(i) of this section
acquired for cash in an account on or after
January 1, 2011, except stock for which
the average basis method is available
under §1.1012-1(e).
(B) Stock for which the average basis
method is available under §1.1012-1(e)
acquired for cash in an account on or after
January 1, 2012.
(C) A specified security described in
paragraphs (a)(14)(ii) and (n)(2)(i) of this
section (not including the debt instruments
described in paragraph (n)(2)(ii) of this
section) acquired for cash in an account
on or after January 1, 2014.
(D) A specified security described in
paragraphs (a)(14)(ii) and (n)(3) of this
section acquired for cash in an account on
or after January 1, 2016.
(E) Except for an option described in
paragraph (m)(2)(ii)(C) of this section
(relating to an option on a digital asset), an
option described in paragraph (a)(14)(iii)
of this section granted or acquired for cash
in an account on or after January 1, 2014.
(F) A securities futures contract
described in paragraph (a)(14)(iv) of this
section entered into in an account on or
after January 1, 2014.
(G) A specified security transferred to
an account if the broker or other custodian
of the account receives a transfer state-
ment (as described in §1.6045A-1) report-
ing the security as a covered security.
(H) An option on a digital asset
described in paragraphs (a)(14)(iii) and
(m)(2)(ii)(C) of this section (other than an
option described in paragraph (a)(14)(v)
of this section) granted or acquired in an
account on or after January 1, 2026.
(I) [Reserved]
(J) A specified security described in
paragraph (a)(14)(v) of this section that is
acquired in a customer’s account by a bro-
ker providing custodial services for such
specified security on or after January 1,
2026, in exchange for cash, stored-value
cards, different digital assets, or any other
property or services described in para-
graph (a)(9)(ii)(B) or (C) of this section,
respectively.
(K) A specified security described in
paragraph (a)(14)(vi) of this section, not
described in paragraph (a)(14)(v) of this
section, that is entered into or acquired in
an account on or after January 1, 2026.
(ii) Acquired in an account. For pur-
poses of this paragraph (a)(15), a security
is considered acquired in a customer’s
account at a broker or custodian if the
security is acquired by the customer’s
broker or custodian or acquired by another
broker and delivered to the customer’s
broker or custodian. Acquiring a security
in an account includes granting an option
and entering into a forward contract or
short sale.
(iii) Corporate actions and other
events. For purposes of this paragraph (a)
(15), a security acquired due to a stock
dividend, stock split, reorganization,
redemption, stock conversion, recapital-
ization, corporate division, or other sim-
ilar action is considered acquired for cash
in an account.
(iv) Exceptions. Notwithstanding para-
graph (a)(15)(i) of this section, the follow-
ing specified securities are not covered
securities:
(A) Stock acquired in 2011 that is trans-
ferred to a dividend reinvestment plan (as
described in §1.1012-1(e)(6)) in 2011.
However, a covered security acquired in
2011 that is transferred to a dividend rein-
vestment plan after 2011 remains a cov-
ered security.
(B) A specified security, other than a
specified security described in paragraph
(a)(14)(v) or (vi) of this section, acquired
through an event described in paragraph
(a)(15)(iii) of this section if the basis of
the acquired security is determined from
the basis of a noncovered security.
(C) A specified security that is excepted
at the time of its acquisition from report-
ing under paragraph (c)(3) or (g) of this
section. However, a broker cannot treat
a specified security as acquired by an
exempt foreign person under paragraph
(g)(1)(i) or paragraphs (g)(4)(ii) through
(v) of this section at the time of acquisi-
tion if, at that time, the broker knows or
should have known (including by reason
of information that the broker is required
to collect under section 1471 or 1472 of
the Code) that the customer is not a for-
eign person.
(D) A security for which reporting
under this section is required by §1.6049-
5(d)(3)(ii) (certain securities owned by
a foreign intermediary or flow-through
entity).
(E) Digital assets in a sale required to
be reported under paragraph (g)(4)(vi)(E)
of this section by a broker making a pay-

Bulletin No. 2024–31 267 July 29, 2024
ment of gross proceeds from the sale to a
foreign intermediary, flow-through entity,
or U.S. branch.
(16) Noncovered security. The term
noncovered security means any specified
security that is not a covered security.
(17) Debt instrument, bond, debt obli-
gation, and obligation. For purposes of
this section, the terms debt instrument,
bond, debt obligation, and obligation
mean a debt instrument as defined in
§1.1275-1(d) and any instrument or posi-
tion that is treated as a debt instrument
under a specific provision of the Code (for
example, a regular interest in a REMIC as
defined in section 860G(a)(1) of the Code
and §1.860G-1). Solely for purposes of
this section, a security classified as debt
by the issuer is treated as debt. If the issuer
has not classified the security, the security
is not treated as debt unless the broker
knows that the security is reasonably clas-
sified as debt under general Federal tax
principles or that the instrument or posi-
tion is treated as a debt instrument under a
specific provision of the Code.
(18) Securities futures contract. For
purposes of this section, the term secu-
rities futures contract means a contract
described in section 1234B(c) of the Code
whose underlying asset is described in
paragraph (a)(14)(i) of this section and
which is entered into on or after January
1, 2014.
(19) Digital asset--(i) In general. For
purposes of this section, the term digital
asset means any digital representation of
value that is recorded on a cryptograph-
ically secured distributed ledger (or
any similar technology), without regard
to whether each individual transaction
involving that digital asset is actually
recorded on that ledger, and that is not
cash as defined in paragraph (a)(12) of
this section.
(ii) No inference. Nothing in this para-
graph (a)(19) or elsewhere in this section
may be construed to mean that a digital
asset is or is not properly classified as a
security, commodity, option, securities
futures contract, regulated futures con-
tract, or forward contract for any other
purpose of the Code.
(20) Digital asset address. For pur-
poses of this section, the term digital asset
address means the unique set of alphanu-
meric characters, in some cases referred
to as a quick response or QR Code, that
is generated by the wallet into which the
digital asset will be transferred.
(21) Digital asset middleman--(i) In
general. The term digital asset middleman
means any person who provides a facilita-
tive service as described in paragraph (a)
(21)(iii) of this section with respect to a
sale of digital assets.
(ii) [Reserved]
(iii) Facilitative service. (A) [Reserved]
(B) Special rule involving sales of dig-
ital assets under paragraphs (a)(9)(ii)(B)
through (D) of this section. A facilitative
service means:
(1) The acceptance or processing of
digital assets as payment for property of a
type which when sold would constitute a
sale under paragraph (a)(9)(i) of this sec-
tion by a broker that is in the business of
effecting sales of such property.
(2) Any service performed by a real
estate reporting person as defined in
§1.6045-4(e) with respect to a real estate
transaction in which digital assets are paid
by the real estate buyer in full or partial
consideration for the real estate, provided
the real estate reporting person has actual
knowledge or ordinarily would know that
digital assets were used by the real estate
buyer to make payment to the real estate
seller. For purposes of this paragraph (a)
(21)(iii)(B)(2), a real estate reporting per-
son is considered to have actual knowl-
edge that digital assets were used by the
real estate buyer to make payment if the
terms of the real estate contract provide
for payment using digital assets.
(3) The acceptance or processing of
digital assets as payment for any service
provided by a broker described in para-
graph (a)(1) of this section determined
without regard to any sales under para-
graph (a)(9)(ii)(C) of this section that are
effected by such broker.
(4) Any payment service performed
by a processor of digital asset payments
described in paragraph (a)(22) of this
section, provided the processor of digital
asset payments has actual knowledge or
ordinarily would know the nature of the
transaction and the gross proceeds there-
from.
(5) The acceptance of digital assets in
return for cash, stored-value cards, or dif-
ferent digital assets, to the extent provided
by a physical electronic terminal or kiosk.
(22) Processor of digital asset pay-
ments. For purposes of this section, the
term processor of digital asset payments
means a person who in the ordinary course
of a trade or business stands ready to
effect sales of digital assets as defined in
paragraph (a)(9)(ii)(D) of this section by
regularly facilitating payments from one
party to a second party by receiving dig-
ital assets from the first party and paying
those digital assets, cash, or different digi-
tal assets to the second party.
(23) Stored-value card. For purposes
of this section, the term stored-value card
means a card, including any gift card, with
a prepaid value in U.S. dollars, any con-
vertible foreign currency, or any digital
asset, without regard to whether the card
is in physical or digital form.
(24) Transaction identification. For
purposes of this section, the term trans-
action identification, or transaction ID,
means the unique set of alphanumeric
identification characters that a digital
asset distributed ledger associates with a
transaction involving the transfer of a dig-
ital asset from one digital asset address to
another. The term transaction ID includes
terms such as a TxID or transaction hash.
(25) Wallet, hosted wallet, unhosted
wallet, and held in a wallet or account-
-(i) Wallet. A wallet is a means of storing,
electronically or otherwise, a user’s pri-
vate keys to digital assets held by or for
the user.
(ii) Hosted wallet. A hosted wallet is a
custodial service that electronically stores
the private keys to digital assets held on
behalf of others.
(iii) Unhosted wallet. An unhosted
wallet is a non-custodial means of stor-
ing, electronically or otherwise, a user’s
private keys to digital assets held by or
for the user. Unhosted wallets, sometimes
referred to as self-hosted or self-custodial
wallets, can be provided through software
that is connected to the Internet (a hot
wallet) or through hardware or physical
media that is disconnected from the Inter-
net (a cold wallet).
(iv) Held in a wallet or account. A
digital asset is referred to in this sec-
tion as held in a wallet or account if the
wallet, whether hosted or unhosted, or
account stores the private keys necessary
to transfer control of the digital asset. A
digital asset associated with a digital asset

July 29, 2024 268 Bulletin No. 2024–31
address that is generated by a wallet, and
a digital asset associated with a sub-ledger
account of a wallet, are similarly referred
to as held in a wallet. References to vari-
ations of held in a wallet or account, such
as held at a broker, held with a broker, held
by the user of a wallet, held on behalf of
another, acquired in a wallet or account, or
transferred into a wallet or account, each
have a similar meaning.
(b) Examples. The following examples
illustrate the definitions in paragraph (a)
of this section.
(1) Example 1. The following persons generally
are brokers within the meaning of paragraph (a)(1)
of this section—
(i) A mutual fund, an underwriter of the mutual
fund, or an agent for the mutual fund, any of which
stands ready to redeem or repurchase shares in such
mutual fund.
(ii) A professional custodian (such as a bank) that
regularly arranges sales for custodial accounts pur-
suant to instructions from the owner of the property.
(iii) A depositary trust or other person who reg-
ularly acts as an escrow agent in corporate acquisi-
tions, if the nature of the activities of the agent is
such that the agent ordinarily would know the gross
proceeds from sales.
(iv) A stock transfer agent for a corporation,
which agent records transfers of stock in such cor-
poration, if the nature of the activities of the agent is
such that the agent ordinarily would know the gross
proceeds from sales.
(v) A dividend reinvestment agent for a corpora-
tion that stands ready to purchase or redeem shares.
(vi) A person who in the ordinary course of a
trade or business provides users with hosted wal-
let services to the extent such person stands ready
to effect the sale of digital assets on behalf of its
customers, including by acting as an agent for a
party in the sale wherein the nature of the agency
is as described in paragraph (a)(10)(i)(A) of this
section.
(vii) A processor of digital asset payments as
described in paragraph (a)(22) of this section.
(viii) A person who in the ordinary course of a
trade or business either owns or operates one or more
physical electronic terminals or kiosks that stand
ready to effect the sale of digital assets for cash,
stored-value cards, or different digital assets, regard-
less of whether the other person is the disposer or
the acquirer of the digital assets in such an exchange.
(ix) [Reserved]
(x) A person who in the ordinary course of a
trade or business stands ready at a physical location
to effect sales of digital assets on behalf of others.
(xi) [Reserved]
(2) Example 2. The following persons are not
brokers within the meaning of paragraph (a)(1) of
this section in the absence of additional facts that
indicate the person is a broker—
(i) A stock transfer agent for a corporation, which
agent daily records transfers of stock in such corpo-
ration, if the nature of the activities of the agent is
such that the agent ordinarily would not know the
gross proceeds from sales.
(ii) A person (such as a stock exchange) that
merely provides facilities in which others effect
sales.
(iii) An escrow agent or nominee if such agency
is not in the ordinary course of a trade or business.
(iv) An escrow agent, otherwise a broker, which
agent effects no sales other than such transactions as
are incidental to the purpose of the escrow (such as
sales to collect on collateral).
(v) A floor broker on a commodities exchange,
which broker maintains no records with respect to
the terms of sales.
(vi) A corporation that issues and retires
long-term debt on an irregular basis.
(vii) A clearing organization.
(viii) A merchant who is not otherwise required
to make a return of information under section 6045
of the Code and who regularly sells goods or other
property (other than digital assets) or services in
return for digital assets.
(ix) A person solely engaged in the business of
validating distributed ledger transactions, through
proof-of-work, proof-of-stake, or any other similar
consensus mechanism, without providing other func-
tions or services.
(x) A person solely engaged in the business of
selling hardware or licensing software, the sole func-
tion of which is to permit a person to control private
keys which are used for accessing digital assets on a
distributed ledger, without providing other functions
or services.
(3) Example 3: Barter exchange. A, B, and C
belong to a carpool in which they commute to and
from work. Every third day, each member of the
carpool provides transportation for the other two
members. Because the carpool arrangement provides
solely for the informal exchange of similar services
on a noncommercial basis, the carpool is not a barter
exchange within the meaning of paragraph (a)(4) of
this section.
(4) Example 4: Barter exchange. X is an orga-
nization whose members include retail merchants,
wholesale merchants, and persons in the trade or
business of performing services. X’s members
exchange property and services among themselves
using credits on the books of X as a medium of
exchange. Each exchange through X is reflected on
the books of X by crediting the account of the mem-
ber providing property or services and debiting the
account of the member receiving such property or
services. X also provides information to its mem-
bers concerning property and services available
for exchange through X. X charges its members a
commission on each transaction in which credits on
its books are used as a medium of exchange. X is a
barter exchange within the meaning of paragraph (a)
(4) of this section.
(5) Example 5: Commodity, forward contract. A
warehouse receipt is an interest in personal property
for purposes of paragraph (a) of this section. Conse-
quently, a warehouse receipt for a quantity of lead is
a commodity under paragraph (a)(5)(ii) of this sec-
tion. Similarly, an executory contract that requires
delivery of a warehouse receipt for a quantity of lead
is a forward contract under paragraph (a)(7)(ii) of
this section.
(6) Example 6: Customer. The only customers
of a depositary trust acting as an escrow agent in
corporate acquisitions, which trust is a broker, are
shareholders to whom the trust makes payments or
shareholders for whom the trust is acting as an agent.
(7) Example 7: Customer. The only customers of
a stock transfer agent, which agent is a broker, are
shareholders to whom the agent makes payments
or shareholders for whom the agent is acting as an
agent.
(8) Example 8: Customer. D, an individual not
otherwise exempt from reporting, is the holder of an
obligation issued by P, a corporation. R, a broker,
acting as an agent for P, retires such obligation held
by D. Such obligor payments from R represent obli-
gor payments by P. D, the person to whom the gross
proceeds are paid or credited by R, is the customer
of R.
(9) Example 9: Covered security. E, an indi-
vidual not otherwise exempt from reporting, main-
tains an account with S, a broker. On June 1, 2012,
E instructs S to purchase stock that is a specified
security for cash. S places an order to purchase the
stock with T, another broker. E does not maintain an
account with T. T executes the purchase. Custody of
the purchased stock is transferred to E’s account at S.
Under paragraph (a)(15)(ii) of this section, the stock
is considered acquired for cash in E’s account at S.
Because the stock is acquired on or after January 1,
2012, under paragraph (a)(15)(i) of this section, it is
a covered security.
(10) Example 10: Covered security. F, an indi-
vidual not otherwise exempt from reporting, is
granted 100 shares of stock in F’s employer by F’s
employer. Because F does not acquire the stock for
cash or through a transfer to an account with a trans-
fer statement (as described in §1.6045A-1), under
paragraph (a)(15) of this section, the stock is not a
covered security.
(11) Example 11: Covered security. G, an indi-
vidual not otherwise exempt from reporting, owns
400 shares of stock in Q, a corporation, in an account
with U, a broker. Of the 400 shares, 100 are covered
securities and 300 are noncovered securities. Q takes
a corporate action to split its stock in a 2-for-1 split.
After the stock split, G owns 800 shares of stock.
Because the adjusted basis of 600 of the 800 shares
that G owns is determined from the basis of noncov-
ered securities, under paragraphs (a)(15)(iii) and (a)
(15)(iv)(B) of this section, these 600 shares are not
covered securities and the remaining 200 shares are
covered securities.
(12) Example 12: Processor of digital asset pay-
ments, sale, and customer—(i) Facts. Company Z is
an online merchant that accepts digital asset DE as
a form of payment for the merchandise it sells. The
merchandise Z sells does not include digital assets.
Z does not provide any other service that could be
considered as standing ready to effect sales of dig-
ital assets or any other property subject to reporting
under section 6045. CPP is in the business of facil-
itating payments made by users of digital assets to
merchants with which CPP has an account. CPP also
has contractual arrangements with users of digital
assets for the provision of digital asset payment ser-
vices that provide that CPP may verify such user’s
identity pursuant to AML program requirements. Z
contracts with CPP to help Z’s customers to make
payments to Z using digital assets. Under Z’s agree-
ment with CPP, when purchasers of merchandise

Bulletin No. 2024–31 269 July 29, 2024
initiate payment on Z’s website using DE, they are
directed to CPP’s website to complete the payment
part of the transaction. CPP is a third party settlement
organization, as defined in §1.6050W-1(c)(2), with
respect to the payments it makes to Z. Customer R
seeks to purchase merchandise from Z that is priced
at $6,000 (which is 6,000 units of DE). After R ini-
tiates a purchase, R is directed to CPP’s website
where R is directed to enter into an agreement with
CPP, which as part of CPP’s customary onboarding
procedures developed pursuant to AML program
requirements, requires R to submit information to
CPP to verify R’s identity. Thereafter, R is instructed
to transfer 6,000 units of DE to a digital asset address
controlled by CPP. CPP then pays $6,000 in cash to
Z, who in turn processes R’s order.
(ii) Analysis. CPP is a processor of digital asset
payments within the meaning of paragraph (a)(22) of
this section because CPP, in the ordinary course of
its business, regularly effects sales of digital assets
as defined in paragraph (a)(9)(ii)(D) of this section
by receiving digital assets from one party and paying
those digital assets, cash, or different digital assets to
a second party. Based on CPP’s contractual relation-
ship with Z, CPP has actual knowledge that R’s pay-
ment was a payment transaction and the amount of
gross proceeds R received as a result. Accordingly,
CPP’s services are facilitative services under para-
graph (a)(21)(iii)(B) of this section and CPP is acting
as a digital asset middleman under paragraph (a)(21)
of this section to effect R’s sale of digital assets under
paragraph (a)(10)(i)(D) of this section. R’s payment
of 6,000 units of DE to CPP in return for the pay-
ment of $6,000 cash to Z is a sale of digital assets
under paragraph (a)(9)(ii)(D) of this section. Addi-
tionally, because CPP has an arrangement with R for
the provision of digital asset payment services that
provides that CPP may verify R’s identity pursuant
to AML program requirements, R is CPP’s customer
under paragraph (a)(2)(ii)(A) of this section. Finally,
CPP is also required to report the payment to Z under
§1.6050W-1(a) because the payment is a third party
network transaction under §1.6050W-1(c). The
answer would be the same if CPP paid Z the 6,000
units of DE or another digital asset instead of cash.
(13) Example 13: Broker. The facts are the same
as in paragraph (b)(12)(i) of this section (the facts
in Example 12), except that Z accepts digital asset
DE from its purchasers directly without the services
of CPP or any other processor of digital asset pay-
ments. To pay for the merchandise R purchases on
Z’s website, R is directed by Z to transfer 15 units
of DE directly to Z’s digital asset address. Z is not
a broker under the definition of paragraph (a)(1) of
this section because Z does not stand ready as part
of its trade or business to effect sales as defined in
paragraph (a)(9) of this section made by others. That
is, the sales that Z is in the business of conducting
are of property that is not subject to reporting under
section 6045.
(14) Example 14: Processor of digital asset pay-
ments—(i) Facts. Customer S purchases goods that
are not digital assets with 10 units of digital asset DE
from Merchant M using a digital asset DE credit card
issued by Bank BK. BK has a contractual arrange-
ment with customers using BK’s credit cards that
provides that BK may verify such customer iden-
tification information pursuant to AML program
requirements. In addition, as part of BK’s custom-
ary onboarding procedures, BK requires credit card
applicants to submit information to BK to verify
their identity. M is one of a network of unrelated per-
sons that has agreed to accept digital asset DE credit
cards issued by BK as payment for purchase trans-
actions under an agreement that provides standards
and mechanisms for settling the transaction between
a merchant acquiring bank and the persons who
accept the cards. Bank MAB is the merchant acquir-
ing entity with the contractual obligation to make
payments to M for goods provided to S in this trans-
action. To make payment for S’s purchase of goods
from M, S transfers 10 units of digital asset DE to
BK. BK pays the 10 units of DE, less its processing
fee, to Bank MAB, which amount Bank MAB pays,
less its processing fee, to M.
(ii) Analysis. BK is a processor of digital asset
payments as defined in paragraph (a)(22) of this
section because BK, in the ordinary course of its
business, regularly effects sales of digital assets as
defined in paragraph (a)(9)(ii)(D) of this section by
receiving digital assets from one party and paying
those digital assets, cash, or different digital assets
to a second party. Bank BK has actual knowledge
that payment made by S is a payment transaction and
also knows S’s gross proceeds therefrom. Accord-
ingly, BK’s services are facilitative services under
paragraph (a)(21)(iii)(B) of this section and BK is
acting as a digital asset middleman under paragraph
(a)(21) of this section to effect sales of digital assets
under paragraph (a)(10)(i)(D) of this section. S’s
payment of 10 units of DE to BK for the payment of
those units, less BK’s processing fee, to Bank MAB
is a sale by S of digital assets under paragraph (a)
(9)(ii)(D) of this section. Additionally, because S
transferred digital assets to BK in a sale described
in paragraph (a)(9)(ii)(D) of this section and because
BK has an arrangement with S for the provision of
digital asset payment services that provides that BK
may verify S’s identity, S is BK’s customer under
paragraph (a)(2)(ii)(A) of this section.
(15) Example 15: Digital asset middleman and
effect—(i) Facts. SBK is in the business of effect-
ing sales of stock and other securities on behalf of
customers. To open an account with SBK, each cus-
tomer must provide SBK with its name, address, and
tax identification number. SBK accepts 20 units of
digital asset DE from Customer P as payment for
10 shares of AB stock. Additionally, P pays SBK an
additional 1 unit of digital asset DE as a commission
for SBK’s services.
(ii) Analysis. SBK’s acceptance of 20 units of
DE as payment for the AB stock is a facilitative ser-
vice under paragraph (a)(21)(iii)(B) of this section
because the payment is for property (the AB stock)
that when sold would constitute a sale under para-
graph (a)(9)(i) of this section by a broker that is in
the business of effecting sales of stock and other
securities. SBK’s acceptance of 1 unit of DE as
payment for SBK’s commission is also a facilitative
service under paragraph (a)(21)(iii)(B) of this sec-
tion because SBK is a broker under paragraph (a)(1)
of this section with respect to a sale of stock under
paragraph (a)(9)(i) of this section. Accordingly, SBK
is acting as a digital asset middleman to effect P’s
sale of 10 units of DE in return for the AB stock and
P’s sale of 1 unit of DE as payment for SBK’s com-
mission under paragraphs (a)(10)(i)(D) and (a)(21)
of this section.
(16) Example 16: Digital asset middleman and
effect—(i) Facts. J, an unmarried individual not oth-
erwise exempt from reporting, enters into a contrac-
tual agreement with B, an individual not otherwise
exempt from reporting, to exchange J’s principal
residence, Blackacre, which has a fair market value
of $225,000 for units of digital asset DE with a value
of $225,000. Prior to closing, J provides closing
agent CA, who is a real estate reporting person under
§1.6045-4(e), with the certifications required under
§1.6045-4(c)(2)(iv) (to exempt the transaction from
reporting under §1.6045-4(a) due to Blackacre being
J’s principal residence). Prior to closing, B transfers
the digital assets directly from B’s wallet to J’s wal-
let, and J certifies to the closing agent (CA) that J
received the digital assets required to be paid under
the contract.
(ii) Analysis. CA is performing services as a real
estate reporting person with respect to a real estate
transaction in which the real estate buyer (B) pays
digital assets in full or partial consideration for the
real estate. In addition, CA has actual knowledge that
payment made to B included digital assets because
the terms of the real estate contract provide for such
payment. Accordingly, the closing services provided
by CA are facilitative services under paragraph (a)
(21)(iii)(B)(2) of this section, and CA is acting as a
digital asset middleman under paragraph (a)(21) of
this section to effect B’s sale of 1,000 DE units under
paragraph (a)(10)(i)(D) of this section. These con-
clusions are not impacted by whether or not CA is
required to report the sale of the real estate by J under
§1.6045-4(a).
(17) Example 17: Digital asset and cash—(i)
Facts. Y is a privately held corporation that issues
DL, a digital representation of value designed to
track the value of the U.S. dollar. DL is backed in
part or in full by U.S. dollars held by Y, and Y offers
to redeem units of DL for U.S. dollars at par at any
time. Transactions involving DL utilize cryptogra-
phy to secure transactions that are digitally recorded
on a cryptographically secured distributed ledger
called the DL blockchain. CRX is a digital asset bro-
ker that also provides hosted wallet services for its
customers seeking to make trades of digital assets
using CRX. R is a customer of CRX. R exchanges
100 units of DL for $100 in cash from CRX. CRX
does not record this transaction on the DL block-
chain, but instead records the transaction on CRX’s
own centralized private ledger.
(ii) Analysis. DL is not cash under paragraph
(a)(12) of this section because it is not issued by a
government or central bank. DL is a digital asset
under paragraph (a)(19) of this section because it is
a digital representation of value that is recorded on
a cryptographically secured distributed ledger. The
fact that CRX recorded R’s transaction on its own
private ledger and not on the DL blockchain does not
change this conclusion.
(18) Example 18: Broker and effect—(i) Facts.
Individual J is an artist in the business of creating and
selling nonfungible tokens that reference J’s digital
artwork. To find buyers and to execute these transac-
tions, J uses the services of P2X, an unrelated digital
asset marketplace that provides a service for nonfun-
gible token sellers to find buyers and automatically

July 29, 2024 270 Bulletin No. 2024–31
executing contracts in return for a transaction fee.
J does not perform any other services with respect
to these transactions. Using P2X’s platform, buyer
K purchases J’s newly created nonfungible token
(DA-J) for 1,000 units of digital asset DE. Using
the interface provided by P2X, J and K execute their
exchange using an automatically executing contract,
which automatically transfers DA-J to K and K’s
payment of DE units to J.
(ii) Analysis. Although J is a principal in the
exchange of DA-J for 1,000 units of DE, J is not act-
ing as an obligor retiring its own debt obligations, a
corporation redeeming its own stock, or an issuer of
digital assets that is redeeming those digital assets,
as described in paragraph (a)(10)(i)(B) of this sec-
tion. Because J created DA-J as part of J’s business
of creating and selling specified nonfungible tokens,
J is also not acting in these transactions as a dealer
as described in paragraph (a)(10)(i)(C) of this sec-
tion, as an agent for another party as described in
paragraph (a)(10)(i)(A) of this section, or as a dig-
ital asset middleman described in paragraph (a)(10)
(i)(D) of this section. Accordingly, J is not a broker
under paragraph (a)(1) of this section because J does
not effect sales of digital assets on behalf of others
under the definition of effect under paragraph (a)(10)
(i) of this section.
(19) Example 19: Broker, sale, and effect—(i)
Facts. HWP is a person that regularly provides
hosted wallet services for customers. HWP does not
operate a digital asset trading platform, but at the
direction of its customers regularly executes cus-
tomer exchange orders using the services of digital
asset trading platforms. Individual L maintains dig-
ital assets with HWP. L places an order with HWP
to exchange 10 units of digital asset DE held by
L with HWP for 100 units of digital asset RN. To
execute the order, HWP places the order with PRX,
a person, as defined in section 7701(a)(1) of the
Code, that operates a digital asset trading platform.
HWP debits L’s account for the disposed DE units
and credits L’s account for the RN units received
in exchange.
(ii) Analysis. The exchange of L’s DE units for
RN units is a sale under paragraph (a)(9)(ii)(A)(2)
of this section. HWP acts as an agent for L in this
sale, and the nature of this agency is such that HWP
ordinarily would know the gross proceeds from the
sale. Accordingly, HWP has effected the sale under
paragraph (a)(10)(i)(A) of this section. Addition-
ally, HWP is a broker under paragraph (a)(1) of this
section because in the ordinary course of its trade
or business, HWP stands ready to effect sales to be
made by others. If PRX is also a broker, see the mul-
tiple broker rule in paragraph (c)(3)(iii)(B) of this
section.
(20) Example 20: Digital asset and security. M
owns 10 ownership units of a fund organized as a
trust described in §301.7701-4(c) of this chapter that
was formed to invest in digital assets. M’s units are
held in a securities brokerage account and are not
recorded using cryptographically secured distributed
ledger technology. Although the underlying invest-
ments are comprised of one or more digital assets,
M’s investment is in ownership units of a trust, and
the units are not themselves digital assets under para-
graph (a)(19) of this section because transactions
involving these units are not secured using cryptog-
raphy and are not digitally recorded on a distributed
ledger, such as a blockchain. The answer would be
the same if the fund is organized as a C corporation
or partnership.
(21) Example 21: Forward contract, closing
transaction, and sale—(i) Facts. On February 24,
Year 1, J contracts with broker CRX to sell J’s 10
units of digital asset DE to CRX at an agreed upon
price, with delivery under the contract to occur at 4
pm on March 10, Year 1. Pursuant to this agreement,
J delivers the 10 units of DE to CRX, and CRX pays
J the agreed upon price in cash.
(ii) Analysis. Under paragraph (a)(7)(iii) of this
section, the contract between J and CRX is a for-
ward contract. J’s delivery of digital asset DE pur-
suant to the forward contract is a closing transaction
described in paragraph (a)(8) of this section that is
treated as a sale of the underlying digital asset DE
under paragraph (a)(9)(ii)(A)(3) of this section. Pur-
suant to the rules of paragraphs (a)(9)(i) and (a)(9)
(ii)(A)(3) of this section, CRX may treat the delivery
of DE as a sale without separating the profit or loss
on the forward contract from the profit or loss on the
delivery.
(22) Example 22: Digital asset—(i) Facts. On
February 7, Year 1, J purchases a regulated futures
contract on digital asset DE through futures com-
mission merchant FCM. The contract is not recorded
using cryptographically secured distributed ledger
technology. The contract expires on the last Friday
in June, Year 1. On May 1, Year 1, J enters into an
offsetting closing transaction with respect to the reg-
ulated futures contract.
(ii) Analysis. Although the regulated futures
contract’s underlying assets are comprised of digi-
tal assets, J’s investment is in the regulated futures
contract, which is not a digital asset under paragraph
(a)(19) of this section because transactions involv-
ing the contract are not secured using cryptography
and are not digitally recorded using cryptographi-
cally secured distributed ledger technology, such as
a blockchain. When J disposes of the contract, the
transaction is a sale of a regulated futures contract
covered by paragraph (a)(9)(i) of this section.
(23) Example 23: Closing transaction and sale—
(i) Facts. On January 15, Year 1, J purchases digital
asset DE through Broker. On March 1, Year 1, J sells
a regulated futures contract on DE through Broker.
The contract expires on the last Friday in June, Year
1. On the last Friday in June, Year 1, J delivers the
DE in settlement of the regulated futures contract.
(ii) Analysis. J’s delivery of the DE pursuant to
the regulated futures contract is a closing transaction
described in paragraph (a)(8) of this section that is
treated as a sale of the regulated futures contract
under paragraph (a)(9)(i) of this section. In addition,
under paragraph (a)(9)(ii)(A)(3) of this section, J’s
delivery of digital asset DE pursuant to the settle-
ment of the regulated futures contract is a sale of the
underlying digital asset DE.
(c) * * *
(3) Exceptions--(i) Sales effected for
exempt recipients--(A) In general. No
return of information is required with
respect to a sale effected for a customer
that is an exempt recipient under para-
graph (c)(3)(i)(B) of this section.
(B) Exempt recipient defined. The term
exempt recipient means—
(1) A corporation as defined in section
7701(a)(3), whether domestic or foreign,
except that this exclusion does not apply
to sales of covered securities acquired on
or after January 1, 2012, by an S corpora-
tion as defined in section 1361(a);
(2) An organization exempt from taxa-
tion under section 501(a) or an individual
retirement plan;
(3) The United States or a State, the
District of Columbia, the Commonwealth
of Puerto Rico, Guam, the Commonwealth
of Northern Mariana Islands, the U.S. Vir-
gin Islands, or American Samoa, a polit-
ical subdivision of any of the foregoing,
a wholly owned agency or instrumentality
of any one or more of the foregoing, or a
pool or partnership composed exclusively
of any of the foregoing;
(4) A foreign government, a political
subdivision thereof, an international orga-
nization, or any wholly owned agency or
instrumentality of the foregoing;
(5) A foreign central bank of issue as
defined in §1.895-1(b)(1) (i.e., a bank that
is by law or government sanction the prin-
cipal authority, other than the government
itself, issuing instruments intended to cir-
culate as currency);
(6) A dealer in securities or commod-
ities registered as such under the laws of
the United States or a State;
(7) A futures commission merchant
registered as such with the Commodity
Futures Trading Commission;
(8) A real estate investment trust (as
defined in section 856);
(9) An entity registered at all times
during the taxable year under the Invest-
ment Company Act of 1940 (15 U.S.C.
80a-1, et seq.);
(10) A common trust fund (as defined
in section 584(a));
(11) A financial institution such as a
bank, mutual savings bank, savings and
loan association, building and loan asso-
ciation, cooperative bank, homestead
association, credit union, industrial loan
association or bank, or other similar orga-
nization; or
(12) A U.S. digital asset broker as
defined in paragraph (g)(4)(i)(A)(1) of this
section other than an investment adviser
registered either under the Investment
Advisers Act of 1940 (15 U.S.C. 80b-1,

Bulletin No. 2024–31 271 July 29, 2024
et seq.) or with a state securities regulator
and that investment adviser is not other-
wise an exempt recipient in one or more
of paragraphs (c)(3)(i)(B)(1) through (11)
of this section.
(C) Exemption certificate--(1) In gen-
eral. Except as provided in paragraph (c)
(3)(i)(C)(2) or (3) of this section, a broker
may treat a person described in paragraph
(c)(3)(i)(B) of this section as an exempt
recipient based on a properly completed
exemption certificate (as provided in
§31.3406(h)-3 of this chapter); the bro-
ker’s actual knowledge that the customer
is a person described in paragraph (c)(3)
(i)(B) of this section; or the applicable
indicators described in §1.6049-4(c)(1)(ii)
(A) through (M). A broker may require an
exempt recipient to file a properly com-
pleted exemption certificate and may treat
an exempt recipient that fails to do so as a
recipient that is not exempt.
(2) Limitation for corporate customers.
For sales of covered securities acquired
on or after January 1, 2012, a broker may
not treat a customer as an exempt recipi-
ent described in paragraph (c)(3)(i)(B)(1)
of this section based on the indicators of
corporate status described in §1.6049-4(c)
(1)(ii)(A). However, for sales of all securi-
ties and for sales of digital assets, a broker
may treat a customer as an exempt recipi-
ent if one of the following applies—
(i) The name of the customer contains
the term insurance company, indemnity
company, reinsurance company, or assur-
ance company.
(ii) The name of the customer indicates
that it is an entity listed as a per se corpo-
ration under §301.7701-2(b)(8)(i) of this
chapter.
(iii) The broker receives a properly
completed exemption certificate (as pro-
vided in §31.3406(h)-3 of this chapter)
that asserts that the customer is not an S
corporation as defined in section 1361(a).
(iv) The broker receives a withholding
certificate described in §1.1441-1(e)(2)(i)
that includes a certification that the person
whose name is on the certificate is a for-
eign corporation.
(3) Limitation for U.S. digital asset
brokers. For sales of digital assets, a bro-
ker may not treat a customer as an exempt
recipient described in paragraph (c)(3)(i)
(B)(12) of this section unless it obtains
from that customer a certification on a
properly completed exemption certifi-
cate (as provided in §31.3406(h)-3 of this
chapter) that the customer is a U.S. digital
asset broker described in paragraph (g)(4)
(i)(A)(1) of this section.
(ii) Excepted sales. No return of infor-
mation is required with respect to a sale
effected by a broker for a customer if the
sale is an excepted sale. The inclusion in
this paragraph (c)(3)(ii) of a digital asset
transaction is not intended to create an
inference that the transaction is a sale of a
digital asset under paragraph (a)(9)(ii) of
this section. For this purpose, a sale is an
excepted sale if it is—
(A) So designated by the Internal Rev-
enue Service in a revenue ruling or reve-
nue procedure (see §601.601(d)(2) of this
chapter);
(B) A sale with respect to which a return
is not required by applying the rules of
§1.6049-4(c)(4) (by substituting the term
a sale subject to reporting under section
6045 for the term an interest payment);
(C) A sale of digital asset units withheld
by the broker from digital assets received
by the customer in any underlying digital
asset sale to pay for the customer’s digital
asset transaction costs;
(D) A sale for cash of digital asset
units withheld by the broker from digital
assets received by the customer in a sale
of digital assets for different digital assets
(underlying sale) that is undertaken imme-
diately after the underlying sale to satisfy
the broker’s obligation under section 3406
of the Code to deduct and withhold a tax
with respect to the underlying sale;
(E) A disposition of a digital asset rep-
resenting loyalty program credits or loy-
alty program rewards offered by a provider
of non-digital asset goods or services to
its customers, in exchange for non-digital
asset goods or services from the provider
or other merchants participating with the
developer as part of the program, pro-
vided that the digital asset is not capable
of being transferred, exchanged, or oth-
erwise used outside the cryptographically
secured distributed ledger network of the
loyalty program;
(F) A disposition of a digital asset
created and designed for use within a
video game or network of video games in
exchange for different digital assets also
created and designed for use within that
video game or video game network, pro-
vided the disposed of digital assets are not
capable of being transferred, exchanged,
or otherwise used outside of the video
game or video game network;
(G) Except in the case of digital assets
cleared or settled on a limited-access reg-
ulated network as described in paragraph
(c)(8)(iii) of this section, a disposition of
a digital asset representing information
with respect to payment instructions or
the management of inventory that does
not consist of digital assets, within a cryp-
tographically secured distributed ledger
(or network of interoperable distributed
ledgers) that provides access only to users
of such information provided the digital
assets disposed of are not capable of being
transferred, exchanged, or otherwise used
outside such distributed ledger or net-
work; or
(H) A disposition of a digital asset
offered by a seller of goods or provider
of services to its customers that can be
exchanged or redeemed only by those
customers for goods or services provided
by such seller or provider if the digital
asset is not capable of being transferred,
exchanged, or otherwise used outside the
cryptographically secured distributed led-
ger network of the seller or provider and
cannot be sold or exchanged for cash,
stored-value cards, or qualifying stable-
coins at a market rate inside the seller or
provider’s distributed ledger network.
(iii) Multiple brokers--(A) In general.
If a broker is instructed to initiate a sale
by a person that is an exempt recipient
described in paragraph (c)(3)(i)(B)(6),
(7), or (11) of this section, no return of
information is required with respect to
the sale by that broker. In a redemption of
stock or retirement of securities, only the
broker responsible for paying the holder
redeemed or retired, or crediting the
gross proceeds on the sale to that holder’s
account, is required to report the sale.
(B) Special rule for sales of digital
assets. If more than one broker effects a
sale of a digital asset on behalf of a cus-
tomer, the broker responsible for first cred-
iting the gross proceeds on the sale to the
customer’s wallet or account is required
to report the sale. A broker that did not
first credit the gross proceeds on the sale
to the customer’s wallet or account is not
required to report the sale if prior to the
sale that broker obtains a certification on

July 29, 2024 272 Bulletin No. 2024–31
a properly completed exemption certif-
icate (as provided in §31.3406(h)-3 of
this chapter) that the broker first crediting
the gross proceeds on the sale is a person
described in paragraph (c)(3)(i)(B)(12) of
this section.
(iv) Cash on delivery transactions. In
the case of a sale of securities through a
cash on delivery account, a delivery ver-
sus payment account, or other similar
account or transaction, only the broker
that receives the gross proceeds from the
sale against delivery of the securities sold
is required to report the sale. If, however,
the broker’s customer is another broker
(second-party broker) that is an exempt
recipient, then only the second-party bro-
ker is required to report the sale.
(v) Fiduciaries and partnerships. No
return of information is required with
respect to a sale effected by a custodian
or trustee in its capacity as such or a
redemption of a partnership interest by a
partnership, provided the sale is otherwise
reported by the custodian or trustee on a
properly filed Form 1041, or the redemp-
tion is otherwise reported by the partner-
ship on a properly filed Form 1065, and
all Schedule K-1 reporting requirements
are satisfied.
(vi) Money market funds--(A) In gen-
eral. No return of information is required
with respect to a sale of shares in a reg-
ulated investment company that is per-
mitted to hold itself out to investors as a
money market fund under Rule 2a-7 under
the Investment Company Act of 1940 (17
CFR 270.2a-7).
(B) Effective/applicability date. Para-
graph (c)(3)(vi)(A) of this section applies
to sales of shares in calendar years begin-
ning on or after July 8, 2016. Taxpayers
and brokers (as defined in §1.6045-1(a)
(1)), however, may rely on paragraph
(c)(3)(vi)(A) of this section for sales of
shares in calendar years beginning before
July 8, 2016.
(vii) Obligor payments on certain
obligations. No return of information is
required with respect to payments repre-
senting obligor payments on—
(A) Nontransferable obligations
(including savings bonds, savings
accounts, checking accounts, and NOW
accounts);
(B) Obligations as to which the entire
gross proceeds are reported by the bro-
ker on Form 1099 under provisions of the
Internal Revenue Code other than section
6045 (including stripped coupons issued
prior to July 1, 1982); or
(C) Retirement of short-term obliga-
tions (i.e., obligations with a fixed matu-
rity date not exceeding 1 year from the
date of issue) that have original issue
discount, as defined in section 1273(a)
(1), with or without application of the
de minimis rule. The preceding sentence
does not apply to a debt instrument issued
on or after January 1, 2014. For a short-
term obligation issued on or after January
1, 2014, see paragraph (c)(3)(xiii) of this
section.
(D) Demand obligations that also are
callable by the obligor and that have no
premium or discount. The preceding sen-
tence does not apply to a debt instrument
issued on or after January 1, 2014.
(viii) Foreign currency. No return of
information is required with respect to a
sale of foreign currency other than a sale
pursuant to a forward contract or regulated
futures contract that requires delivery of
foreign currency.
(ix) Fractional share. No return of
information is required with respect to a
sale of a fractional share of stock if the
gross proceeds on the sale of the fractional
share are less than $20.
(x) Certain retirements. No return of
information is required from an issuer or
its agent with respect to the retirement of
book entry or registered form obligations
as to which the relevant books and records
indicate that no interim transfers have
occurred. The preceding sentence does
not apply to a debt instrument issued on or
after January 1, 2014.
(xi) Short sales--(A) In general. A bro-
ker may not make a return of information
under this section for a short sale of a
security entered into on or after January
1, 2011, until the year a customer deliv-
ers a security to satisfy the short sale obli-
gation. The return must be made without
regard to the constructive sale rule in sec-
tion 1259 or to section 1233(h). In general,
the broker must report on a single return
the information required by paragraph (d)
(2)(i)(A) of this section for the short sale
except that the broker must report the date
the short sale was closed in lieu of the sale
date. In applying paragraph (d)(2)(i)(A) of
this section, the broker must report the rel-
evant information regarding the security
sold to open the short sale and the adjusted
basis of the security delivered to close the
short sale and whether any gain or loss on
the closing of the short sale is long-term or
short-term (within the meaning of section
1222).
(B) Short sale closed by delivery of
a noncovered security. A broker is not
required to report adjusted basis and
whether any gain or loss on the closing of
the short sale is long-term or short-term
if the short sale is closed by delivery of
a noncovered security and the return so
indicates. A broker that chooses to report
this information is not subject to penal-
ties under section 6721 or 6722 for fail-
ure to report this information correctly if
the broker indicates on the return that the
short sale was closed by delivery of a non-
covered security.
(C) Short sale obligation transferred
to another account. If a short sale obli-
gation is satisfied by delivery of a secu-
rity transferred into a customer’s account
accompanied by a transfer statement (as
described in §1.6045A-1(b)(7)) indicating
that the security was borrowed, the broker
receiving custody of the security may not
file a return of information under this sec-
tion. The receiving broker must furnish a
statement to the transferor that reports the
amount of gross proceeds received from
the short sale, the date of the sale, the
quantity of shares, units, or amounts sold,
and the Committee on Uniform Security
Identification Procedures (CUSIP) num-
ber of the sold security (if applicable) or
other security identifier number that the
Secretary may designate by publication
in the Federal Register or in the Internal
Revenue Bulletin (see §601.601(d)(2) of
this chapter). The statement to the trans-
feror also must include the transfer date,
the name and contact information of the
receiving broker, the name and contact
information of the transferor, and suffi-
cient information to identify the customer.
If the customer subsequently closes the
short sale obligation in the transferor’s
account with non-borrowed securities,
the transferor must make the return of
information required by this section. In
that event, the transferor must take into
account the information furnished under
this paragraph (c)(3)(xi)(C) on the return
unless the transferor knows that the infor-

Bulletin No. 2024–31 273 July 29, 2024
mation furnished under this paragraph (c)
(3)(xi)(C) is incorrect or incomplete. A
failure to report correct information that
arises solely from this reliance is deemed
to be due to reasonable cause for purposes
of penalties under sections 6721 and 6722.
See §301.6724-1(a)(1) of this chapter.
(xii) Cross reference. For an exception
for certain sales of agricultural commod-
ities and certificates issued by the Com-
modity Credit Corporation after January
1, 1993, see paragraph (c)(7) of this sec-
tion.
(xiii) Short-term obligations issued
on or after January 1, 2014. No return
of information is required under this sec-
tion with respect to a sale (including a
retirement) of a short-term obligation, as
described in section 1272(a)(2)(C), that is
issued on or after January 1, 2014.
(xiv) Certain redemptions. No return
of information is required under this sec-
tion for payments made by a stock transfer
agent (as described in §1.6045-1(b)(iv))
with respect to a redemption of stock of
a corporation described in section 1297(a)
with respect to a shareholder in the corpo-
ration if—
(A) The stock transfer agent obtains
from the corporation a written certifica-
tion signed by a person authorized to sign
on behalf of the corporation, that states
that the corporation is described in sec-
tion 1297(a) for each calendar year during
which the stock transfer agent relies on the
provisions of this paragraph (c)(3)(xiv),
and the stock transfer agent has no reason
to know that the written certification is
unreliable or incorrect;
(B) The stock transfer agent identi-
fies, prior to payment, the corporation as
a participating FFI (including a reporting
Model 2 FFI) (as defined in §1.6049-4(f)
(10) or (14), respectively), or reporting
Model 1 FFI (as defined in §1.6049-4(f)
(13)), in accordance with the requirements
of §1.1471-3(d)(4) (substituting the terms
stock transfer agent and corporation for
the terms withholding agent and payee,
respectively) and validates that status
annually;
(C) The stock transfer agent obtains a
written certification representing that the
corporation shall report the payment as
part of its account holder reporting obli-
gations under chapter 4 of the Code or an
applicable IGA (as defined in §1.6049-
4(f)(7)) and provided the stock transfer
agent does not know that the corporation
is not reporting the payment as required.
The paying agent may rely on the writ-
ten certification until there is a change in
circumstances or the paying agent knows
or has reason to know that the statement
is unreliable or incorrect. A stock trans-
fer agent that knows that the corporation
is not reporting the payment as required
under chapter 4 of the Code or an appli-
cable IGA must report all payments
reportable under this section that it makes
during the year in which it obtains such
knowledge; and
(D) The stock transfer agent is not
also acting in its capacity as a custodian,
nominee, or other agent of the payee with
respect to the payment.
(4) Examples. The following examples
illustrate the application of the rules in
paragraph (c)(3) of this section:
(i) Example 1. P, an individual who is not an
exempt recipient, places an order with B, a person
generally known in the investment community to be
a federally registered broker/dealer, to effect a sale
of P’s stock in a publicly traded corporation. B, in
turn, places an order to sell the stock with C, a sec-
ond broker, who will execute the sale. B discloses to
C the identity of the customer placing the order. C
is not required to make a return of information with
respect to the sale because C was instructed by B, an
exempt recipient as defined in paragraph (c)(3)(i)(B)
(6) of this section, to initiate the sale. B is required
to make a return of information with respect to the
sale because P is B’s customer and is not an exempt
recipient.
(ii) Example 2. Assume the same facts as in para-
graph (c)(4)(i) of this section (the facts in Example
1) except that B has an omnibus account with C so
that B does not disclose to C whether the transaction
is for a customer of B or for B’s own account. C is
not required to make a return of information with
respect to the sale because C was instructed by B, an
exempt recipient as defined in paragraph (c)(3)(i)(B)
(6) of this section, to initiate the sale. B is required
to make a return of information with respect to the
sale because P is B’s customer and is not an exempt
recipient.
(iii) Example 3. D, an individual who is not
an exempt recipient, enters into a cash on delivery
stock transaction by instructing K, a federally reg-
istered broker/dealer, to sell stock owned by D, and
to deliver the proceeds to L, a custodian bank. Con-
currently with the above instructions, D instructs L
to deliver D’s stock to K (or K’s designee) against
delivery of the proceeds from K. The records of both
K and L with respect to this transaction show an
account in the name of D. Pursuant to paragraph (h)
(1) of this section, D is considered the customer of K
and L. Under paragraph (c)(3)(iv) of this section, K
is not required to make a return of information with
respect to the sale because K will pay the gross pro-
ceeds to L against delivery of the securities sold. L is
required to make a return of information with respect
to the sale because D is L’s customer and is not an
exempt recipient.
(iv) Example 4. Assume the same facts as in
paragraph (c)(4)(iii) of this section (the facts in
Example 3) except that E, a federally registered
investment adviser, instructs K to sell stock owned
by D and to deliver the proceeds to L. Concurrently
with the above instructions, E instructs L to deliver
D’s stock to K (or K’s designee) against delivery of
the proceeds from K. The records of both K and L
with respect to the transaction show an account in
the name of D. Pursuant to paragraph (h)(1) of this
section, D is considered the customer of K and L.
Under paragraph (c)(3)(iv) of this section, K is not
required to make a return of information with respect
to the sale because K will pay the gross proceeds to
L against delivery of the securities sold. L is required
to make a return of information with respect to the
sale because D is L’s customer and is not an exempt
recipient.
(v) Example 5. Assume the same facts as in
paragraph (c)(4)(iv) of this section (the facts in
Example 4) except that the records of both K and L
with respect to the transaction show an account in
the name of E. Pursuant to paragraph (h)(1) of this
section, E is considered the customer of K and L.
Under paragraph (c)(3)(iv) of this section, K is not
required to make a return of information with respect
to the sale because K will pay the gross proceeds to
L against delivery of the securities sold. L is required
to make a return of information with respect to the
sale because E is L’s customer and is not an exempt
recipient. E is required to make a return of informa-
tion with respect to the sale because D is E’s cus-
tomer and is not an exempt recipient.
(vi) Example 6. F, an individual who is not an
exempt recipient, owns bonds that are held by G,
a federally registered broker/dealer, in an account
for F with G designated as nominee for F. Upon the
retirement of the bonds, the gross proceeds are auto-
matically credited to the account of F. G is required
to make a return of information with respect to the
retirement because G is the broker responsible for
making payments of the gross proceeds to F.
(vii) Example 7. On June 24, 2010, H, an indi-
vidual who is not an exempt recipient, opens a short
sale of stock in an account with M, a broker. Because
the short sale is entered into before January 1, 2011,
paragraph (c)(3)(xi) of this section does not apply.
Under paragraphs (c)(2) and (j) of this section, M
must make a return of information for the year of
the sale regardless of when the short sale is closed.
(viii) Example 8—(A) Facts. On August 25,
2011, H opens a short sale of stock in an account
with M, a broker. H closes the short sale with M on
January 25, 2012, by purchasing stock of the same
corporation in the account in which H opened the
short sale and delivering the stock to satisfy H’s short
sale obligation. The stock H purchased is a covered
security.
(B) Analysis. Because the short sale is entered
into on or after January 1, 2011, under paragraphs
(c)(2) and (c)(3)(xi) of this section, the broker clos-
ing the short sale must make a return of information
reporting the sale for the year in which the short sale
is closed. Thus, M is required to report the sale for
2012. M must report on a single return the relevant

July 29, 2024 274 Bulletin No. 2024–31
information for the sold stock, the adjusted basis of
the purchased stock, and whether any gain or loss
on the closing of the short sale is long-term or short-
term (within the meaning of section 1222). Thus,
M must report the information about the short sale
opening and closing transactions on a single return
for taxable year 2012.
(ix) Example 9—(A) Facts. Assume the same
facts as in paragraph (c)(4)(viii) of this section (the
facts in Example 8) except that H also has an account
with N, a broker, and satisfies the short sale obliga-
tion with M by borrowing stock of the same corpo-
ration from N and transferring custody of the bor-
rowed stock from N to M. N indicates on the transfer
statement that the transferred stock was borrowed in
accordance with §1.6045A-1(b)(7).
(B) Analysis with respect to M. Under paragraph
(c)(3)(xi)(C) of this section, M may not file the return
of information required under this section. M must
furnish a statement to N that reports the gross pro-
ceeds from the short sale on August 25, 2011, the
date of the sale, the quantity of shares sold, the
CUSIP number or other security identifier number of
the sold stock, the transfer date, the name and contact
information of M and N, and information identifying
H such as H’s name and the account number from
which H transferred the borrowed stock.
(C) Analysis with respect to N. N must report
the gross proceeds from the short sale, the date the
short sale was closed, the adjusted basis of the stock
acquired to close the short sale, and whether any gain
or loss on the closing of the short sale is long-term or
short-term (within the meaning of section 1222) on
the return of information N is required to file under
paragraph (c)(2) of this section when H closes the
short sale in the account with N.
(x) Example 10: Excepted sale of digital assets
representing payment instructions—(A) Facts. BNK
is a bank that uses a cryptographically secured dis-
tributed ledger technology system (DLT) that pro-
vides access only to other member banks to securely
transfer payment instructions that are not securi-
ties or commodities described in paragraph (c)(8)
(iii) of this section. These payment instructions are
exchanged between member banks through the use
of digital asset DX. Dispositions of DX do not give
rise to sales of other digital assets within the cryp-
tographically secured distributed ledger (or network
of interoperable distributed ledgers) and are not
capable of being transferred, exchanged, or other-
wise used, outside the DLT system. BNK disposes
of DX using the DLT system to make a payment
instruction to another bank within the DLT system.
(B) Analysis. BNK’s disposition of DX using
the DLT system to make a payment instruction to
another bank within the DLT system is a disposition
of a digital asset representing payment instructions
that are not securities or commodities within a cryp-
tographically secured distributed ledger that provides
access only to users of such information. Because
DX cannot be transferred, exchanged, or otherwise
used, outside of DLT, and because the payment
instructions are not dual classification assets under
paragraph (c)(8)(iii) of this section, BNK’s disposi-
tion of DX is an excepted sale under paragraph (c)(3)
(ii)(G) of this section.
(xi) Example 11: Excepted sale of digital assets
representing a loyalty program—(A) Facts. S cre-
ated a loyalty program as a marketing tool to incen-
tivize customers to make purchases at S’s store,
which sells non-digital asset goods and services.
Customers that join S’s loyalty program receive
1 unit of digital asset LY at the end of each month
for every $1 spent in S’s store. Units of LY can only
be disposed of within S’s cryptographically secured
distributed ledger (DLY) in exchange for goods or
services provided by S or merchants, such as M,
that have contractually agreed to provide goods or
services to S’s loyalty customers in exchange for a
predetermined payment from S. Customer C is a par-
ticipant in S’s loyalty program and has earned 1,000
units of LY. C redeems 1,000 units of LY in exchange
for non-digital asset goods in M’s store.
(B) Analysis. Customer C’s disposition of LY
using the DLY system in exchange for non-digital
asset goods in M’s store is a disposition of a digi-
tal asset representing loyalty program credits in
exchange for non-digital asset goods or services from
M, a merchant participating with S’s loyalty pro-
gram. Because LY cannot be transferred, exchanged,
or otherwise used outside of DLY, C’s disposition of
LY is an excepted sale under paragraph (c)(3)(ii)(E)
of this section.
(xii) Example 12: Multiple brokers—(A) Facts.
L, an individual who is not an exempt recipient,
maintains digital assets with HWP, a U.S. corpo-
ration that provides hosted wallet services. L also
maintains an account at CRX, a U.S. corporation that
operates a digital asset trading platform and that also
provides custodial services for digital assets held by
L. L places an order with HWP to exchange 10 units
of digital asset DE for 100 units of digital asset RN.
To effect the order, HWP places the order with CRX
and communicates to CRX that the order is on behalf
of L. Prior to initiating the transaction, CRX obtains
a certification from HWP on a properly completed
exemption certificate (as provided in §31.3406(h)-3
of this chapter) that HWP is a U.S. digital asset bro-
ker described in paragraph (g)(4)(i)(A)(1) of this
section. CRX completes the transaction and transfers
the 100 units of RN to HWP. HWP, in turn, credits
L’s account with the 100 units of RN.
(B) Analysis. HWP is the broker responsible for
first crediting the gross proceeds on the sale to L’s
wallet. Accordingly, because CRX has obtained from
HWP a certification on a properly completed exemp-
tion certificate (as provided in §31.3406(h)-3 of
this chapter) that HWP is a U.S. digital asset broker
described in paragraph (g)(4)(i)(A)(1) of this section,
CRX is not required to make a return of information
with respect to the sale of 100 units of RN effected
on behalf of L under paragraph (c)(3)(iii)(B) of this
section. In contrast, because HWP is the broker that
credits the 100 units of RN to L’s account, HWP is
required to make a return of information with respect
to the sale.
(xiii) Example 13: Multiple brokers—(A) Facts.
The facts are the same as in paragraph (c)(4)(xii)(A)
of this section (the facts in Example 12), except that
CRX deposits the 100 units of RN into L’s account
with CRX after the transaction is effected by CRX.
Thereafter, L transfers the 100 units of RN in L’s
account with CRX to L’s account with HWP. Prior
to the transaction, HWP obtained a certification from
CRX on a properly completed exemption certificate
(as provided in §31.3406(h)-3 of this chapter) that
CRX is a U.S. digital asset broker described in para-
graph (g)(4)(i)(A)(1) of this section.
(B) Analysis. Under paragraph (c)(3)(iii)(B) of
this section, despite being instructed by HWP to
make the sale of 100 units of RN on behalf of L,
CRX is required to make a return of information with
respect to the sale effected on behalf of L because
CRX is the broker that credits the 100 units of RN
to L’s account. In contrast, HWP is not required to
make a return of information with respect to the sale
effected on behalf of L because HWP obtained from
CRX a certification on a properly completed exemp-
tion certificate (as provided in §31.3406(h)-3 of
this chapter) that CRX is a U.S. digital asset broker
described in paragraph (g)(4)(i)(A)(1) of this section.
(5) * * *
(i) In general. A broker effecting clos-
ing transactions in regulated futures con-
tracts shall report information with respect
to regulated futures contracts solely in
the manner prescribed in this paragraph
(c)(5). In the case of a sale that involves
making delivery pursuant to a regulated
futures contract, only the profit or loss on
the contract is reported as a transaction
with respect to regulated futures con-
tracts under this paragraph (c)(5); such
sales are, however, subject to reporting
under paragraph (d)(2)(i)(A). The infor-
mation required under this paragraph (c)
(5) must be reported on a calendar year
basis, unless the broker is advised in writ-
ing by an account’s owner that the own-
er’s taxable year is other than a calendar
year and the broker elects to report with
respect to regulated futures contracts in
such account on the basis of the owner’s
taxable year. The following information
must be reported as required by Form
1099-B, Proceeds From Broker and Bar-
ter Exchange Transactions, or any succes-
sor form, with respect to regulated futures
contracts held in a customer’s account:
(A) The name, address, and taxpayer
identification number of the customer.
(B) The net realized profit or loss from
all regulated futures contracts closed
during the calendar year.
(C) The net unrealized profit or loss in
all open regulated futures contracts at the
end of the preceding calendar year.
(D) The net unrealized profit or loss in
all open regulated futures contracts at the
end of the calendar year.
(E) The aggregate profit or loss from
regulated futures contracts ((b) + (d)−(c)).
(F) Any other information required by
Form 1099-B. See 17 CFR 1.33. For this
purpose, the end of a year is the close of

Bulletin No. 2024–31 275 July 29, 2024
business of the last business day of such
year. In reporting under this paragraph
(c)(5), the broker shall make such adjust-
ments for commissions that have actually
been paid and for option premiums as are
consistent with the books of the broker.
No additional returns of information with
respect to regulated futures contracts so
reported are required.
* * * * *
(8) Special coordination rules for
reporting digital assets that are dual
classification assets--(i) General rule for
reporting dual classification assets as
digital assets. Except in the case of a sale
described in paragraph (c)(8)(ii), (iii), or
(iv) of this section, for any sale of a digi-
tal asset under paragraph (a)(9)(ii) of this
section that also constitutes a sale under
paragraph (a)(9)(i) of this section, the
broker must treat the transaction as set
forth in paragraphs (c)(8)(i)(A) through
(D). For purposes of this section, an asset
described in this paragraph (c)(8)(i) is a
dual classification asset.
(A) The broker must report the sale
only as a sale of a digital asset under para-
graph (a)(9)(ii) of this section and not as a
sale under paragraph (a)(9)(i) of this sec-
tion.
(B) The broker must treat the sale only
as a sale of a specified security under para-
graph (a)(14)(v) or (vi) of this section, as
applicable, and not as a specified security
under paragraph (a)(14)(i), (ii), (iii), or
(iv) of this section.
(C) The broker must apply the report-
ing rules set forth in paragraphs (d)(2)(i)
(B) through (D) of this section, as appli-
cable, for the information required to be
reported for such sale.
(D) For a sale of a dual classification
asset that is treated as a tokenized security,
the broker must report the information set
forth in paragraph (c)(8)(i)(D)(3) of this
section.
(1) A tokenized security is a dual classi-
fication asset that:
(i) Provides the holder with an interest
in another asset that is a security described
in paragraph (a)(3) of this section, other
than a security that is also a digital asset;
or
(ii) Constitutes an asset the offer and
sale of which was registered with the U.S.
Securities and Exchange Commission,
other than an asset treated as a security
for securities law purposes solely as an
investment contract.
(2) For purposes of paragraph (c)(8)(i)
(D)(1) of this section, a qualifying stable-
coin is not treated as a tokenized security.
(3) In the case of a sale of a tokenized
security, the broker must report the infor-
mation set forth in paragraph (d)(2)(i)(B)
(6) of this section, as applicable. In the
case of a tokenized security that is a spec-
ified security under paragraph (a)(14)(i),
(ii), (iii), or (iv) of this section, the bro-
ker must also report the information set
forth in paragraph (d)(2)(i)(D)(4) of this
section.
(ii) Reporting of dual classification
assets that constitute contracts covered by
section 1256(b) of the Code. For a sale of
a digital asset on or after January 1, 2025,
that is also a contract covered by section
1256(b), the broker must report the sale
only under paragraph (c)(5) of this section
including, as appropriate, the application
of the rules in paragraph (m)(3) of this
section.
(iii) Reporting of dual classification
assets cleared or settled on a limited-ac-
cess regulated network--(A) General
rule. The coordination rule of paragraph
(c)(8)(i) of this section does not apply to
any sale of a dual classification asset that
is a digital asset solely because the sale of
such asset is cleared or settled on a lim-
ited-access regulated network described
in paragraph (c)(8)(iii)(B) of this section.
In such case, the broker must report such
sale only as a sale under paragraph (a)(9)
(i) of this section and not as a sale under
paragraph (a)(9)(ii) of this section and
must treat the sale as a sale of a specified
security under paragraph (a)(14)(i), (ii),
(iii), or (iv) of this section, to the extent
applicable, and not as a sale of a specified
security under paragraph (a)(14)(v) or
(vi) of this section. For all other purposes
of this section including transfers, a dual
classification asset that is a digital asset
solely because it is cleared or settled on
a limited-access regulated network is not
treated as a digital asset and is not report-
able as a digital asset. See paragraph (d)
(2)(i)(A) of this section for the informa-
tion required to be reported for such a
sale.
(B) Limited-access regulated network.
For purposes of this section, a limited-ac-
cess regulated network is described in
paragraph (c)(8)(iii)(B)(1) or (2) of this
section.
(1) A cryptographically secured distrib-
uted ledger, or network of interoperable
cryptographically secured distributed led-
gers, that provides clearance or settlement
services and that either:
(i) Provides access only to persons
described in one or more of paragraphs (c)
(3)(i)(B)(6), (7), (10), or (11) of this sec-
tion; or
(ii) Is provided exclusively to its partic-
ipants by an entity that has registered with
the U.S. Securities and Exchange Com-
mission as a clearing agency, or that has
received an exemption order from the U.S.
Securities and Exchange Commission as a
clearing agency, under section 17A of the
Securities Exchange Act of 1934.
(2) A cryptographically secured dis-
tributed ledger controlled by a single per-
son described in one of paragraphs (c)(3)
(i)(B)(6) through (11) of this section that
permits the ledger to be used solely by
itself and its affiliates, and therefore does
not provide access to the ledger to third
parties such as customers or investors, in
order to clear or settle sales of assets.
(iv) Reporting of dual classification
assets that are interests in money market
funds. The coordination rule of paragraph
(c)(8)(i) of this section does not apply to
any sale of a dual classification asset that
is a share in a regulated investment com-
pany that is permitted to hold itself out to
investors as a money market fund under
Rule 2a-7 under the Investment Company
Act of 1940 (17 CFR 270.2a-7). In such
case, the broker must treat such sale only
as a sale under paragraph (a)(9)(i) of this
section and not as a sale under paragraph
(a)(9)(ii) of this section. See paragraph
(c)(3)(vi) of this section, providing that
no return of information is required for
shares described in the first sentence of
this paragraph (c)(8)(iv).
(v) Example: Digital asset securities—
(A) Facts. Brokers registered under the
securities laws of the United States have
formed a large network (broker network)
that maintains accounts for customers
seeking to purchase and sell stock. The
broker network clears and settles sales
of this stock using a cryptographically
secured distributed ledger (DLN) that pro-
vides clearance or settlement services to
the broker network. DLN may not be used

July 29, 2024 276 Bulletin No. 2024–31
by any person other than a registered bro-
ker in the broker network.
(B) Analysis. DLN is a limited-access
regulated network described in paragraph
(c)(8)(iii)(B)(1)(i) of this section because
it is a cryptographically secured distrib-
uted ledger that provides clearance or set-
tlement services and that provides access
only to brokers described in paragraph (c)
(3)(i)(B)(6) of this section. Additionally,
sales of stock cleared on DLN are sales
of securities under paragraph (a)(9)(i)
of this section and sales of digital assets
under paragraph (a)(9)(ii) of this section.
Accordingly, sales of stock cleared on
DLN are described in paragraph (c)(8)(iii)
of this section and the coordination rule of
paragraph (c)(8)(i) of this section does not
apply to these sales. Therefore, the sales
of stock cleared on DLN are reported only
under paragraph (a)(9)(i) of this section.
See paragraph (d)(2)(i)(A) of this section
for the method for reporting the informa-
tion required to be reported for such a sale.
(d) * * *
(2) Transactional reporting--(i)
Required information--(A) General rule
for sales described in paragraph (a)(9)
(i) of this section. Except as provided
in paragraph (c)(5) of this section, for
each sale described in paragraph (a)(9)
(i) of this section for which a broker is
required to make a return of information
under this section, the broker must report
on Form 1099-B, Proceeds From Broker
and Barter Exchange Transactions, or
any successor form, the name, address,
and taxpayer identification number of the
customer, the property sold, the Commit-
tee on Uniform Security Identification
Procedures (CUSIP) number of the secu-
rity sold (if applicable) or other security
identifier number that the Secretary may
designate by publication in the Federal
Register or in the Internal Revenue Bul-
letin (see §601.601(d)(2) of this chapter),
the adjusted basis of the security sold,
whether any gain or loss with respect to
the security sold is long-term or short-
term (within the meaning of section 1222
of the Code), the gross proceeds of the
sale, the sale date, and other information
required by the form in the manner and
number of copies required by the form. In
addition, for a sale of a covered security
on or after January 1, 2014, a broker must
report on Form 1099-B whether any gain
or loss is ordinary. See paragraph (m) of
this section for additional rules related to
options and paragraph (n) of this section
for additional rules related to debt instru-
ments. See paragraph (c)(8) of this section
for rules related to sales of securities or
sales of commodities under paragraph (a)
(9)(i) of this section that are also sales of
digital assets under paragraph (a)(9)(ii) of
this section.
(B) Required information for digital
asset transactions. Except in the case of a
sale of a qualifying stablecoin or a speci-
fied nonfungible token for which the bro-
ker reports in the manner set forth in para-
graph (d)(10) of this section and subject to
the exception described in paragraph (d)
(2)(i)(C) of this section for sales of digital
assets described in paragraph (a)(9)(ii)(D)
of this section (sales effected by proces-
sors of digital asset payments), for each
sale of a digital asset described in para-
graph (a)(9)(ii) of this section for which
a broker is required to make a return of
information under this section, the broker
must report on Form 1099-DA, Digital
Asset Proceeds From Broker Transac-
tions, or any successor form, in the man-
ner required by such form or instructions
the following information:
(1) The name, address, and taxpayer
identification number of the customer;
(2) The name and number of units of
the digital asset sold;
(3) The sale date;
(4) The gross proceeds amount (after
reduction for the allocable digital asset
transaction costs as defined and allocated
pursuant to paragraph (d)(5)(iv) of this
section);
(5) Whether the sale was for cash,
stored-value cards, or in exchange for ser-
vices or other property;
(6) In the case of a sale that is reported
as a digital asset sale pursuant to the rule
in paragraph (c)(8)(i) of this section and is
described as a tokenized security in para-
graph (c)(8)(i)(D) of this section, the bro-
ker must also report to the extent required
by Form 1099-DA or instructions: the
CUSIP number of the security sold (if
applicable) or other security identifier
number that the Secretary may designate
by publication in the Federal Register
or in the Internal Revenue Bulletin (see
§601.601(d)(2) of this chapter); any infor-
mation required under paragraph (m) of
this section (related to options); any infor-
mation required under paragraph (n) of
this section (related to debt instruments);
and any other information required by the
form or instructions;
(7) For each such sale of a digital asset
that was held by the broker in a hosted
wallet on behalf of a customer and was
previously transferred into an account at
the broker (transferred-in digital asset),
the broker must also report the date of
such transfer in and the number of units
transferred in by the customer;
(8) Whether the broker took into
account customer-provided acquisition
information from the customer or the cus-
tomer’s agent as described in paragraph
(d)(2)(ii)(B)(4) of this section when deter-
mining the identification of the units sold
(without regard to whether the broker’s
determination with respect to the particu-
lar unit sold was derived from the broker’s
own records or from that information);
and
(9) Any other information required by
the form or instructions.
(C) Exception for certain sales effected
by processors of digital asset payments. A
broker is not required to report any infor-
mation required by paragraph (d)(2)(i)(B)
of this section with respect to a sale of a
digital asset described in paragraph (a)
(9)(ii)(D) of this section (sales effected
by processors of digital asset payments)
by a customer if the gross proceeds (after
reduction for the allocable digital asset
transaction costs) from all such sales of
digital assets effected by that broker for
the year by the customer do not exceed
$600. Gross proceeds from sales of qual-
ifying stablecoins or specified nonfungi-
ble tokens that are reported in the man-
ner set forth in paragraph (d)(10) of this
section are not included in determining if
this $600 threshold has been met. For the
rules applicable for determining who the
customer is for purposes of calculating
this $600 threshold in the case of a joint
account, see paragraph (d)(10)(v) of this
section.
(D) Acquisition information for sales
of certain digital assets. Except in the case
of a sale of a qualifying stablecoin or a
specified nonfungible token for which the
broker reports in the manner set forth in
paragraph (d)(10) of this section, for each
sale described in paragraph (a)(9)(ii) of

Bulletin No. 2024–31 277 July 29, 2024
this section on or after January 1, 2026, of
a covered security defined in paragraph (a)
(15)(i)(H), (J), or (K) of this section that
was acquired by the broker for the cus-
tomer and held in the customer’s account,
for which a broker is required to make a
return of information under paragraph (d)
(2)(i)(B) of this section, the broker must
also report the following information:
(1) The adjusted basis of the covered
security sold calculated in accordance
with paragraph (d)(6) of this section;
(2) The date such covered security was
purchased, and whether any gain or loss
with respect to the covered security sold
is long-term or short-term in accordance
with paragraph (d)(7) of this section;
(3) For purpose of determining the
information required in paragraphs (d)
(2)(i)(D)(1) through (2) in the case of an
option and any asset delivered in settle-
ment of an option, the broker must apply
any applicable rules set forth in paragraph
(m) of this section; and
(4) In the case of a sale that is reported
as a digital asset sale pursuant to the rule
in paragraph (c)(8)(i) of this section and
is described as a tokenized security in
paragraph (c)(8)(i)(D) of this section, see
paragraphs (d)(6)(iii)(A)(2) and (d)(7)(ii)
(A)(2) of this section regarding the basis
and holding period adjustments required
for wash sales, paragraph (d)(6)(v) of this
section for rules regarding the application
of the average basis method, paragraph
(m) of this section for rules related to
options, paragraph (n) of this section for
rules related to debt instruments, and any
other information required by the form or
instructions.
(ii) Specific identification of speci-
fied securities--(A) In general. Except
as provided in §1.1012-1(e)(7)(ii), for a
specified security described in paragraph
(a)(14)(i) of this section sold on or after
January 1, 2011, or for a specified secu-
rity described in paragraph (a)(14)(ii) of
this section sold on or after January 1,
2014, a broker must report a sale of less
than the entire position in an account of
a specified security that was acquired on
different dates or at different prices con-
sistently with a customer’s adequate and
timely identification of the security to be
sold. See §1.1012-1(c). If the customer
does not provide an adequate and timely
identification for the sale, the broker
must first report the sale of securities in
the account for which the broker does not
know the acquisition or purchase date fol-
lowed by the earliest securities purchased
or acquired, whether covered securities or
noncovered securities.
(B) Identification of digital assets sold,
disposed of, or transferred. For a specified
security described in paragraph (a)(14)
(v) of this section, a broker must deter-
mine the unit sold, disposed of, or trans-
ferred, if less than the entire position in
an account of such specified security that
was acquired on different dates or at dif-
ferent prices, consistently with the ade-
quate identification of the digital asset to
be sold, disposed of, or transferred.
(1) No identification of units by cus-
tomer. In the case of multiple units of the
same digital asset that are held by a bro-
ker for a customer, if the customer does
not provide the broker with an adequate
identification of which units of a digital
asset are sold, disposed of, or transferred
by the date and time of the sale, disposi-
tion, or transfer, and the broker does not
have adequate transfer-in date records and
does not have or take into account cus-
tomer-provided acquisition information
as defined by paragraph (d)(2)(ii)(B)(4)
of this section, then the broker must first
report the sale, disposition, or transfer of
units that were not acquired by the broker
for the customer. After the disposition of
all such units of digital assets, the broker
must treat units as sold, disposed of, or
transferred in order of time from the earli-
est date on which units of the same digital
asset were acquired by the customer. See
paragraph (d)(2)(ii)(B)(4) of this section
for circumstances under which a broker
may use information provided by the cus-
tomer or the customer’s agent to determine
when units of a digital asset were acquired
by the customer. If the broker does not
receive customer-provided acquisition
information with respect to digital assets
that were transferred into the customer’s
account or otherwise does not take such
information into account, the broker must
treat those units as acquired as of the date
and time of the transfer.
(2) Adequate identification of units by
customer. Except as provided in paragraph
(d)(2)(ii)(B)(3) of this section, when mul-
tiple units of the same digital asset are left
in the custody of the broker, an adequate
identification occurs if, no later than the
date and time of the sale, disposition, or
transfer, the customer specifies to the bro-
ker the particular units of the digital asset
to be sold, disposed of, or transferred by
reference to any identifier that the broker
designates as sufficiently specific to deter-
mine the units sold, disposed of, or trans-
ferred. For example, a customer’s refer-
ence to the purchase date and time of the
units to be sold may be designated by the
broker as sufficiently specific to determine
the units sold, disposed of, or transferred if
no other unidentified units were purchased
at that same purchase date and time or
purchase price. To the extent permitted by
paragraph (d)(2)(ii)(B)(4) of this section,
a broker may take into account custom-
er-provided acquisition information with
respect to transferred-in digital assets for
purposes of enabling a customer to make a
sufficiently specific reference. A standing
order or instruction for the specific iden-
tification of digital assets is treated as an
adequate identification made at the date
and time of sale, disposition, or transfer.
In the case of a broker that offers only one
method of making a specific identifica-
tion, such method is treated as a standing
order or instruction within the meaning of
the prior sentence.
(3) Special rule for the identification of
certain units withheld from a transaction.
Notwithstanding paragraphs (d)(2)(ii)(B)
(1) and (2) of this section, in the case of a
sale of digital assets in exchange for other
digital assets differing materially in kind
or in extent and for which the broker with-
holds units of the digital assets received
for either the broker’s obligation to deduct
and withhold a tax under section 3406, or
for payment of the customer’s digital asset
transaction costs as defined in paragraph
(d)(5)(iv)(A) of this section, the customer
is deemed to have made an adequate iden-
tification, within the meaning of paragraph
(d)(2)(ii)(B)(2) of this section, for such
withheld units as from the units received
in the underlying transaction regardless of
any other adequate identification within
the meaning of paragraph (d)(2)(ii)(B)(2)
of this section designating other units of
the same digital asset as the units sold, dis-
posed of, or transferred.
(4) Customer-provided acquisition
information for digital assets. For pur-
poses of identifying which units are sold,

July 29, 2024 278 Bulletin No. 2024–31
disposed of, or transferred under para-
graph (d)(2)(ii)(A) of this section, a broker
is permitted, but not required, to take into
account customer-provided acquisition
information. For purposes of this section,
customer-provided acquisition informa-
tion means reasonably reliable informa-
tion, such as the date and time of acquisi-
tion of units of a digital asset, provided by
a customer or the customer’s agent to the
broker no later than the date and time of
a sale, disposition, or transfer. Reasonably
reliable information includes purchase or
trade confirmations at other brokers or
immutable data on a public distributed
ledger. Solely for purposes of penalties
under sections 6721 and 6722, a broker
that takes into account customer-provided
acquisition information for purposes of
identifying which units are sold, disposed
of, or transferred is deemed to have relied
upon this information in good faith if the
broker neither knows nor has reason to
know that the information is incorrect. See
§301.6724-1(c)(6) of this chapter.
(iii) Penalty relief for reporting infor-
mation not subject to reporting--(A)
Noncovered securities. A broker is not
required to report adjusted basis and the
character of any gain or loss for the sale
of a noncovered security if the return
identifies the sale as a sale of a noncov-
ered security. A broker that chooses to
report this information for a noncovered
security is not subject to penalties under
section 6721 or 6722 of the Code for fail-
ure to report this information correctly if
the return identifies the sale as a sale of a
noncovered security. For purposes of this
paragraph (d)(2)(iii)(A), a broker must
treat a security for which a broker makes
the single-account election described in
§1.1012-1(e)(11)(i) as a covered security.
(B) Gross proceeds from digital assets
sold before applicability date. A broker is
not required to report the gross proceeds
from the sale of a digital asset as described
in paragraph (a)(9)(ii) of this section if the
sale is effected prior to January 1, 2025. A
broker that chooses to report this informa-
tion on either the Form 1099-B, or when
available the Form 1099-DA, pursuant to
paragraph (d)(2)(i)(B) of this section is
not subject to penalties under section 6721
or 6722 for failure to report this informa-
tion correctly. See paragraph (d)(2)(iii)(A)
of this section for the reporting of adjusted
basis and the character of any gain or loss
for the sale of a noncovered security that
is a digital asset.
(iv) Information from other parties
and other accounts--(A) Transfer and
issuer statements. When reporting a sale
of a covered security, a broker must take
into account all information, other than
the classification of the security (such as
stock), furnished on a transfer statement
(as described in §1.6045A-1) and all infor-
mation furnished or deemed furnished
on an issuer statement (as described
in §1.6045B-1) unless the statement
is incomplete or the broker has actual
knowledge that it is incorrect. A broker
may treat a customer as a minority share-
holder when taking the information on an
issuer statement into account unless the
broker knows that the customer is a major-
ity shareholder and the issuer statement
reports the action’s effect on the basis of
majority shareholders. A failure to report
correct information that arises solely from
reliance on information furnished on a
transfer statement or issuer statement is
deemed to be due to reasonable cause for
purposes of penalties under sections 6721
and 6722. See §301.6724-1(a)(1) of this
chapter.
(B) Other information with respect to
securities. Except in the case of a covered
security that is described in paragraph (a)
(15)(i)(H), (J), or (K) of this section, a
broker is permitted, but not required, to
take into account information about a cov-
ered security other than what is furnished
on a transfer statement or issuer statement,
including any information the broker has
about securities held by the same cus-
tomer in other accounts with the broker.
For purposes of penalties under sections
6721 and 6722, a broker that takes into
account information with respect to secu-
rities described in the previous sentence
that is received from a customer or third
party other than information furnished on
a transfer statement or issuer statement
is deemed to have relied upon this infor-
mation in good faith if the broker neither
knows nor has reason to know that the
information is incorrect. See §301.6724-
1(c)(6) of this chapter.
(v) Failure to receive a complete trans-
fer statement for securities. A broker
that has not received a complete transfer
statement as required under §1.6045A-
1(a)(3) for a transfer of a specified secu-
rity described in paragraphs (a)(14)(i)
through (iv) of this section must request
a complete statement from the applica-
ble person effecting the transfer unless,
under §1.6045A-1(a), the transferor has
no duty to furnish a transfer statement for
the transfer. The broker is only required to
make this request once. If the broker does
not receive a complete transfer statement
after requesting it, the broker may treat
the security as a noncovered security upon
its subsequent sale or transfer. A transfer
statement for a covered security is com-
plete if, in the view of the receiving bro-
ker, it provides sufficient information to
comply with this section when reporting
the sale of the security. A transfer state-
ment for a noncovered security is com-
plete if it indicates that the security is a
noncovered security.
(vi) Reporting by other parties after
a sale of securities--(A) Transfer state-
ments. If a broker receives a transfer state-
ment indicating that a security is a cov-
ered security after the broker reports the
sale of the security, the broker must file
a corrected return within thirty days of
receiving the statement unless the broker
reported the required information on the
original return consistently with the trans-
fer statement.
(B) Issuer statements. If a broker
receives or is deemed to receive an issuer
statement after the broker reports the sale
of a covered security, the broker must file
a corrected return within thirty days of
receiving the issuer statement unless the
broker reported the required information
on the original return consistently with the
issuer statement.
(C) Exception. A broker is not required
to file a corrected return under this para-
graph (d)(2)(vi) if the broker receives
the transfer statement or issuer statement
more than three years after the broker filed
the return.
(vii) Examples. The following exam-
ples illustrate the rules of this paragraph
(d)(2). Unless otherwise indicated, all
events and transactions described in para-
graphs (d)(2)(vii)(C) and (D) of this sec-
tion (Examples 3 and 4) occur on or after
January 1, 2026.
(A) Example 1--(1) Facts. On February 22, 2012,
K sells 100 shares of stock of C, a corporation, at a
loss in an account held with F, a broker. On March
15, 2012, K purchases 100 shares of C stock for cash

Bulletin No. 2024–31 279 July 29, 2024
in an account with G, a different broker. Because K
acquires the stock purchased on March 15, 2012, for
cash in an account after January 1, 2012, under para-
graph (a)(15) of this section, the stock is a covered
security. K asks G to increase K’s adjusted basis in
the stock to account for the application of the wash
sale rules under section 1091 to the loss transaction
in the account held with F.
(2) Analysis. Under paragraph (d)(2)(iv)(B) of
this section, G is not required to take into account
the information provided by K when subsequently
reporting the adjusted basis and whether any gain
or loss on the sale is long-term or short-term. If G
chooses to take this information into account, under
paragraph (d)(2)(iv)(B) of this section, G is deemed
to have relied upon the information received from K
in good faith for purposes of penalties under sections
6721 and 6722 if G neither knows nor has reason to
know that the information provided by K is incorrect.
(B) Example 2--(1) Facts. L purchases shares of
stock of a single corporation in an account with F, a
broker, on April 17, 1969, April 17, 2012, April 17,
2013, and April 17, 2014. In January 2015, L sells
all the stock.
(2) Analysis. Under paragraph (d)(2)(i)(A) of
this section, F must separately report the gross pro-
ceeds and adjusted basis attributable to the stock
purchased in 2014, for which the gain or loss on the
sale is short-term, and the combined gross proceeds
and adjusted basis attributable to the stock purchased
in 2012 and 2013, for which the gain or loss on the
sale is long-term. Under paragraph (d)(2)(iii)(A) of
this section, F must also separately report the gross
proceeds attributable to the stock purchased in 1969
as the sale of noncovered securities in order to avoid
treatment of this sale as the sale of covered securi-
ties.
(C) Example 3: Ordering rule—(1) Facts. On
August 1, Year 1, TP opens a hosted wallet account
at CRX, a digital asset broker that owns and oper-
ates a digital asset trading platform, and purchases
within the account 10 units of digital asset DE for
$9 per unit. On January 1, Year 2, TP opens a hosted
wallet account at BEX, another digital asset broker
that owns and operates a digital asset trading plat-
form, and purchases within this account 20 units of
digital asset DE for $5 per unit. On August 1, Year
3, TP transfers the digital asset units held in TP’s
hosted wallet account with CRX into TP’s hosted
wallet account with BEX. On September 1, Year
3, TP directs BEX to sell 10 units of DE but does
not specify which units are to be sold and does not
provide to BEX purchase date and time information
with respect to the DE units transferred into TP’s
account with BEX. BEX has adequate transfer-in
date records with respect to TP’s transfer of the 10
units of DE on August 1, Year 3. BEX effects the sale
on TP’s behalf for $10 per unit.
(2) Analysis. TP did not make an adequate iden-
tification of the units to be sold in a sale of DE units
that was less than TP’s entire position in digital asset
DE. Therefore, BEX must treat the units of digital
asset DE sold according to the ordering rule provided
in paragraph (d)(2)(ii)(B) of this section. Pursuant to
that rule, because BEX has adequate transfer-in date
records with respect to TP’s transfer of the 10 units
of DE on August 1, Year 3, and because TP did not
give BEX customer-provided acquisition informa-
tion as defined by paragraph (d)(2)(ii)(B)(4) of this
section with respect to the units transferred into TP’s
account at BEX, the units sold must be attributed to
the earliest units of digital asset DE acquired by TP.
Additionally, because TP did not give BEX custom-
er-provided acquisition information, BEX must treat
those units as acquired as of the date and time of
the transfer (August 1, Year 3). Accordingly, the 10
units sold must be attributed to 10 of the 20 DE units
purchased by TP on January 1, Year 2, in the BEX
account because based on the information known
to BEX these units were purchased prior to the date
(August 1, Year 3) when TP transferred the other
units purchased at CRX into the account. The DE
units are digital assets that were acquired on or after
January 1, 2026, for TP by a broker (BEX) provid-
ing custodial services, and, thus, constitute covered
securities under paragraph (a)(15)(i)(J) of this sec-
tion. Accordingly, in addition to the gross proceeds
and other information required to be reported under
paragraph (d)(2)(i)(B) of this section, BEX must also
report the adjusted basis of the DE units sold, the
date the DE units were purchased, and whether any
gain or loss with respect to the DE units sold is long-
term or short-term as required by paragraph (d)(2)(i)
(D) of this section. Finally, because TP did not give
BEX customer-provided acquisition information, TP
will be required to treat different units as sold under
the rules provided by §1.1012-1(j)(3) from those
units that BEX treats as sold under this section unless
TP adopts a standing order to follow the ordering
rule result required by BEX. See §1.1012-1(j)(5)(iv)
(Example 4).
(D) Example 4: Ordering rule—(1) Facts. The
facts are the same as in paragraph (d)(2)(vii)(C)(1)
of this section (the facts in Example 3), except on
September 1, Year 3, TP’s agent (CRX) provides
BEX with purchase confirmations showing that the
10 units TP transferred into TP’s account at BEX
were purchased on August 1, Year 1. BEX neither
knows nor has reason to know that the information
supplied by CRX is incorrect and chooses to take
this information into account for purposes of iden-
tifying which of the TP’s units are sold, disposed of,
or transferred.
(2) Analysis. Because TP did not make an ade-
quate identification of the units to be sold in a sale
of DE units that was less than TP’s entire position
in digital asset DE, BEX must treat the units of dig-
ital asset DE sold as the earliest units of digital asset
DE acquired by TP. The purchase confirmations
(showing a purchase date of August 1, Year 1) for
the 10 units that were transferred into TP’s account
at BEX constitute customer-provided acquisition
information under paragraph (d)(2)(ii)(B)(4) of this
section, which BEX is permitted, but not required, to
take into account. Accordingly, BEX is permitted to
treat the 10 units sold by TP as the 10 DE units TP
purchased on August 1, Year 1 (and transferred into
BEX’s account on August 1, Year 3), because these
were the earliest units of digital asset DE acquired
by TP. The DE units are digital assets that were
acquired on or after January 1, 2026, for TP by a bro-
ker (CRX) providing custodial services, and, thus,
constitute covered securities under paragraph (a)(15)
(i)(J) of this section. However, because these cov-
ered securities were not acquired and thereafter held
by the selling broker (BEX), BEX is not required to
report the acquisition information required by para-
graph (d)(2)(i)(D) of this section. Finally, because TP
provided the purchase information with respect to
the transferred in units to BEX, the units determined
as sold by BEX are the same units that TP must treat
as sold under §1.1012-1(j)(3)(i). See §1.1012-1(j)(5)
(iv) (Example 4).
* * * * *
(4) Sale date--(i) In general. For sales
of property that are reportable under this
section other than digital assets, a broker
must report a sale as occurring on the date
the sale is entered on the books of the bro-
ker.
(ii) Special rules for digital asset
sales. For sales of digital assets that are
effected when digitally recorded using
cryptographically secured distributed led-
ger technology, such as a blockchain or
similar technology, the broker must report
the date of sale as the date when the trans-
actions are recorded on the ledger. For
sales of digital assets that are effected by a
broker and recorded in the broker’s books
and records (commonly referred to as an
off-chain transaction) and not directly on
a distributed ledger or similar technol-
ogy, the broker must report the date of
sale as the date when the transactions are
recorded on its books and records with-
out regard to the date that the transactions
may be later recorded on the distributed
ledger or similar technology.
(5) Gross proceeds--(i) In general.
Except as otherwise provided in paragraph
(d)(5)(ii) of this section with respect to
digital asset sales, for purposes of this sec-
tion, gross proceeds on a sale are the total
amount paid to the customer or credited to
the customer’s account as a result of the
sale reduced by the amount of any qual-
ified stated interest reported under para-
graph (d)(3) of this section and increased
by any amount not paid or credited by rea-
son of repayment of margin loans. In the
case of a closing transaction (other than a
closing transaction related to an option)
that results in a loss, gross proceeds are
the amount debited from the custom-
er’s account. For sales before January 1,
2014, a broker may, but is not required to,
reduce gross proceeds by the amount of
commissions and transfer taxes, provided
the treatment chosen is consistent with the
books of the broker. For sales on or after
January 1, 2014, a broker must reduce
gross proceeds by the amount of commis-
sions and transfer taxes related to the sale

July 29, 2024 280 Bulletin No. 2024–31
of the security. For securities sold pursu-
ant to the exercise of an option granted or
acquired before January 1, 2014, a broker
may, but is not required to, take the option
premiums into account in determining the
gross proceeds of the securities sold, pro-
vided the treatment chosen is consistent
with the books of the broker. For securities
sold pursuant to the exercise of an option
granted or acquired on or after January
1, 2014, or for the treatment of an option
granted or acquired on or after January 1,
2014, see paragraph (m) of this section.
A broker must report the gross proceeds
of identical stock (within the meaning of
§1.1012-1(e)(4)) by averaging the pro-
ceeds of each share if the stock is sold at
separate times on the same calendar day in
executing a single trade order and the bro-
ker executing the trade provides a single
confirmation to the customer that reports
an aggregate total price or an average
price per share. However, a broker may
not average the proceeds if the customer
notifies the broker in writing of an intent
to determine the proceeds of the stock by
the actual proceeds per share and the bro-
ker receives the notification by January 15
of the calendar year following the year of
the sale. A broker may extend the January
15 deadline but not beyond the due date
for filing the return required under this
section.
(ii) Sales of digital assets. The rules
contained in paragraphs (d)(5)(ii)(A) and
(B) of this section apply solely for pur-
poses of this section.
(A) Determining gross proceeds.
Except as otherwise provided in this sec-
tion, gross proceeds from the sale of a dig-
ital asset are equal to the sum of the total
cash paid to the customer or credited to
the customer’s account from the sale plus
the fair market value of any property or
services received (including services giv-
ing rise to digital asset transaction costs),
reduced by the amount of digital asset
transaction costs, as defined and allocated
under paragraph (d)(5)(iv) of this section.
In the case of a debt instrument issued in
exchange for the digital asset and sub-
ject to §1.1001-1(g), the amount realized
attributable to the debt instrument is deter-
mined under §1.1001-7(b)(1)(iv) rather
than by reference to the fair market value
of the debt instrument. See paragraph (d)
(5)(iv)(C) of this section for a special rule
setting forth how cascading digital asset
transaction costs are to be allocated in cer-
tain exchanges of one digital asset for a
different digital asset.
(1) Determining fair market value. Fair
market value is measured at the date and
time the transaction was effected. Except
as provided in the next sentence, in deter-
mining the fair market value of services or
property received or credited in exchange
for a digital asset, the broker must use a
reasonable valuation method that looks
to contemporaneous evidence of value,
such as the purchase price of the services,
goods or other property, the exchange
rate, and the U.S. dollar valuation applied
by the broker to effect the exchange. In
determining the fair market value of ser-
vices giving rise to digital asset transac-
tion costs, the broker must look to the fair
market value of the digital assets used to
pay for such transaction costs. In deter-
mining the fair market value of a digital
asset, the broker may perform its own val-
uations or rely on valuations performed by
a digital asset data aggregator as defined
in paragraph (d)(5)(ii)(B) of this section,
provided such valuations apply a reason-
able valuation method for digital assets as
described in paragraph (d)(5)(ii)(A)(3) of
this section.
(2) Consideration value not readily
ascertainable. When valuing services
or property (including digital assets)
received in exchange for a digital asset,
the value of what is received should ordi-
narily be identical to the value of the dig-
ital asset exchanged. If there is a disparity
between the value of services or property
received and the value of the digital asset
exchanged, the gross proceeds received by
the customer is the fair market value at the
date and time the transaction was effected
of the services or property, including digi-
tal assets, received. If the broker or digital
asset data aggregator, in the case of digital
assets, reasonably determines that the fair
market value of the services or property
received cannot be determined with rea-
sonable accuracy, the fair market value of
the received services or property must be
determined by reference to the fair mar-
ket value of the transferred digital asset
at the time of the exchange. See §1.1001-
7(b)(4). If the broker or digital asset data
aggregator, in the case of a digital asset,
reasonably determines that neither the
value of the received services or property
nor the value of the transferred digital
asset can be determined with reasonable
accuracy, the broker must report that the
received services or property has an unde-
terminable value.
(3) Reasonable valuation method for
digital assets. A reasonable valuation
method for digital assets is a method that
considers and appropriately weighs the
pricing, trading volumes, market capital-
ization and other factors relevant to the
valuation of digital assets traded through
digital asset trading platforms. A valua-
tion method is not a reasonable valuation
method for digital assets if it, for example,
gives an underweight effect to exchange
prices lying near the median price value,
an overweight effect to digital asset trad-
ing platforms having low trading volume,
or otherwise inappropriately weighs fac-
tors associated with a price that would
make that price an unreliable indicator of
value.
(B) Digital asset data aggregator. A
digital asset data aggregator is an infor-
mation service provider that provides
valuations of digital assets based on any
reasonable valuation method.
(iii) Digital asset transactions effected
by processors of digital asset payments.
The amount of gross proceeds under para-
graph (d)(5)(ii) of this section received
by a party who sells a digital asset under
paragraph (a)(9)(ii)(D) of this section
(effected by a processor of digital asset
payments) is equal to: the sum of the
amount paid in cash, and the fair market
value of the amount paid in digital assets
by that processor to a second party, plus
any digital asset transaction costs and
other fees charged to the second party that
are withheld (whether withheld from the
digital assets transferred by the first party
or withheld from the amount due to the
second party); and reduced by the amount
of digital asset transaction costs paid by
or withheld from the first party, as defined
and allocated under the rules of paragraph
(d)(5)(iv) of this section.
(iv) Definition and allocation of digi-
tal asset transaction costs--(A) Definition.
The term digital asset transaction costs
means the amount paid in cash or prop-
erty (including digital assets) to effect the
sale, disposition, or acquisition of a dig-
ital asset. Digital asset transaction costs

Bulletin No. 2024–31 281 July 29, 2024
include transaction fees, transfer taxes,
and commissions.
(B) General allocation rule. Except as
provided in paragraph (d)(5)(iv)(C) of this
section, in the case of a sale or disposi-
tion of digital assets, the total digital asset
transaction costs paid by the customer are
allocable to the sale or disposition of the
digital assets.
(C) Special rule for allocation of cer-
tain cascading digital asset transaction
costs. In the case of a sale of one digital
asset in exchange for another digital asset
differing materially in kind or in extent
(original transaction) and for which dig-
ital assets received in the original trans-
action are withheld to pay digital asset
transaction costs, the total digital asset
transaction costs paid by the taxpayer to
effect both the original transaction and the
disposition of the withheld digital assets
are allocable exclusively to the disposition
of digital assets in the original transaction.
(v) Examples. The following examples
illustrate the rules of this paragraph (d)(5).
Unless otherwise indicated, all events and
transactions in the following examples
occur on or after January 1, 2025.
(A) Example 1: Determination of gross proceeds
when digital asset transaction costs paid in digital
assets—(1) Facts. CRX, a digital asset broker, buys,
sells, and exchanges various digital assets for cash
or different digital assets on behalf of its customers.
For this service, CRX charges a transaction fee equal
to 1 unit of CRX’s proprietary digital asset CM per
transaction. Using the services of CRX, customer K,
an individual not otherwise exempt from reporting,
purchases 15 units of CM and 10 units of digital asset
DE. On April 28, Year 1, when the CM units have a
value of $2 per unit, the DE units have a value of $8
per unit, and digital asset ST units have a value of
$0.80 per unit, K instructs CRX to exchange K’s 10
units of DE for 100 units of digital asset ST. CRX
charges K one unit of CM as a transaction fee for
the exchange.
(2) Analysis. Under paragraph (d)(5)(iv)(A) of
this section, K has digital asset transaction costs of
$2, which is the value of 1 CM unit. Under para-
graph (d)(5)(ii)(A) of this section, the gross proceeds
amount that CRX must report from K’s sale of the 10
units of DE is equal to the fair market value of the
100 units of ST that K received (less the value of the
CM unit sold to pay the digital asset transaction cost
to CRX and allocable to the sale of the DE units).
The fair market value of the 100 units of ST at the
date and time the transaction was effected is equal
to $80 (the product of $0.80 and 100 units). Accord-
ingly, CRX must report gross proceeds of $78 from
K’s sale of the 10 units of DE. CRX must also report
the gross proceeds from K’s sale of one CM unit to
pay for CRX’s services. Under paragraph (d)(5)(ii)
(A) of this section, the gross proceeds from K’s sale
of one unit of CM is equal to the fair market value
of the digital assets used to pay for such transaction
costs. Accordingly, CRX must report $2 as gross pro-
ceeds from K’s sale of one unit of CM.
(B) Example 2: Determination of gross proceeds
when digital asset transaction costs are withheld
from transferred digital assets—(1) Facts. K owns
a total of 10 units of digital asset A that K deposits
with broker BEX that provides custodial services for
digital assets. K directs BEX to effect the exchange
of 10 units of K’s digital asset A for 20 units of dig-
ital asset B. At the time of the exchange, each unit
of digital asset A has a fair market value of $2 and
each unit of digital asset B has a fair market value of
$1. BEX charges a fee of $2 per transaction, which
BEX withholds from the units of the digital asset
A transferred. At the time of the transaction, BEX
withholds 1 unit of digital asset A. TP exchanges the
remaining 9 units of digital asset A for 18 units of
digital asset B.
(2) Analysis. The withholding of 1 unit of digi-
tal asset A is a sale of a digital asset for BEX’s ser-
vices within the meaning of paragraph (a)(9)(ii)(C)
of this section. Under paragraph (d)(5)(iv)(A) of this
section, K has digital asset transaction costs of $2.
Under paragraph (d)(5)(iv)(C) of this section, TP
must allocate such costs to the disposition of the 10
units of digital asset A. Under paragraphs (d)(5)(ii)
(A) and (d)(5)(iv)(C) of this section, TP’s gross pro-
ceeds from the sale of the 10 units of digital asset A
is $18, which is the excess of the fair market value of
the 18 units of digital asset B received ($18) and the
fair market value of the broker services received ($2)
as of the date and time of the transaction over the
allocated digital asset transaction costs ($2). Accord-
ingly, BEX must report $18 as gross proceeds from
K’s sale of 10 units of digital asset A.
(C) Example 3: Determination of gross proceeds
when digital asset transaction costs are withheld
from acquired digital assets in an exchange of dig-
ital assets—(1) Facts. The facts are the same as in
paragraph (d)(5)(v)(B)(1) of this section (the facts in
Example 2), except that BEX requires its payment be
withheld from the units of the digital asset acquired.
At the time of the transaction, BEX withholds 3
units of digital asset B, two units of which effect the
exchange of digital asset A for digital asset B and one
unit of which effects the disposition of digital asset B
for payment of the transaction fees.
(2) Analysis. The withholding of 3 units of digital
asset B is a disposition of digital assets for BEX’s
services within the meaning of paragraph (a)(9)(ii)
(C) of this section. Under paragraph (d)(5)(iv)(A) of
this section, K has digital asset transaction costs of
$3. Under paragraph (d)(5)(iv)(C) of this section, K
must allocate such costs to the disposition of the 10
units of digital asset A. Under paragraphs (d)(5)(ii)
(A) and (d)(5)(iv)(C) of this section, K’s gross pro-
ceeds from the sale of the 10 units of digital asset A
is $17, which is the excess of the fair market value
of the 20 units of digital asset B received ($20) as
of the date and time of the transaction over the allo-
cated digital asset transaction costs ($3). K’s gross
proceeds from the sale of the 3 units of digital asset
B used to pay digital asset transaction costs is $3,
which is the fair market value of BEX’s services
received at the time of the transaction. Accordingly,
BEX must report $17 as gross proceeds from K’s sale
of 10 units of digital asset A. Additionally, pursuant
to paragraph (c)(3)(ii)(C) of this section, BEX is not
required to report K’s sale of the 3 withheld units of
digital asset B because the 3 units of digital asset B
were units withheld from digital assets received by K
to pay for K’s digital asset transaction costs.
(D) Example 4: Determination of gross pro-
ceeds—(1) Facts. CPP, a processor of digital asset
payments, offers debit cards to its customers who
hold digital asset FE in their accounts with CPP.
The debit cards allow CPP’s customers to use digital
assets held in accounts with CPP to make payments
to merchants who do not accept digital assets. CPP
charges its card holders a 2% transaction fee for
purchases made using the debit card and sets forth
in its terms and conditions the process CPP will
use to determine the exchange rate provided at the
date and time of its customers’ transactions. CPP
has issued a debit card to B, an individual not oth-
erwise exempt from reporting, who wants to make
purchases using digital assets. B transfers 1,000 units
of FE into B’s account with CPP. B then uses the
debit card to purchase merchandise from a U.S. mer-
chant STR for $1,000. An exchange rate of 1 FE =
$2 USD is applied to effect the transaction, based on
the exchange rate at that date and time and pursuant
to B’s account agreement. To settle the transaction,
CPP removes 510 units of FE from B’s account equal
to $1,020 ($1,000 plus a 2% transaction fee equal to
$20). CPP then pays STR $1,000 in cash.
(2) Analysis. B paid $20 of digital asset trans-
action costs as defined in paragraph (d)(5)(iv)(A)
of this section. Under paragraph (d)(5)(iii) of this
section, the gross proceeds amount that CPP must
report with respect to B’s sale of the 510 units of
FE to purchase the merchandise is $1,000, which is
the sum of the amount of cash paid by CPP to STR
plus the $20 digital asset transaction costs withheld
by CPP, reduced by the $20 digital asset transaction
costs as allocated under paragraph (d)(5)(iv)(B) of
this section. CPP’s payment of cash to STR is also a
payment card transaction under §1.6050W-1(b) sub-
ject to reporting under §1.6050W-1(a).
(E) Example 5: Determination of gross pro-
ceeds—(1) Facts. STR, a U.S. merchant corporation,
advertises that it accepts digital asset FE as payment
for its merchandise that is not digital assets. Cus-
tomers making purchases at STR using digital asset
FE are directed to create an account with CXX, a
processor of digital asset payments, which, pursuant
to a preexisting agreement with STR, accepts digi-
tal asset FE in return for payments in cash made to
STR. CXX charges a 2% transaction fee, which is
paid by STR and not STR’s customers. S, an indi-
vidual not otherwise exempt from reporting, seeks
to purchase merchandise from STR for $10,000. To
effect payment, S is directed by STR to CXX, with
whom S has an account. An exchange rate of 1 FE =
$2 USD is applied to effect the purchase transaction.
Pursuant to this exchange rate, S then transfers 5,000
units of FE to CXX, which, in turn, pays STR $9,800
($10,000 less a 2% transaction fee equal to $200).
(2) Analysis. Under paragraph (d)(5)(iii) of this
section, the gross proceeds amount that CXX must
report with respect to this sale is $10,000, which is
the sum of the amount in U.S. dollars paid by CPP
to STR ($9,800) plus the $200 digital asset transac-
tion costs withheld from the payment due to STR.
Because S does not have any digital asset transaction

July 29, 2024 282 Bulletin No. 2024–31
costs, the $9,800 amount is not reduced by any dig-
ital asset transaction costs charged to STR because
that fee was not paid by S. In addition, CXX’s pay-
ment of cash to STR (plus the withheld transaction
fee) may be reportable under §1.6050W-1(a) as a
third party network transaction under §1.6050W-1(c)
if CXX is a third party settlement organization under
the definition in §1.6050W-1(c)(2).
(F) Example 6: Determination of gross pro-
ceeds in a real estate transaction—(1) Facts. J, an
unmarried individual not otherwise exempt from
reporting, enters into a contractual agreement with
B, an individual not otherwise exempt from report-
ing, to exchange J’s principal residence, Blackacre,
which has a fair market value of $300,000, for cash
in the amount of $75,000 and units of digital asset
DE with a value of $225,000. Prior to closing, B
transfers the digital asset portion of the payment
directly from B’s wallet to J’s wallet. At closing,
J certifies to the closing agent (CA) that J received
the DE units required to be paid under the contrac-
tual agreement. CA is also a real estate reporting
person under §1.6045-4, and a digital asset middle-
man under paragraph (a)(21) of this section with
respect to the transaction.
(2) Analysis. CA is required to report on Form
1099-DA the gross proceeds received by B in
exchange for B’s sale of digital assets in this trans-
action. The gross proceeds amount to be reported
under paragraph (d)(5)(ii)(A) of this section is equal
to $225,000, which is the $300,000 value of Black-
acre less $75,000 that B paid in cash. In addition,
under §1.6045-4, CA is required to report on Form
1099-S the $300,000 of gross proceeds received by J
($75,000 cash and $225,000 in digital assets) as con-
sideration for J’s disposition of Blackacre.
(6) * * *
(i) In general. For purposes of this sec-
tion, the adjusted basis of a specified secu-
rity is determined from the initial basis
under paragraph (d)(6)(ii) of this section
as of the date the specified security is
acquired in an account, increased by the
commissions and transfer taxes related to
its sale to the extent not accounted for in
gross proceeds as described in paragraph
(d)(5) of this section. A broker is not
required to consider transactions or events
occurring outside the account except
for an organizational action taken by an
issuer of a specified security other than a
digital asset during the period the broker
holds custody of the security (beginning
with the date that the broker receives a
transferred security) reported on an issuer
statement (as described in §1.6045B-1)
furnished or deemed furnished to the bro-
ker. Except as otherwise provided in para-
graph (n) of this section, a broker is not
required to consider customer elections.
For rules related to the adjusted basis of a
debt instrument, see paragraph (n) of this
section.
(ii) Initial basis--(A) Cost basis for
specified securities acquired for cash. For
a specified security acquired for cash, the
initial basis generally is the total amount
of cash paid by the customer or credited
against the customer’s account for the
specified security, increased by the com-
missions, transfer taxes, and digital asset
transaction costs related to its acquisi-
tion. A broker may, but is not required
to, take option premiums into account in
determining the initial basis of securities
purchased or acquired pursuant to the
exercise of an option granted or acquired
before January 1, 2014. For rules related
to options granted or acquired on or after
January 1, 2014, see paragraph (m) of this
section. A broker may, but is not required
to, increase initial basis for income rec-
ognized upon the exercise of a compen-
satory option or the vesting or exercise of
other equity-based compensation arrange-
ments, granted or acquired before January
1, 2014. A broker may not increase initial
basis for income recognized upon the
exercise of a compensatory option or the
vesting or exercise of other equity-based
compensation arrangements, granted or
acquired on or after January 1, 2014, or
upon the vesting or exercise of a digital
asset-based compensation arrangement
granted or acquired on or after January
1, 2025. A broker must report the basis
of identical stock (within the meaning of
§1.1012-1(e)(4)) by averaging the basis
of each share if the stock is purchased at
separate times on the same calendar day
in executing a single trade order and the
broker executing the trade provides a
single confirmation to the customer that
reports an aggregate total price or an aver-
age price per share. However, a broker
may not average the basis if the customer
timely notifies the broker in writing of an
intent to determine the basis of the stock
by the actual cost per share in accordance
with §1.1012-1(c)(1)(ii).
(B) Basis of transferred securities--(1)
In general. The initial basis of a security
transferred to an account is generally the
basis reported on the transfer statement
(as described in §1.6045A-1).
(2) Securities acquired by gift. If a
transfer statement indicates that the secu-
rity is acquired as a gift, a broker must
apply the relevant basis rules for prop-
erty acquired by gift in determining the
initial basis, but is not required to adjust
basis for gift tax. A broker must treat the
initial basis as equal to the gross proceeds
from the sale determined under paragraph
(d)(5) of this section if the relevant basis
rules for property acquired by gift prevent
recognizing both gain and loss, or if the
relevant basis rules treat the initial basis of
the security as its fair market value as of
the date of the gift and the broker neither
knows nor can readily ascertain this value.
If the transfer statement did not report a
date for the gift, the broker must treat the
settlement date for the transfer as the date
of the gift.
(C) Digital assets acquired in exchange
for property--(1) In general. This para-
graph (d)(6)(ii)(C) applies solely for
purposes of this section. For a digital
asset acquired in exchange for property
that is not a debt instrument described in
§1.1012-1(h)(1)(v) or another digital asset
differing materially in kind or extent, the
initial basis of the digital asset is the fair
market value of the digital asset received at
the time of the exchange, increased by any
digital asset transaction costs allocable to
the acquisition of the digital asset. The fair
market value of the digital asset received
must be determined using a reasonable
valuation method as of the date and time
the exchange transaction was effected. In
valuing the digital asset received, the bro-
ker may perform its own valuations or rely
on valuations performed by a digital asset
data aggregator as defined in paragraph
(d)(5)(ii)(B) of this section, provided such
valuations apply a reasonable valuation
method for digital assets as described in
paragraph (d)(5)(ii)(A)(3) of this section.
If the broker or digital asset data aggre-
gator reasonably determines that the fair
market value of the digital asset received
cannot be determined with reasonable
accuracy, the fair market value of the dig-
ital asset received must be determined by
reference to the property transferred at
the time of the exchange. If the broker or
digital asset data aggregator reasonably
determines that neither the value of the
digital asset received nor the value of the
property transferred can be determined
with reasonable accuracy, the fair market
value of the received digital asset must be
treated as zero. For a digital asset acquired
in exchange for another digital asset differ-
ing materially in kind or extent, see para-

Bulletin No. 2024–31 283 July 29, 2024
graph (d)(6)(ii)(C)(2) of this section. For
a digital asset acquired in exchange for a
debt instrument described in §1.1012-1(h)
(1)(v), the initial basis of the digital asset
attributable to the debt instrument is the
amount determined under §1.1012-1(h)(1)
(v).
(2) Allocation of digital asset transac-
tion costs. Except as provided in the fol-
lowing sentence, in the case of a sale of
one digital asset in exchange for another
digital asset differing materially in kind or
extent, the total digital asset transaction
costs paid by the customer are allocable
to the digital assets disposed. In the case
of a transaction described in paragraph (d)
(5)(iv)(C) of this section, the digital asset
transaction costs paid by the customer to
acquire the digital assets received are allo-
cable as provided therein.
(iii) * * *
(A) Securities in the same account
or wallet--(1) In general. A broker must
apply the wash sale rules under sec-
tion 1091 if both the sale and purchase
transactions are of covered securities,
other than covered securities reportable
as digital assets after the application of
paragraph (c)(8) of this section, with the
same CUSIP number or other security
identifier number that the Secretary may
designate by publication in the Federal
Register or in the Internal Revenue Bul-
letin (see §601.601(d)(2) of this chapter).
When reporting the sale transaction that
triggered the wash sale, the broker must
report the amount of loss that is disal-
lowed by section 1091 in addition to
gross proceeds and adjusted basis. The
broker must increase the basis of the pur-
chased covered security by the amount of
loss disallowed on the sale transaction.
(2) Special rules for covered securities
that are also digital assets. In the case of
a purchase or sale of a tokenized security
described in paragraph (c)(8)(i)(D) of
this section that is a stock or security for
purposes of section 1091, a broker must
apply the wash sale rules under section
1091 if both the sale and purchase trans-
actions are of covered securities with the
same CUSIP number or other security
identifier number that the Secretary may
designate by publication in the Federal
Register or in the Internal Revenue Bul-
letin (see §601.601(d)(2) of this chapter).
When reporting the sale transaction that
triggered the wash sale, the broker must
report the amount of loss that is disal-
lowed by section 1091 in addition to gross
proceeds and adjusted basis. The broker
must increase the basis of the purchased
covered security by the amount of loss
disallowed on the sale transaction.
(B) Covered securities in differ-
ent accounts or wallets. A broker is not
required to apply paragraph (d)(6)(iii)
(A) of this section if the covered securi-
ties are purchased and sold from differ-
ent accounts or wallets, if the purchased
covered security is transferred to another
account or wallet before the wash sale,
or if the covered securities are treated as
held in separate accounts under §1.1012-
1(e). A covered security is not purchased
in an account or wallet if it is purchased in
another account or wallet and transferred
into the account or wallet.
* * * * *
(v) Average basis method adjustments.
For a covered security for which basis
may be determined by the average basis
method, a broker must compute basis
using the average basis method if a cus-
tomer validly elects that method for the
covered securities sold or, in the absence
of any instruction from the customer, if the
broker chooses that method as its default
basis determination method. See §1.1012-
1(e). The previous sentence applies to
any stock that is also a tokenized security
described in paragraph (c)(8)(i)(D) of this
section.
* * * * *
(x) Examples. The following exam-
ples illustrate the rules of paragraph (d)
(5) of this section and this paragraph (d)
(6) as applied to digital assets. Unless
otherwise indicated, all events and trans-
actions in the following examples occur
using the services of CRX, an entity that
owns and operates a digital asset trading
platform and provides digital asset broker
and hosted wallet services. In performing
these services, CRX holds and records
all customer purchase and sale transac-
tions using CRX’s centralized omnibus
account. CRX does not record any of its
customer’s purchase or sale transactions
on the relevant cryptographically secured
distributed ledgers. Additionally, unless
otherwise indicated, all events and trans-
actions in the following examples occur
on or after January 1, 2026.
(A) Example 1: Determination of gross proceeds
and basis in digital assets—(1) Facts. As a digital
asset broker, CRX generally charges transaction fees
equal to 1 unit of CRX’s proprietary digital asset
CM per transaction. CRX does not, however, charge
transaction fees for the purchase of CM. On March 9,
Year 1, K, an individual not otherwise exempt from
reporting, purchases 20 units of CM for $20 in cash
in K’s account at CRX. A week later, on March 16,
Year 1, K uses CRX’s services to purchase 10 units
of digital asset DE for $80 in cash. To pay for CRX’s
transaction fee, K directs CRX to debit 1 unit of CM
(worth $1 at the time of transfer) from K’s account.
(2) Analysis. Under paragraph (d)(2)(i)(B) of this
section, CRX must report the gross proceeds from
K’s sale of 1 unit of CM. Additionally, because the
units of CM were purchased in K’s account at a bro-
ker providing custodial services for digital assets that
are specified securities described in paragraph (a)
(14)(v) of this section, the units of CM purchased by
K are covered securities under paragraph (a)(15)(i)
(J) of this section. Accordingly, under paragraphs (d)
(2)(i)(D)(1) and (2) of this section, CRX must report
K’s adjusted basis in the 1 unit of CM and whether
any gain or loss with respect to the CM unit sold is
long-term or short-term. The gross proceeds from
that sale is equal to the fair market value of the CM
units on March 16, Year 1 ($1), and the adjusted basis
of that unit is equal to the amount K paid in cash for
the CM unit on March 9, Year 1 ($1). This reporting
is required regardless of the fact that there is $0 of
gain or loss associated with this sale. Additionally,
K’s adjusted basis in the 10 units of DE acquired is
equal to the $81 initial basis in DE, which is $80 plus
the $1 value of 1 unit of CM paid as a digital asset
transaction cost for the purchase of the DE units.
(B) Example 2: Determination of gross proceeds
and basis in digital assets—(1) Facts. The facts are
the same as in paragraph (d)(6)(x)(A)(1) of this sec-
tion (the facts in Example 1), except that on June 12,
Year 2, K instructs CRX to exchange K’s 10 units of
DE for 50 units of digital asset ST. CRX effects this
exchange using its own omnibus account holdings
of ST at an exchange rate of 1 DE = 5 ST. The total
value of the 50 units of ST received by K is $100. K
directs CRX to debit 1 CM unit (worth $2 at the time
of the transfer) from K’s account to pay CRX for the
transaction fee.
(2) Analysis. K has digital asset transaction costs
of $2 as defined in paragraph (d)(5)(iv)(A) of this
section, which is the value of 1 unit of CM. Under
paragraph (d)(2)(i)(B) of this section, CRX must
report the gross proceeds from K’s exchange of
DE for ST (as a sale of K’s 10 units of DE) and the
gross proceeds from K’s disposition of 1 unit of CM
for CRX’s services. Additionally, because the units
of DE and CM were purchased in K’s account at a
broker providing custodial services for digital assets
that are specified securities described in paragraph
(a)(14)(v) of this section, the units of DE and CM
are covered securities under paragraph (a)(15)(i)(J)
of this section, and, pursuant to paragraphs (d)(2)(i)
(D)(1) and (2) of this section, CRX must report K’s
adjusted basis in the 10 units of DE and 1 unit of
CM and whether any gain or loss with respect to the
those units is long-term or short-term. Under para-
graph (d)(5)(ii)(A) of this section, the gross proceeds
from K’s sale of the DE units is $98 (the fair market

July 29, 2024 284 Bulletin No. 2024–31
value of the 50 units of ST that K received less the $2
digital asset transaction costs paid by K using 1 unit
of CM), that is allocable to the sale of the DE units.
Under this paragraph (d)(6), K’s adjusted basis in the
10 units of DE is $81 (which is $80 plus the $1 value
of 1 unit of CM paid as a digital asset transaction
cost for the purchase of the DE units), resulting in a
long-term capital gain to K of $17 ($98 - $81). The
gross proceeds from K’s sale of the single unit of CM
is $2, and K’s adjusted basis in the single unit of CM
is $1, resulting in a long-term capital gain to K of $1
($2 - $1). K’s adjusted basis in the ST units under
paragraph (d)(6)(ii)(C) of this section is equal to the
initial basis in ST, which is $100.
(C) Example 3: Determination of gross proceeds
and basis when digital asset transaction costs are
withheld from transferred digital assets—(1) Facts.
K has an account with digital asset broker BEX. On
December 20, Year 1, K acquired 10 units of digi-
tal asset A, for $2 per unit, and 100 units of digital
asset B, for $0.50 per unit. (Assume that K did not
incur any digital asset transaction costs on the units
acquired on December 20, Year 1.) On July 20, Year
2, K directs BEX to effect the exchange of 10 units
of digital asset A for 50 units of digital asset B. At
the time of the exchange, each unit of digital asset A
has a fair market value of $5 per unit and each unit of
digital asset B has a fair market value of $1 per unit.
For the exchange of 10 units of digital asset A for 50
units of digital asset B, BEX charges K a transaction
fee equal to 2 units of digital asset B, which BEX
withholds from the units of the digital asset B cred-
ited to K’s account on July 20, Year 2. For the dis-
position of 2 units of digital asset B withheld, BEX
charges an additional transaction fee equal to 1 unit
of digital asset B, which BEX also withholds from
the units of digital asset B credited to K’s account on
July 20, Year 2. K has a standing order with BEX for
the specific identification of digital assets as from the
earliest units acquired.
(2) Reporting with respect to the disposition of
the A units. The withholding of 3 units of digital
asset B is a disposition of digital assets for BEX’s
services within the meaning of paragraph (a)(9)(ii)
(C) of this section. Under paragraph (d)(5)(iv)(A) of
this section, K has digital asset transaction costs of
$3. Under paragraph (d)(5)(iv)(C) of this section, the
exchange of 10 units of digital asset A for 50 units
of digital asset B is the original transaction. Accord-
ingly, BEX must allocate the digital asset transaction
costs of $3 exclusively to the disposition of the 10
units of digital asset A. Additionally, because the
units of A are specified securities described in para-
graph (a)(14)(v) of this section and were purchased
in K’s account at BEX by a broker providing custo-
dial services for such specified securities, the units of
A are covered securities under paragraph (a)(15)(i)
(J) of this section, and BEX must report K’s adjusted
basis in the 10 units of A. Under paragraphs (d)(5)(ii)
(A) and (d)(5)(iv)(C) of this section, K’s gross pro-
ceeds from the sale of the 10 units of digital asset A
is $47, which is the excess of the fair market value
of the 50 units of digital asset B received ($50) as of
the date and time of the transaction over the allocated
digital asset transaction costs ($3). Under this para-
graph (d)(6), K’s adjusted basis in the 10 units of A
is $20, resulting in a short-term capital gain to K of
$27 ($47 - $20).
(3) Reporting with respect to the disposition of
the withheld B units. K’s gross proceeds from the
sale of the 3 units of digital asset B used to pay digi-
tal asset transaction costs is $3, which is the fair mar-
ket value of the digital assets used to pay for such
transaction costs. Pursuant to the special rule for the
identification of units withheld from digital assets
received in a transaction to pay a customer’s digi-
tal asset transaction costs under paragraph (d)(2)(ii)
(B)(3) of this section and regardless of K’s standing
order, the withheld units sold are treated as from the
units received in the original (A for B) transaction.
Accordingly, the basis of the 3 withheld units of dig-
ital asset B is $3, which is the fair market value of the
3 units of digital asset B received. Finally, pursuant
to paragraph (c)(3)(ii)(C) of this section, BEX is not
required to report K’s sale of the 3 withheld units of
digital asset B because the 3 units of digital asset B
were units withheld from digital assets received by K
to pay for K’s digital asset transaction costs.
(D) Example 4: Determination of gross proceeds
and basis for digital assets—(1) Facts. On August
26, Year 1, Customer P purchases 10 units of digi-
tal asset DE for $2 per unit in cash in an account at
CRX. CRX charges P a fixed transaction fee of $5
in cash for the exchange. On October 26, Year 2, P
directs CRX to exchange P’s 10 units of DE for units
of digital asset FG. At the time of the exchange, CRX
determines that each unit of DE has a fair market
value of $100 and each unit of FG has a fair market
value of $50. As a result of this determination, CRX
effects an exchange of P’s 10 units of DE for 20 units
of FG. CRX charges P a fixed transaction fee of $20
in cash for the exchange.
(2) Analysis. Under paragraph (d)(5)(iv)(B)
of this section, P has digital asset transaction costs
of $20 associated with the exchange of DE for FG
which must be allocated to the sale of the DE units.
For the transaction that took place on October 26,
Year 2, under paragraph (d)(2)(i)(B) of this section,
CRX must report the amount of gross proceeds from
the sale of DE in the amount of $980 (the $1,000 fair
market value of FG received on the date and time
of transfer, less all of the digital asset transaction
costs of $20 allocated to the sale). Under paragraph
(d)(6)(ii)(C) of this section, the adjusted basis of P’s
DE units is equal to $25, which is the $20 paid in
cash for the 10 units increased by the $5 digital asset
transaction costs allocable to that purchase. Finally,
P’s adjusted basis in the 20 units of FG is equal to
the fair market value of the FG received, $1,000,
because none of the $20 transaction fee may be allo-
cated under paragraph (d)(6)(ii)(C)(2) of this section
to the acquisition of P’s FG units.
(7) * * *
(i) In general. In determining whether
any gain or loss on the sale of a covered
security is long-term or short-term within
the meaning of section 1222 for purposes
of this section, the following rules apply:
(A) A broker must consider the infor-
mation reported on a transfer statement
(as described in §1.6045A-1).
(B) A broker is not required to consider
transactions, elections, or events occurring
outside the account except for an organi-
zational action taken by an issuer during
the period the broker holds custody of
the covered security (beginning with the
date that the broker receives a transferred
security) reported on an issuer statement
(as described in §1.6045B-1) furnished or
deemed furnished to the broker.
(C) A broker is required to apply the
relevant rules for property acquired from
a decedent or by gift for all covered secu-
rities.
(ii) * * *
(A) Securities in the same account or
wallet--(1) In general. A broker must apply
the wash sale rules under section 1091 if
both the sale and purchase transactions are
of covered securities, other than covered
securities reportable as digital assets after
the application of paragraph (c)(8) of this
section, with the same CUSIP number or
other security identifier number that the
Secretary may designate by publication
in the Federal Register or in the Internal
Revenue Bulletin (see §601.601(d)(2) of
this chapter).
(2) Special rules for covered securities
that are also digital assets. In the case of
a purchase or sale of a tokenized security
described in paragraph (c)(8)(i)(D) of this
section that is a stock or security for pur-
poses of section 1091, a broker must apply
the wash sale rules under section 1091 if
both the sale and purchase transactions
are of covered securities with the same
CUSIP number or other security identifier
number that the Secretary may designate
by publication in the Federal Register
or in the Internal Revenue Bulletin (see
§601.601(d)(2) of this chapter).
(B) Covered securities in differ-
ent accounts or wallets. A broker is not
required to apply paragraph (d)(7)(ii)
(A) of this section if the covered securi-
ties are purchased and sold from differ-
ent accounts or wallets, if the purchased
covered security is transferred to another
account or wallet before the wash sale,
or if the covered securities are treated as
held in separate accounts under §1.1012-
1(e). A covered security is not purchased
in an account or wallet if it is purchased in
another account or wallet and transferred
into the account or wallet.
* * * * *
(9) Coordination with the report-
ing rules for widely held fixed invest-
ment trusts under §1.671-5. Information

Bulletin No. 2024–31 285 July 29, 2024
required to be reported under section
6045(a) for a sale of a security or a dig-
ital asset in a widely held fixed invest-
ment trust (WHFIT) (as defined under
§1.671-5) and the sale of an interest in a
WHFIT must be reported as provided by
this section unless the information is also
required to be reported under §1.671-5. To
the extent that this section requires addi-
tional information under section 6045(g),
those requirements are deemed to be met
through compliance with the rules in
§1.671-5.
(10) Optional reporting methods for
qualifying stablecoins and specified non-
fungible tokens. This paragraph (d)(10)
provides optional reporting rules for sales
of qualifying stablecoins as defined in
paragraph (d)(10)(ii) of this section and
sales of specified nonfungible tokens as
defined in paragraph (d)(10)(iv) of this
section. A broker may report sales of qual-
ifying stablecoins or report sales of speci-
fied nonfungible tokens under the optional
method provided in this paragraph (d)
(10) instead of under paragraphs (d)(2)
(i)(B) and (D) of this section for some or
all customers and may change its report-
ing method for any customer from year
to year; however, the method chosen for
a particular customer must be applied for
the entire year of that customer’s sales.
(i) Optional reporting method for qual-
ifying stablecoins--(A) In general. In lieu
of reporting all sales of qualifying stable-
coins under paragraphs (d)(2)(i)(B) and
(D) of this section, a broker may report
designated sales of qualifying stable-
coins, as defined in paragraph (d)(10)(i)
(C) of this section, on an aggregate basis
as provided in paragraph (d)(10)(i)(B)
of this section. A broker reporting under
this paragraph (d)(10)(i) is not required
to report sales of qualifying stablecoins
under this paragraph (d)(10)(i) or under
paragraphs (d)(2)(i)(B) through (D) of
this section if such sales are non-desig-
nated sales of qualifying stablecoins or if
the gross proceeds (after reduction for the
allocable digital asset transaction costs)
from all designated sales effected by that
broker of qualifying stablecoins by the
customer do not exceed $10,000 for the
year as described in paragraph (d)(10)(i)
(B) of this section.
(B) Aggregate reporting method for
designated sales of qualifying stablecoins.
If a customer’s aggregate gross proceeds
(after reduction for the allocable digi-
tal asset transaction costs) from all des-
ignated sales effected by that broker of
qualifying stablecoins exceed $10,000 for
the year, the broker must make a separate
return for each qualifying stablecoin that
includes the information set forth in this
paragraph (d)(10)(i)(B). If the aggregate
gross proceeds reportable under the pre-
vious sentence exceed $10,000, reporting
is required with respect to each qualifying
stablecoin for which there are designated
sales even if the aggregate gross proceeds
for a particular qualifying stablecoin does
not exceed $10,000. A broker reporting
under this paragraph (d)(10)(i)(B) must
report the following information with
respect to designated sales of each quali-
fying stablecoin on a separate Form 1099-
DA or any successor form in the manner
required by such form or instructions—
(1) The name, address, and taxpayer
identification number of the customer;
(2) The name of the qualifying stable-
coin sold;
(3) The aggregate gross proceeds for
the year from designated sales of the qual-
ifying stablecoin (after reduction for the
allocable digital asset transaction costs
as defined and allocated pursuant to para-
graph (d)(5)(iv) of this section);
(4) The total number of units of the
qualifying stablecoin sold in designated
sales of the qualifying stablecoin;
(5) The total number of designated sale
transactions of the qualifying stablecoin;
and
(6) Any other information required by
the form or instructions.
(C) Designated sale of a qualifying
stablecoin. For purposes of this para-
graph (d)(10), the term designated sale
of a qualifying stablecoin means: any
sale as defined in paragraphs (a)(9)(ii)(A)
through (D) of this section of a qualify-
ing stablecoin other than a sale of a quali-
fying stablecoin in exchange for different
digital assets that are not qualifying sta-
blecoins. In addition, the term designated
sale of a qualifying stablecoin includes
the delivery of a qualifying stablecoin
pursuant to the settlement of any exec-
utory contract which would be treated as
a designated sale of the qualifying digital
asset under the previous sentence if the
contract had not been executory. Finally,
the term non-designated sale of a quali-
fying stablecoin means any sale of a qual-
ifying stablecoin other than a designated
sale of a qualifying stablecoin as defined
in this paragraph (d)(10)(i)(C).
(D) Examples. For purposes of the
following examples, assume that digital
asset WW and digital asset YY are qual-
ifying stablecoins, and digital asset DL is
not a qualifying stablecoin. Additionally,
assume that the transactions set forth in
each example include all sales of qualify-
ing stablecoins on behalf of the customer
during Year 1, and that no transaction
costs were imposed on the sales described
therein.
(1) Example 1: Optional reporting method for
qualifying stablecoins—(i) Facts. CRX is a digital
asset broker that provides services to customer K,
an individual not otherwise exempt from reporting.
CRX effects the following sales on behalf of K: sale
of 1,000 units of WW in exchange for cash of $1,000;
sale of 5,000 units of WW in exchange for YY, with a
value of $5,000; sale of 10,000 units of WW in return
for DL, with a value of $10,000; and sale of 3,000
units of YY in exchange for cash of $3,000.
(ii) Analysis. In lieu of reporting all of K’s sales
of WW and YY under paragraph (d)(2)(i)(B) of this
section, CRX may report K’s designated sales of
WW and YY under the optional reporting method
set forth in paragraph (d)(10)(i)(B) of this section.
In this case, K’s designated sales of qualifying sta-
blecoins resulted in total gross proceeds of $9,000,
which is the total of $1,000 from sale of WW for
cash, $5,000 from the sale of WW in exchange
for YY, and $3,000 from the sale of YY for cash.
Because K’s designated sales of WW and YY did
not exceed $10,000, CRX is not required to make
a return of information under this section for any of
K’s qualifying stablecoin sales. The $10,000 of gross
proceeds from the sale of WW for DL, which is not
a qualifying stablecoin, is not included in this calcu-
lation to determine if the de minimis threshold has
been exceeded because that sale is not a designated
sale and, as such, is not reportable.
(2) Example 2: Optional reporting method for
qualifying stablecoins—(i) Facts. The facts are the
same as in paragraph (d)(10)(i)(D)(1)(i) of this sec-
tion (the facts in Example 1), except that CRX also
effects an additional sale of 4,000 units of YY in
exchange for cash of $4,000 on behalf of K.
(ii) Analysis. In lieu of reporting all of K’s sales
of WW and YY under paragraph (d)(2)(i)(B) of this
section, CRX may report K’s designated sales of
WW and YY under the optional reporting method
set forth in paragraph (d)(10)(i)(B) of this section.
In this case, K’s designated sales of qualifying sta-
blecoins resulted in total gross proceeds of $13,000,
which is the total of $1,000 from sale of WW for
cash, $5,000 from the sale of WW for YY, $3,000
from the sale of YY for cash, and $4,000 from the
sale of YY for cash. Because K’s designated sales of
all types of qualifying stablecoins exceeds $10,000,
CRX must make two returns of information under
this section: one for all of K’s designated sales of

July 29, 2024 286 Bulletin No. 2024–31
WW and another for all of K’s designated sales of
YY.
(ii) Qualifying stablecoin. For purposes
of this section, the term qualifying stable-
coin means any digital asset that satisfies
the conditions set forth in paragraphs (d)
(10)(ii)(A) through (C) of this section for
the entire calendar year.
(A) Designed to track certain other
currencies. The digital asset is designed to
track on a one-to-one basis a single con-
vertible currency issued by a government
or a central bank (including the U.S. dol-
lar).
(B) Stabilization mechanism. Either:
(1) The digital asset uses a stabilization
mechanism that causes the unit value of
the digital asset not to fluctuate from the
unit value of the convertible currency it
was designed to track by more than 3 per-
cent over any consecutive 10-day period,
determined using Coordinated Universal
Time (UTC), during the calendar year; or
(2) The issuer of the digital asset is
required by regulation to redeem a unit
of the digital asset at any time on a one-
to-one basis for the same convertible cur-
rency that the digital asset was designed
to track.
(C) Accepted as payment. The digital
asset is generally accepted as payment
by persons other than the issuer. A digital
asset that satisfies the conditions set forth
in paragraphs (d)(10)(ii)(A) and (B) of this
section that is accepted by a broker pursu-
ant to a sale of another digital asset, or that
is accepted by a second party pursuant to a
sale effected by a processor of digital asset
payments described in paragraph (a)(9)(ii)
(D) of this section, meets the condition set
forth in this paragraph (d)(10)(ii)(C).
(D) Examples--(1) Example 1—(i) Facts. Y is a
privately held corporation that issues DL1, a digital
asset designed to track the value of the U.S. dollar.
Pursuant to regulatory requirements, DL1 is backed
in full by U.S. dollars and other liquid short-term
U.S. dollar-denominated assets held by Y, and Y
offers to redeem units of DL1 for U.S. dollars at par
at any time. Y’s retention of U.S. dollars and other
liquid short-term U.S. dollar-denominated assets as
collateral and Y’s offer to redeem units of DL for
U.S. dollars at par at any time are intended to cause
DL1 to track the U.S. dollar on a one-to-one basis.
Broker B accepts DL1 as payment in return for sales
of other digital assets.
(ii) Analysis. DL1 satisfies the three conditions
set forth in paragraphs (d)(10)(ii)(A) through (C) of
this section. First, DL1 was designed to track on a
one-to-one basis the U.S. dollar, which is a single
convertible currency issued by a government or a
central bank. Second, DL1 uses a stabilization mech-
anism, as described in paragraph (d)(10)(ii)(B)(2) of
this section, that pursuant to regulatory requirements
requires Y to offer to redeem one unit of DL1 for one
U.S. dollar at any time. Finally, because B accepts
DL1 as payment for sales of other digital assets, DL1
is generally accepted as payment by persons other
than Y. Accordingly, DL1 is a qualifying stablecoin
under this paragraph (d)(10)(ii).
(2) Example 2—(i) Facts. Z is a privately held
corporation that issues DL2, a digital asset designed
to track the value of the U.S. dollar on a one-to-one
basis that has a mechanism that is intended to effect
that tracking. On April 28, Year X, Broker B effects
the sale of units of DL2 for cash on behalf of cus-
tomer C. During Year X, the unit value of DL2 did
not fluctuate from the U.S. dollar by more than 3 per-
cent over any consecutive 10-day period. Merchant
M accepts payment in DL2 in return for goods and
services in connection with sales effected by proces-
sors of digital asset payments.
(ii) Analysis. DL2 satisfies the three conditions
set forth in paragraphs (d)(10)(ii)(A) through (C) of
this section. First, DL2 was designed to track on a
one-to-one basis the U.S. dollar, which is a single
convertible currency issued by a government or a
central bank. Second, DL2 uses a stabilization mech-
anism, as described in paragraph (d)(10)(ii)(B)(2) of
this section, that results in the unit value of DL2 not
fluctuating from the U.S. dollar by more than 3 per-
cent over any consecutive 10-day period during the
calendar year (Year X). Third, Merchant M accepts
payment in DL2 in return for goods and services in
connection with sales effected by processors of digi-
tal asset payments DL2 is generally accepted as pay-
ment by persons other than Z. Accordingly, DL2 is
a qualifying stablecoin under this paragraph (d)(10)
(ii).
(iii) Optional reporting method for
specified nonfungible tokens--(A) In gen-
eral. In lieu of reporting sales of specified
nonfungible tokens under the reporting
rules provided under paragraph (d)(2)(i)
(B) of this section, a broker may report
sales of specified nonfungible tokens as
defined in paragraph (d)(10)(iv) of this
section on an aggregate basis as provided
in this paragraph (d)(10)(iii). Other digi-
tal assets, including nonfungible tokens
that are not specified nonfungible tokens,
are not eligible for the optional reporting
method in this paragraph (d)(10)(iii).
(B) Reporting method for specified
nonfungible tokens. A broker report-
ing under this paragraph (d)(10)(iii)
must report sales of specified nonfungi-
ble tokens if the customer’s aggregate
gross proceeds (after reduction for the
allocable digital asset transaction costs)
from all sales of specified nonfungible
tokens exceed $600 for the year. If the
customer’s aggregate gross proceeds
(after reduction for the allocable digital
asset transaction costs) from such sales
effected by that broker do not exceed
$600 for the year, no report is required. A
broker reporting under this paragraph (d)
(10)(iii)(B) must report on a Form 1099-
DA or any successor form in the manner
required by such form or instructions the
following information with respect to the
customer’s sales of specified nonfungible
tokens—
(1) The name, address, and taxpayer
identification number of the customer;
(2) The aggregate gross proceeds for
the year from all sales of specified non-
fungible tokens (after reduction for the
allocable digital asset transaction costs
as defined and allocated pursuant to para-
graph (d)(5)(iv) of this section);
(3) The total number of specified non-
fungible token sales;
(4) To the extent ordinarily known by
the broker, the aggregate gross proceeds
that is attributable to the first sale by a cre-
ator or minter of the specified nonfungible
token; and
(5) Any other information required by
the form or instructions.
(C) Examples. The following examples
illustrate the rules of this paragraph (d)
(10)(iii).
(1) Example 1: Optional reporting method for
specified nonfungible tokens—(i) Facts. CRX is a
digital asset broker that provides services to cus-
tomer J, an individual not otherwise exempt from
reporting. In Year 1, CRX sells on behalf of J, ten
specified nonfungible tokens for a gross proceeds
amount equal to $1,500. CRX does not sell any other
specified nonfungible tokens for J during Year 1.
(ii) Analysis. In lieu of reporting J’s sales of the
ten specified nonfungible tokens under paragraph (d)
(2)(i)(B) of this section, CRX may report these sales
under the reporting method set forth in this para-
graph (d)(10)(iii). In this case, J’s sales of the ten
specified nonfungible tokens gave rise to total gross
proceeds of $1,500 for Year 1. Because the total
gross proceeds from J’s sales of the ten specified
nonfungible tokens exceeds $600, CRX must make
a single return of information under this section for
these sales.
(2) Example 2: Optional reporting method for
specified nonfungible tokens—(i) Facts. The facts
are the same as in paragraph (d)(10)(iii)(C)(1)(i) of
this section (the facts in Example 1), except that the
total gross proceeds from the sale of J’s ten specified
nonfungible tokens is $500.
(ii) Analysis. Because J’s sales of the specified
nonfungible tokens result in total gross proceeds of
$500, CRX is not required to make a return of infor-
mation under this section for J’s sales of the specified
nonfungible tokens.
(iv) Specified nonfungible token. For
purposes of this section, the term specified
nonfungible token means a digital asset

Bulletin No. 2024–31 287 July 29, 2024
that satisfies the conditions set forth in
paragraphs (d)(10)(iv)(A) through (C) of
this section.
(A) Indivisible. The digital asset cannot
be subdivided into smaller units without
losing its intrinsic value or function.
(B) Unique. The digital asset itself
includes a unique digital identifier, other
than a digital asset address, that distin-
guishes that digital asset from all other
digital assets.
(C) Excluded property. The digital asset
is not and does not directly or through one
or more other digital assets that satisfy the
conditions described in paragraphs (d)(10)
(iv)(A) and (B) of this section, provide the
holder with any interest in any of the fol-
lowing excluded property—
(1) A security under paragraph (a)(3) of
this section;
(2) A commodity under paragraph (a)
(5) of this section;
(3) A regulated futures contract under
paragraph (a)(6) of this section;
(4) A forward contract under paragraph
(a)(7) of this section; or
(5) A digital asset that does not satisfy
the conditions described in paragraphs (d)
(10)(iv)(A) and (B) of this section.
(D) Examples. The following examples
illustrate the rules of this paragraph (d)
(10)(iv).
(1) Example 1: Specified nonfungible token—
(i) Facts. Individual J is an artist in the business of
creating and selling digital assets that reference J’s
artwork. J creates a unique digital asset (DA-J) that
represents J’s artwork. The digital asset includes a
unique digital identifier, other than a digital asset
address, that distinguishes DA-J from all other dig-
ital assets. DA-J cannot be subdivided into smaller
units.
(ii) Analysis. DA-J is a digital asset that satis-
fies the three conditions described in paragraphs
(d)(10)(iv)(A) through (C) of this section. DA-J
cannot be subdivided into smaller units without
losing its intrinsic value or function. Additionally,
DA-J includes a unique digital identifier that distin-
guishes DA-J from all other digital assets. Finally,
DA-J does not provide the holder with any interest
in excluded property listed in paragraphs (d)(10)(iv)
(C)(1) through (5) of this section Accordingly, DA-J
is a specified nonfungible token under this paragraph
(d)(10)(iv).
(2) Example 2: Specified nonfungible token—(i)
Facts. K creates a unique digital asset (DA-K) that
provides the holder with the right to redeem DA-K
for 100 units of digital asset DE. Units of DE can
be subdivided into smaller units and do not include
a unique digital identifier, other than a digital asset
address, that distinguishes one unit of DE from any
other unit of DE. DA-K cannot be subdivided into
smaller units and includes a unique digital identifier,
other than a digital asset address, that distinguishes
DA-K from all other digital assets.
(ii) Analysis. DA-K provides its holder with
an interest in 100 units of digital asset DE, which
is excluded property, as described in paragraph (d)
(10)(iv)(C)(5) of this section, because DE units can
be subdivided into smaller units and do not include
unique digital identifiers that distinguishes one unit
of DE from any other unit of DE. Accordingly,
DA-K is not a specified nonfungible token under this
paragraph (d)(10)(iv).
(3) Example 3: Specified nonfungible token—(i)
Facts. The facts are the same as in paragraph (d)(10)
(iv)(D)(2)(i) of this section (the facts in Example 2)
except that in addition to providing its holder with an
interest in the 100 units of DE, DA-K also provides
rights to or access to a unique work of art.
(ii) Analysis. Because DA-K provides its holder
with an interest in excluded property described in
paragraph (d)(10)(iv)(C)(5) of this section, it is not a
specified nonfungible token under paragraph this (d)
(10)(iv) without regard to whether it also references
property that is not excluded property.
(4) Example 4: Specified nonfungible token—(i)
Facts. B creates a unique digital asset (DA-B) that
provides the holder with the right to redeem DA-B
for physical merchandise in B’s store. DA-B can-
not be subdivided into smaller units and includes
a unique digital identifier, other than a digital asset
address, that distinguishes DA-B from all other dig-
ital assets.
(ii) Analysis. DA-B is a digital asset that satis-
fies the three conditions described in paragraphs (d)
(10)(iv)(A) through (C) of this section. DA-B can-
not be subdivided into smaller units without losing
its intrinsic value or function. Additionally, DA-B
includes a unique digital identifier that distinguishes
DA-B from all other digital assets. Finally, DA-B
does not provide the holder with any interest in
excluded property listed in paragraphs (d)(10)(iv)(C)
(1) through (5) of this section. Accordingly, DA-B is
a specified nonfungible token under this paragraph
(d)(10)(iv).
(v) Joint accounts. For purposes of
determining if the gross proceeds thresh-
olds set forth in paragraphs (d)(10)(i)(B)
and (d)(10)(iii)(B) of this section have
been met for the customer, the customer is
the person whose tax identification num-
ber would be required to be shown on the
information return (but for the application
of the relevant threshold) after the appli-
cation of the backup withholding rules
under §31.3406(h)-2(a) of this chapter.
(11) Collection and retention of addi-
tional information with respect to the sale
of a digital asset. A broker required to
make an information return under para-
graph (c) of this section with respect to
the sale of a digital asset must collect the
following additional information, retain it
for seven years from the date of the due
date for the information return required
to be filed under this section, and make it
available for inspection upon request by
the Internal Revenue Service:
(i) The transaction ID as defined in
paragraph (a)(24) of this section in con-
nection with the sale, if any; and the dig-
ital asset address as defined in paragraph
(a)(20) of this section (or digital asset
addresses if multiple) from which the dig-
ital asset was transferred in connection
with the sale, if any;
(ii) For each sale of a digital asset that
was held by the broker in a hosted wal-
let on behalf of a customer and was pre-
viously transferred into an account at the
broker (transferred-in digital asset), the
transaction ID of such transfer in and
the digital asset address (or digital asset
addresses if multiple) from which the dig-
ital asset was transferred, if any.
(e) * * *
(2) * * *
(iii) Coordination rules for exchanges
of digital assets made through barter
exchanges. Exchange transactions involv-
ing the exchange of one digital asset held
by one customer of a broker for a different
digital asset held by a second customer
of the same broker must be treated as a
sale under paragraph (a)(9)(ii) of this sec-
tion subject to reporting under paragraphs
(c) and (d) of this section, and not as an
exchange of personal property through a
barter exchange subject to reporting under
this paragraph (e) and paragraph (f) of this
section, with respect to both customers
involved in the exchange transaction. In
the case of an exchange transaction that
involves the transfer of a digital asset for
personal property or services that are not
also digital assets, if the digital asset pay-
ment also is a reportable payment trans-
action subject to reporting by the barter
exchange under §1.6050W-1(a)(1), the
exchange transaction must be treated as a
reportable payment transaction and not as
an exchange of personal property through
a barter exchange subject to reporting
under this paragraph (e) and paragraph (f)
of this section with respect to the member
or client disposing of personal property or
services. Additionally, an exchange trans-
action described in the previous sentence
must be treated as a sale under paragraph
(a)(9)(ii)(D) of this section subject to
reporting under paragraphs (c) and (d) of
this section and not as an exchange of per-
sonal property through a barter exchange

July 29, 2024 288 Bulletin No. 2024–31
subject to reporting under this paragraph
(e) and paragraph (f) of this section with
respect to the member or client disposing
of the digital asset. Nothing in this para-
graph (e)(2)(iii) may be construed to mean
that any broker is or is not properly classi-
fied as a barter exchange.
* * * * *
(g) Exempt foreign persons--(1) Bro-
kers. No return of information is required
to be made by a broker with respect to
a customer who is considered to be an
exempt foreign person under paragraphs
(g)(1)(i) through (iii) or paragraph (g)(4)
of this section. See paragraph (a)(1) of this
section for when a person is not treated
as a broker under this section for a sale
effected at an office outside the United
States. See paragraphs (g)(1)(i) through
(g)(3) of this section for rules relating to
sales as defined in paragraph (a)(9)(i) of
this section and see paragraph (g)(4) of
this section for rules relating to sales of
digital assets as defined in paragraph (a)
(9)(ii) of this section.
(i) With respect to a sale as defined in
paragraph (a)(9)(i) of this section (relating
to sales other than sales of digital assets)
that is effected at an office of a broker
either inside or outside the United States,
the broker may treat the customer as an
exempt foreign person if the broker can,
prior to the payment, reliably associate the
payment with documentation upon which
it can rely in order to treat the customer as
a foreign beneficial owner in accordance
with §1.1441-1(e)(1)(ii), as made to a for-
eign payee in accordance with §1.6049-
5(d)(1), or presumed to be made to a for-
eign payee under §1.6049-5(d)(2) or (3).
For purposes of this paragraph (g)(1)(i),
the provisions in §1.6049-5(c) regarding
rules applicable to documentation of for-
eign status shall apply with respect to a
sale when the broker completes the acts
necessary to effect the sale at an office
outside the United States, as described in
paragraph (g)(3)(iii)(A) of this section,
and no office of the same broker within
the United States negotiated the sale with
the customer or received instructions with
respect to the sale from the customer. The
provisions in §1.6049-5(c) regarding the
definitions of U.S. payor, U.S. middle-
man, non-U.S. payor, and non-U.S. mid-
dleman shall also apply for purposes of
this paragraph (g)(1)(i). The provisions of
§1.1441-1 shall apply by substituting the
terms broker and customer for the terms
withholding agent and payee, respec-
tively, and without regard for the fact that
the provisions apply to amounts subject to
withholding under chapter 3 of the Code.
The provisions of §1.6049-5(d) shall
apply by substituting the terms broker and
customer for the terms payor and payee,
respectively. For purposes of this para-
graph (g)(1)(i), a broker that is required to
obtain, or chooses to obtain, a beneficial
owner withholding certificate described
in §1.1441-1(e)(2)(i) from an individual
may rely on the withholding certificate
only to the extent the certificate includes a
certification that the beneficial owner has
not been, and at the time the certificate is
furnished, reasonably expects not to be
present in the United States for a period
aggregating 183 days or more during each
calendar year to which the certificate per-
tains. The certification is not required if
a broker receives documentary evidence
under §1.6049-5(c)(1) or (4).
(ii) With respect to a redemption or
retirement of stock or an obligation (the
interest or original issue discount on,
which is described in §1.6049-5(b)(6), (7),
(10), or (11) or the dividends on, which
are described in §1.6042-3(b)(1)(iv)) that
is effected at an office of a broker outside
the United States by the issuer (or its pay-
ing or transfer agent), the broker may treat
the customer as an exempt foreign person
if the broker is not also acting in its capac-
ity as a custodian, nominee, or other agent
of the payee.
(iii) With respect to a sale as defined in
paragraph (a)(9)(i) of this section (relating
to sales other than sales of digital assets)
that is effected by a broker at an office
of the broker either inside or outside the
United States, the broker may treat the
customer as an exempt foreign person for
the period that those proceeds are assets
blocked as described in §1.1441-2(e)(3).
For purposes of this paragraph (g)(1)(iii)
and section 3406, a sale is deemed to
occur in accordance with paragraph (d)
(4) of this section. The exemption in this
paragraph (g)(1)(iii) shall terminate when
payment of the proceeds is deemed to
occur in accordance with the provisions of
§1.1441-2(e)(3).
(2) Barter exchange. No return of infor-
mation is required by a barter exchange
under the rules of paragraphs (e) and (f)
of this section with respect to a client or
a member that the barter exchange may
treat as an exempt foreign person pursuant
to the procedures described in paragraph
(g)(1) of this section.
(3) Applicable rules--(i) Joint owners.
Amounts paid to joint owners for which
a certificate or documentation is required
as a condition for being exempt from
reporting under paragraph (g)(1)(i) or (g)
(2) of this section are presumed made to
U.S. payees who are not exempt recip-
ients if, prior to payment, the broker or
barter exchange cannot reliably associ-
ate the payment either with a Form W-9
furnished by one of the joint owners in
the manner required in §§31.3406(d)-1
through 31.3406(d)-5 of this chapter, or
with documentation described in para-
graph (g)(1)(i) of this section furnished by
each joint owner upon which it can rely to
treat each joint owner as a foreign payee
or foreign beneficial owner. For purposes
of applying this paragraph (g)(3)(i), the
grace period described in §1.6049-5(d)(2)
(ii) shall apply only if each payee qualifies
for such grace period.
(ii) Special rules for determining who
the customer is. For purposes of paragraph
(g)(1) of this section, the determination of
who the customer is shall be made on the
basis of the provisions in §1.6049-5(d) by
substituting in that section the terms payor
and payee with the terms broker and cus-
tomer.
(iii) Place of effecting sale--(A) Sale
outside the United States. For purposes
of this paragraph (g), a sale as defined in
paragraph (a)(9)(i) of this section (relating
to sales other than sales of digital assets)
is considered to be effected by a broker
at an office outside the United States if,
in accordance with instructions directly
transmitted to such office from outside the
United States by the broker’s customer,
the office completes the acts necessary to
effect the sale outside the United States.
The acts necessary to effect the sale may
be considered to have been completed
outside the United States without regard
to whether—
(1) Pursuant to instructions from an
office of the broker outside the United
States, an office of the same broker within
the United States undertakes one or more
steps of the sale in the United States; or

Bulletin No. 2024–31 289 July 29, 2024
(2) The gross proceeds of the sale are
paid by a draft drawn on a United States
bank account or by a wire or other elec-
tronic transfer from a United States
account.
(B) Sale inside the United States. For
purposes of this paragraph (g), a sale that
is considered to be effected by a broker at
an office outside the United States under
paragraph (g)(3)(iii)(A) of this section
shall nevertheless be considered to be
effected by a broker at an office inside the
United States if either—
(1) The customer has opened an
account with a United States office of that
broker;
(2) The customer has transmitted
instructions concerning this and other
sales to the foreign office of the broker
from within the United States by mail,
telephone, electronic transmission or oth-
erwise (unless the transmissions from the
United States have taken place in isolated
and infrequent circumstances);
(3) The gross proceeds of the sale are
paid to the customer by a transfer of funds
into an account (other than an interna-
tional account as defined in §1.6049-5(e)
(4)) maintained by the customer in the
United States or mailed to the customer at
an address in the United States;
(4) The confirmation of the sale is
mailed to a customer at an address in the
United States; or
(5) An office of the same broker within
the United States negotiates the sale with
the customer or receives instructions with
respect to the sale from the customer.
(iv) Special rules where the customer
is a foreign intermediary or certain U.S.
branches. A foreign intermediary, as
defined in §1.1441-1(c)(13), is an exempt
foreign person, except when the broker
has actual knowledge (within the mean-
ing of §1.6049-5(c)(3)) that the person
for whom the intermediary acts is a U.S.
person that is not exempt from reporting
under paragraph (c)(3) of this section or
the broker is required to presume under
§1.6049-5(d)(3) that the payee is a U.S.
person that is not an exempt recipient. If
a foreign intermediary, as described in
§1.1441-1(c)(13), or a U.S. branch that
is not treated as a U.S. person receives a
payment from a payor or middleman (as
defined in §1.6049-4(a) and (f)(4)), which
payment the payor or middleman can reli-
ably associate with a valid withholding
certificate described in §1.1441-1(e)(3)
(ii), (iii) or (v), respectively, furnished
by such intermediary or branch, then the
intermediary or branch is not required to
report such payment when it, in turn, pays
the amount, unless, and to the extent, the
intermediary or branch knows that the
payment is required to be reported under
this section and was not so reported. For
example, if a U.S. branch described in
§1.1441-1(b)(2)(iv) fails to provide infor-
mation regarding U.S. persons that are
not exempt from reporting under para-
graph (c)(3) of this section to the person
from whom the U.S. branch receives the
payment, the U.S. branch must report
the payment on an information return.
See, however, paragraph (c)(3)(ii) of this
section for when reporting under section
6045 is coordinated with reporting under
chapter 4 of the Code or an applicable
IGA (as defined in §1.6049-4(f)(7)). The
exception of this paragraph (g)(3)(iv) for
amounts paid by a foreign intermediary
shall not apply to a qualified intermedi-
ary that assumes reporting responsibility
under chapter 61 of the Code except as
provided under the agreement described
in §1.1441-1(e)(5)(iii).
(4) Rules for sales of digital assets.
The rules of this paragraph (g)(4) apply
to a sale of a digital asset as defined in
paragraph (a)(9)(ii) of this section. See
paragraph (a)(1) of this section for when
a person is treated as a broker under this
section with respect to a sale of a digital
asset. See paragraph (c) of this section for
rules requiring brokers to report sales. See
paragraph (g)(1) of this section providing
that no return of information is required to
be made by a broker effecting a sale of a
digital asset for a customer who is consid-
ered to be an exempt foreign person under
this paragraph (g)(4).
(i) Definitions. The following defini-
tions apply for purposes of this section.
(A) U.S. digital asset broker. A U.S.
digital asset broker is a person that effects
sales of digital assets on behalf of others
and that is—
(1) A U.S. payor or U.S. middleman as
defined in §1.6049-5(c)(5)(i)(A) that is not
a foreign branch or office of such person,
§1.6049-5(c)(5)(i)(B) or (F) that is not a
territory financial institution described in
§1.1441-1(b)(2)(iv).
(2) [Reserved]
(B) [Reserved]
(ii) Rules for U.S. digital asset bro-
kers--(A) Place of effecting sale. For pur-
poses of this section, a sale of a digital
asset that is effected by a U.S. digital asset
broker is considered a sale effected at an
office inside the United States.
(B) Determination of foreign status.
A U.S. digital asset broker may treat a
customer as an exempt foreign person
with respect to a sale effected at an
office inside the United States provided
that, prior to the payment to such cus-
tomer of the gross proceeds from the
sale, the broker has a beneficial owner
withholding certificate described in
§1.1441-1(e)(2)(i) that the broker may
treat as valid under §1.1441-1(e)(2)
(ii) and that satisfies the requirements
of paragraph (g)(4)(vi) of this section.
Additionally, a U.S. digital asset bro-
ker may treat a customer as an exempt
foreign person with respect to a sale
effected at an office inside the United
States under an applicable presumption
rule as provided in paragraph (g)(4)(vi)
(A)(2)(i) of this section. A beneficial
owner withholding certificate provided
by an individual must include a certifi-
cation that the beneficial owner has not
been, and at the time the certificate is
furnished reasonably expects not to be,
present in the United States for a period
aggregating 183 days or more during
each calendar year to which the certifi-
cate pertains. See paragraphs (g)(4)(vi)
(A) through (D) of this section for addi-
tional rules applicable to withholding
certificates, when a broker may rely on
a withholding certificate, presumption
rules that apply in the absence of docu-
mentation, and rules for customers that
are joint account holders. See paragraph
(g)(4)(vi)(E) of this section for the
extent to which a U.S. digital asset bro-
ker may treat a customer as an exempt
foreign person with respect to a pay-
ment treated as made to a foreign inter-
mediary, flow-through entity or certain
U.S. branches. See paragraph (g)(4)(vi)
(F) of this section for a transition rule
for preexisting accounts.
(iii) [Reserved]
(iv) Rules for non-U.S. digital asset
brokers not conducting activities as money
services businesses.

July 29, 2024 290 Bulletin No. 2024–31
(A) [Reserved]
(B) Sale treated as effected at an office
inside the United States--(1) [Reserved]
(2) U.S. indicia. The U.S. indicia rele-
vant for purposes of this paragraph (g)(4)
(iv)(B) are as follows—
(i) A permanent residence address (as
defined in §1.1441-1(c)(38)) in the U.S. or
a U.S. mailing address for the customer,
a current U.S. telephone number and no
non-U.S. telephone number for the cus-
tomer, or the broker’s classification of the
customer as a U.S. person in its records;
(ii) An unambiguous indication of a
U.S. place of birth for the customer; or
(v) [Reserved]
(vi) Rules applicable to brokers that
obtain or are required to obtain documen-
tation for a customer and presumption
rules--(A) In general. Paragraph (g)(4)(vi)
(A)(1) of this section describes rules appli-
cable to documentation permitted to be
used under this paragraph (g)(4) to deter-
mine whether a customer may be treated
as an exempt foreign person. Paragraph
(g)(4)(vi)(A)(2) of this section provides
presumption rules that apply if the broker
does not have documentation on which
the broker may rely to determine a cus-
tomer’s status. Paragraph (g)(4)(vi)(A)(3)
of this section provides a grace period for
obtaining documentation in circumstances
where there are indicia that a customer is
a foreign person. Paragraph (g)(4)(vi)(A)
(4) of this section provides rules relating
to blocked income. Paragraph (g)(4)(vi)
(B) of this section provides rules relating
to reliance on beneficial ownership with-
holding certificates to determine whether
a customer is an exempt foreign person.
Paragraph (g)(4)(vi)(C) of this section
provides rules relating to reliance on doc-
umentary evidence to determine whether
a customer is an exempt foreign person.
Paragraph (g)(4)(vi)(D) of this section
provides rules relating to customers that
are joint account holders. Paragraph (g)
(4)(vi)(E) of this section provides special
rules for a customer that is a foreign inter-
mediary, a flow-through entity, or certain
U.S. branches. Paragraph (g)(4)(vi)(F) of
this section provides a transition rule for
obtaining documentation to treat a cus-
tomer as an exempt foreign person.
(1) Documentation of foreign status. A
broker may treat a customer as an exempt
foreign person when the broker obtains
valid documentation permitted to support
a customer’s foreign status as described
in paragraph (g)(4)(ii), (iii), or (iv) of this
section (as applicable) that the broker can
reliably associate (within the meaning of
§1.1441-1(b)(2)(vii)(A)) with a payment
of gross proceeds, provided that the bro-
ker is not required to treat the documenta-
tion as unreliable or incorrect under para-
graph (g)(4)(vi)(B) or (C) of this section.
For rules regarding the validity period of
a withholding certificate, or of documen-
tary evidence (when permitted to be relied
upon under paragraph (g)(4)(vi)(C) of
this section), retention of documentation,
electronic transmission of documentation,
information required to be provided on a
withholding certificate, who may sign a
withholding certificate, when a substitute
withholding certificate may be accepted,
and general reliance rules on documen-
tation (including when a prior version of
a withholding certificate may be relied
upon), the provisions of §§1.1441-1(e)
(4)(i) through (ix) and 1.6049-5(c)(1)(ii)
apply, with the following modifications—
(i) The provisions in §1.1441-1(e)(4)
(i) through (ix) apply by substituting the
terms broker and customer for the terms
withholding agent and payee, respec-
tively, and disregarding the fact that the
provisions under §1.1441-1 apply only
to amounts subject to withholding under
chapter 3 of the Code;
(ii) The provisions of §1.6049-5(c)(1)
(ii) (relating to general requirements for
when a payor may rely upon and must
maintain documentary evidence with
respect to a payee) apply (as applicable to
the broker) by substituting the terms bro-
ker and customer for the terms payor and
payee, respectively;
(iii) To apply §1.1441-1(e)(4)(viii)
(reliance rules for documentation), the
reference to §1.1441-7(b)(4) through (6)
is replaced by the provisions of paragraph
(g)(4)(vi)(B) or (C) of this section, as
applicable, and the reference to §1.1441-
6(c)(2) is disregarded; and
(iv) To apply §1.1441-1(e)(4)(viii)
(reliance rules for documentation) and (ix)
(certificates to be furnished to a withhold-
ing agent for each obligation unless an
exception applies), the provisions appli-
cable to a financial institution apply to a
broker described in this paragraph (g)(4)
whether or not it is a financial institution.
(2) Presumption rules--(i) In general.
If a broker is not permitted to treat a cus-
tomer as an exempt foreign person under
paragraph (g)(4)(vi)(A)(1) of this section
because the broker has not collected the
documentation permitted to be collected
under this paragraph (g)(4) or is not per-
mitted to rely on the documentation it has
collected, the broker must determine the
classification of a customer (as an individ-
ual, entity, etc.) by applying the presump-
tion rules of §1.1441-1(b)(3)(ii), except
that references in §1.1441-1(b)(3)(ii)
(B) to exempt recipient categories under
section 6049 are replaced by the exempt
recipient categories in paragraph (c)(3)(i)
of this section. With respect to a customer
that a broker has classified as an entity, the
broker must determine the status of the
customer as U.S. or foreign by applying
§§1.1441-1(b)(3)(iii)(A) and 1.1441-5(d)
and (e)(6), except that §1.1441-1(b)(3)
(iii)(A)(1)(iv) does not apply. For pre-
sumption rules to treat a payment as made
to an intermediary or flow-through entity
and whether the payment is also treated
as made to an exempt foreign person, see
paragraph (g)(4)(vi)(E) of this section.
Notwithstanding the provisions of this
paragraph (g)(4)(vi)(A)(2), a broker may
not treat a customer as a foreign person
under this paragraph (g)(4)(vi)(A)(2) if
the broker has actual knowledge or rea-
son to know that the customer is a U.S.
person. For purposes of applying the pre-
sumption rules of this paragraph (g)(4)(vi)
(A)(2), a broker must identify its customer
by applying the rules of §1.6049-5(d)(1),
substituting the terms customer and bro-
ker for the terms payee and payor, respec-
tively.
(ii) Presumption rule specific to U.S.
digital asset brokers. With respect to a
customer that a U.S. digital asset broker
has classified as an individual, the broker
must treat the customer as a U.S. person.
(3) Grace period to collect valid doc-
umentation in the case of indicia of a for-
eign customer. If a broker has not obtained
valid documentation that it can reliably
associate with a payment of gross pro-
ceeds to a customer to treat the customer
as an exempt foreign person, or if the bro-
ker is unable to rely upon documentation
under the rules described in paragraph (g)
(4)(vi)(A)(1) of this section or is required
to treat documentation obtained for a

Bulletin No. 2024–31 291 July 29, 2024
customer as unreliable or incorrect (after
applying paragraphs (g)(4)(vi)(B) and (C)
of this section), the broker may apply the
grace period described in §1.6049-5(d)
(2)(ii) (generally allowing in certain cir-
cumstances a payor to treat an account
as owned by a foreign person for a 90
day period). In applying §1.6049-5(d)(2)
(ii), references to securities described in
§1.1441-6(c)(2) are replaced with digital
assets.
(4) Blocked income. A broker may
apply the provisions in paragraph (g)(1)
(iii) of this section to treat a customer as
an exempt foreign person when the pro-
ceeds are blocked income as described in
§1.1441-2(e)(3).
(B) Reliance on beneficial ownership
withholding certificates to determine for-
eign status. For purposes of determining
whether a customer may be treated as an
exempt foreign person under this section,
except as otherwise provided in this para-
graph (g)(4)(vi)(B), a broker may rely on
a beneficial owner withholding certificate
described in paragraph (g)(4)(ii)(B) of this
section unless the broker has actual knowl-
edge or reason to know that the certificate
is unreliable or incorrect. With respect to
a U.S. digital asset broker described in
paragraph (g)(4)(i)(A)(1) of this section,
reason to know is limited to when the bro-
ker has any of the U.S. indicia set forth in
paragraph (g)(4)(iv)(B)(2)(i) or (ii) of this
section in its account opening files or other
files pertaining to the account (account
information), including documentation
collected for purposes of an AML pro-
gram or the beneficial owner withholding
certificate. A broker will not be considered
to have reason to know that a certificate is
unreliable or incorrect based on documen-
tation collected for an AML program until
the date that is 30 days after the account is
opened. A broker may rely, however, on
a beneficial owner withholding certificate
notwithstanding the presence of any of the
U.S. indicia set forth in paragraph (g)(4)
(iv)(B)(2)(i) or (ii) of this section on the
withholding certificate or in the account
information for a customer in the circum-
stances described in paragraphs (g)(4)(vi)
(B)(1) and (2) of this section.
(1) Collection of information other
than U.S. place of birth--(i) In general.
With respect to any of the U.S. indicia
described in paragraph (g)(4)(iv)(B)(2)(i)
of this section, the broker has in its posses-
sion for a customer who is an individual
documentary evidence establishing for-
eign status (as described in §1.1471-3(c)
(5)(i)) that does not contain a U.S. address
and the customer provides the broker with
a reasonable explanation (as defined in
§1.1441-7(b)(12)) from the customer, in
writing, supporting the claim of foreign
status. Notwithstanding the preceding
sentence, in a case in which the broker
classified an individual customer as a U.S.
person in its account information, the bro-
ker may treat the customer as an exempt
foreign person only if it has in its posses-
sion documentary evidence described in
§1.1471-3(c)(5)(i)(B) evidencing citizen-
ship in a country other than the United
States. In the case of a customer that is an
entity, the broker may treat the customer
as an exempt foreign person if it has in
its possession documentation establish-
ing foreign status that substantiates that
the entity is actually organized or created
under the laws of a foreign country.
(ii) [Reserved]
(2) Collection of information showing
U.S. place of birth. With respect to the
U.S. indicia described in paragraph (g)
(4)(iv)(B)(2)(ii) of this section, the broker
has in its possession documentary evi-
dence described in §1.1471-3(c)(5)(i)(B)
evidencing citizenship in a country other
than the United States and the broker has
in its possession either a copy of the cus-
tomer’s Certificate of Loss of Nationality
of the United States or a reasonable writ-
ten explanation of the customer’s renunci-
ation of U.S. citizenship or the reason the
customer did not obtain U.S. citizenship
at birth.
(C) [Reserved]
(D) Joint owners. In the case of
amounts paid to customers that are joint
account holders for which a certificate or
documentation is required as a condition
for being exempt from reporting under
this paragraph (g)(4), such amounts are
presumed made to U.S. payees who are
not exempt recipients (as defined in para-
graph (c)(3)(i)(B) of this section) when
the conditions of paragraph (g)(3)(i) of
this section are met.
(E) Special rules for customer that is
a foreign intermediary, a flow-through
entity, or certain U.S. branches--(1) For-
eign intermediaries in general. For pur-
poses of this paragraph (g)(4), a broker
may determine the status of a customer
as a foreign intermediary (as defined in
§1.1441-1(c)(13)) by reliably associating
(under §1.1441-1(b)(2)(vii)) a payment of
gross proceeds with a valid foreign inter-
mediary withholding certificate described
in §1.1441-1(e)(3)(ii) or (iii), without
regard to whether the withholding cer-
tificate contains a withholding statement
and withholding certificates or other doc-
umentation for each account holder. In
the case of a payment of gross proceeds
from a sale of a digital asset that a broker
treats as made to a foreign intermediary
under this paragraph (g)(4)(vi)(E)(1), the
broker must treat the foreign intermediary
as an exempt foreign person except to the
extent required by paragraph (g)(3)(iv)
of this section (rules for when a broker is
required to treat a payment as made to a
U.S. person that is not an exempt recipient
under paragraph (c)(3) of this section and
for reporting that may be required by the
foreign intermediary).
(i) Presumption rule specific to U.S.
digital asset brokers. A U.S. digital asset
broker that does not have a valid foreign
intermediary withholding certificate or a
valid beneficial owner withholding certif-
icate described in paragraph (g)(4)(ii)(B)
of this section for the customer applies the
presumption rules in §1.1441-1(b)(3)(ii)
(B) (which would presume that the entity
is not an intermediary). For purposes of
applying the presumption rules referenced
in the preceding sentence, a U.S. digital
asset broker must identify its customer
by applying the rules of §1.6049-5(d)(1),
substituting the terms customer and U.S.
digital asset broker for the terms payee
and payor, respectively. See §1.1441-1(b)
(3)(iii) for presumption rules relating to
the U.S. or foreign status of a customer.
(ii) [Reserved]
(2) Foreign flow-through entities. For
purposes of this paragraph (g)(4), a broker
may determine the status of a customer as
a foreign flow-through entity (as defined
in §1.1441-1(c)(23)) by reliably associ-
ating (under §1.1441-1(b)(2)(vii)) a pay-
ment of gross proceeds with a valid for-
eign flow-through withholding certificate
described in §1.1441-5(c)(3)(iii) (relating
to nonwithholding foreign partnerships)
or §1.1441-5(e)(5)(iii) (relating to foreign
simple trusts and foreign grantor trusts

July 29, 2024 292 Bulletin No. 2024–31
that are nonwithholding foreign trusts),
without regard to whether the withholding
certificate contains a withholding state-
ment and withholding certificates or other
documentation for each partner. A broker
may alternatively determine the status
of a customer as a foreign flow-through
entity based on the presumption rules in
§§1.1441-1(b)(3)(ii)(B) (relating to entity
classification), 1.1441-5(d) (relating to
partnership status as U.S. or foreign)
and 1.1441-5(e)(6) (relating to the status
of trusts and estates as U.S. or foreign).
For purposes of applying the presumption
rules referenced in the preceding sen-
tence, a broker must identify its customer
by applying the rules of §1.6049-5(d)(1),
substituting the terms customer and bro-
ker for the terms payee and payor, respec-
tively. In the case of a payment of gross
proceeds from a sale of a digital asset that
a broker treats as made to a foreign flow-
through entity under this paragraph (g)(4)
(vi)(E)(2), the broker must treat the foreign
flow-through entity as an exempt foreign
person except to the extent required by
§1.6049-5(d)(3)(ii) (rules for when a bro-
ker is required to treat a payment as made
to a U.S. person other than an exempt
recipient (substituting exempt recipient
under §1.6045-1(c)(3) for exempt recipi-
ent described in §1.6049-4(c))).
(3) U.S. branches that are not beneficial
owners. For purposes of this paragraph (g)
(4), a broker may determine the status of
a customer as a U.S. branch (as described
in §1.1441-1(b)(2)(iv)) that is not a ben-
eficial owner (as defined in §1.1441-1(c)
(6)) of a payment of gross proceeds by
reliably associating (under §1.1441-1(b)
(2)(vii)) the payment with a valid U.S.
branch withholding certificate described
in §1.1441-1(e)(3)(v) without regard to
whether the withholding certificate con-
tains a withholding statement and with-
holding certificates or other documenta-
tion for each person for whom the branch
receives the payment. If a U.S. branch cer-
tifies on a U.S. branch withholding certif-
icate described in the preceding sentence
that it agrees to be treated as a U.S. person
under §1.1441-1(b)(2)(iv)(A), the broker
provided the certificate must treat the U.S.
branch as an exempt foreign person. If a
U.S. branch does not certify as described
in the preceding sentence on its U.S.
branch withholding certificate, the broker
provided the certificate must treat the U.S.
branch as an exempt foreign person except
to the extent required by paragraph (g)(3)
(iv) of this section (rules for when a broker
is required to treat a payment as made to
a U.S. person that is not an exempt recip-
ient under paragraph (c)(3) of this section
and for reporting that may be required by
the U.S. branch). In a case in which a bro-
ker cannot reliably associate a payment
of gross proceeds made to a U.S. branch
with a U.S. branch withholding certificate
described in §1.1441-1(e)(3)(v) or a valid
beneficial owner withholding certificate
described in paragraph (g)(4)(ii)(B) of this
section, see paragraph (g)(4)(vi)(E)(1) of
this section for determining the status of
the U.S. branch as a beneficial owner or
intermediary.
(F) Transition rule for obtaining doc-
umentation to treat a customer as an
exempt foreign person. Notwithstand-
ing the rules of this paragraph (g)(4) for
determining the status of a customer as an
exempt foreign person, for a sale of a dig-
ital asset effected before January 1, 2027,
that was held in an account established for
the customer by a broker before January
1, 2026, the broker may treat the customer
as an exempt foreign person provided that
the customer has not previously been clas-
sified as a U.S. person by the broker, and
the information that the broker has in the
account opening files or other files pertain-
ing to the account, including documen-
tation collected for purposes of an AML
program, includes a residence address for
the customer that is not a U.S. address.
(vii) Barter exchanges. No return
of information is required by a barter
exchange under the rules of paragraphs (e)
and (f) of this section with respect to a cli-
ent or a member that the barter exchange
may treat as an exempt foreign person
pursuant to the procedures described in
this paragraph (g)(4).
(5) Examples. The application of the
provisions of paragraphs (g)(1) through
(3) of this section may be illustrated by
the following examples:
(i) Example 1. FC is a foreign corporation that
is not a U.S. payor or U.S. middleman described in
§1.6049-5(c)(5) that regularly issues and retires its
own debt obligations. A is an individual whose resi-
dence address is inside the United States, who holds
a bond issued by FC that is in registered form (within
the meaning of section 163(f) and the regulations
under that section). The bond is retired by FP, a for-
eign corporation that is a broker within the meaning
of paragraph (a)(1) of this section and the designated
paying agent of FC. FP mails the proceeds to A at
A’s U.S. address. The sale would be considered to be
effected at an office outside the United States under
paragraph (g)(3)(iii)(A) of this section except that the
proceeds of the sale are mailed to a U.S. address. For
that reason, the sale is considered to be effected at
an office of the broker inside the United States under
paragraph (g)(3)(iii)(B) of this section. Therefore,
FC is a broker under paragraph (a)(1) of this section
with respect to this transaction because, although it is
not a U.S. payor or U.S. middleman, as described in
§1.6049-5(c)(5), it is deemed to effect the sale in the
United States. FP is a broker for the same reasons.
However, under the multiple broker exception under
paragraph (c)(3)(iii) of this section, FP, rather than
FC, is required to report the payment because FP is
responsible for paying the holder the proceeds from
the retired obligations. Under paragraph (g)(1)(i) of
this section, FP may not treat A as an exempt foreign
person and must make an information return under
section 6045 with respect to the retirement of the FC
bond, unless FP obtains the certificate or documenta-
tion described in paragraph (g)(1)(i) of this section.
(ii) Example 2. The facts are the same as in para-
graph (g)(5)(i) of this section (the facts in Example 1)
except that FP mails the proceeds to A at an address
outside the United States. Under paragraph (g)(3)
(iii)(A) of this section, the sale is considered to be
effected at an office of the broker outside the United
States. Therefore, under paragraph (a)(1) of this sec-
tion, neither FC nor FP is a broker with respect to
the retirement of the FC bond. Accordingly, neither
is required to make an information return under sec-
tion 6045.
(iii) Example 3. The facts are the same as in para-
graph (g)(5)(ii) of this section (the facts in Example
2) except that FP is also the agent of A. The result
is the same as in paragraph (g)(5)(ii) of this section
(Example 2). Neither FP nor FC are brokers under
paragraph (a)(1) of this section with respect to the
sale since the sale is effected outside the United
States and neither of them are U.S. payors (within
the meaning of §1.6049-5(c)(5)).
(iv) Example 4. The facts are the same as in para-
graph (g)(5)(i) of this section (the facts in Example 1)
except that the registered bond held by A was issued
by DC, a domestic corporation that regularly issues
and retires its own debt obligations. Also, FP mails
the proceeds to A at an address outside the United
States. Interest on the bond is not described in para-
graph (g)(1)(ii) of this section. The sale is considered
to be effected at an office outside the United States
under paragraph (g)(3)(iii)(A) of this section. DC is
a broker under paragraph (a)(1)(i)(B) of this section.
DC is not required to report the payment under the
multiple broker exception under paragraph (c)(3)(iii)
of this section. FP is not required to make an infor-
mation return under section 6045 because FP is not a
U.S. payor described in §1.6049-5(c)(5) and the sale
is effected outside the United States. Accordingly, FP
is not a broker under paragraph (a)(1) of this section.
(v) Example 5. The facts are the same as in para-
graph (g)(5)(iv) of this section (the facts in Exam-
ple 4) except that FP is also the agent of A. DC is
a broker under paragraph (a)(1) of this section. DC
is not required to report under the multiple broker

Bulletin No. 2024–31 293 July 29, 2024
exception under paragraph (c)(3)(iii) of this section.
FP is not required to make an information return
under section 6045 because FP is not a U.S. payor
described in §1.6049-5(c)(5) and the sale is effected
outside the United States and therefore FP is not a
broker under paragraph (a)(1) of this section.
(vi) Example 6. The facts are the same as in
paragraph (g)(5)(iv) of this section (the facts in
Example 4) except that the bond is retired by DP,
a broker within the meaning of paragraph (a)(1) of
this section and the designated paying agent of DC.
DP is a U.S. payor under §1.6049-5(c)(5). DC is not
required to report under the multiple broker excep-
tion under paragraph (c)(3)(iii) of this section. DP is
required to make an information return under section
6045 because it is the person responsible for pay-
ing the proceeds from the retired obligations unless
DP obtains the certificate or documentary evidence
described in paragraph (g)(1)(i) of this section.
(vii) Example 7—(A) Facts. Customer A owns
U.S. corporate bonds issued in registered form after
July 18, 1984, and carrying a stated rate of inter-
est. The bonds are held through an account with
foreign bank, X, and are held in street name. X is
a wholly-owned subsidiary of a U.S. company and
is not a qualified intermediary within the meaning of
§1.1441-1(e)(5)(ii). X has no documentation regard-
ing A. A instructs X to sell the bonds. In order to
effect the sale, X acts through its agent in the United
States, Y. Y sells the bonds and remits the sales
proceeds to X. X credits A’s account in the foreign
country. X does not provide documentation to Y and
has no actual knowledge that A is a foreign person
but it does appear that A is an entity (rather than an
individual).
(B) Analysis with respect to Y’s obligations to
withhold and report. Y treats X as the customer, and
not A, because Y cannot treat X as an intermediary
because it has received no documentation from X.
Y is not required to report the sales proceeds under
the multiple broker exception under paragraph (c)(3)
(iii) of this section, because X is an exempt recipi-
ent. Further, Y is not required to report the amount
of accrued interest paid to X on Form 1042-S under
§1.1461-1(c)(2)(ii) because accrued interest is not an
amount subject to reporting under chapter 3 unless
the withholding agent knows that the obligation is
being sold with a primary purpose of avoiding tax.
(C) Analysis with respect to X’s obligations
to withhold and report. Although X has effected,
within the meaning of paragraph (a)(1) of this sec-
tion, the sale of a security at an office outside the
United States under paragraph (g)(3)(iii) of this
section, X is treated as a broker, under paragraph
(a)(1) of this section, because as a wholly-owned
subsidiary of a U.S. corporation, X is a controlled
foreign corporation and therefore is a U.S. payor. See
§1.6049-5(c)(5). Under the presumptions described
in §1.6049-5(d)(2) (as applied to amounts not sub-
ject to withholding under chapter 3), X must apply
the presumption rules of §1.1441-1(b)(3)(i) through
(iii), with respect to the sales proceeds, to treat A
as a partnership that is a U.S. non-exempt recipient
because the presumption of foreign status for off-
shore obligations under §1.1441-1(b)(3)(iii)(D) does
not apply. See paragraph (g)(1)(i) of this section.
Therefore, unless X is an FFI (as defined in §1.1471-
1(b)(47)) that is excepted from reporting the sales
proceeds under paragraph (c)(3)(ii) of this section,
the payment of proceeds to A by X is reportable on a
Form 1099 under paragraph (c)(2) of this section. X
has no obligation to backup withhold on the payment
based on the exemption under §31.3406(g)-1(e) of
this chapter, unless X has actual knowledge that A
is a U.S. person that is not an exempt recipient. X is
also required to separately report the accrued interest
(see paragraph (d)(3) of this section) on Form 1099
under section 6049 because A is also presumed to be
a U.S. person who is not an exempt recipient with
respect to the payment because accrued interest is
not an amount subject to withholding under chapter
3 and, therefore, the presumption of foreign status
for offshore obligations under §1.1441-1(b)(3)(iii)
(D) does not apply. See §1.6049-5(d)(2)(i).
(viii) Example 8—(A) Facts. The facts are the
same as in paragraph (g)(5)(vii) of this section (the
facts in Example 7) except that X is a foreign corpo-
ration that is not a U.S. payor under §1.6049-5(c).
(B) Analysis with respect to Y’s obligations to
withhold and report. Y is not required to report the
sales proceeds under the multiple broker exception
under paragraph (c)(3)(iii) of this section, because
X is the person responsible for paying the proceeds
from the sale to A.
(C) Analysis with respect to X’s obliga-
tions to withhold and report. Although A
is presumed to be a U.S. payee under the
presumptions of §1.6049-5(d)(2), X is not
considered to be a broker under paragraph
(a)(1) of this section because it is a not a
U.S. payor under §1.6049-5(c)(5). There-
fore, X is not required to report the sale
under paragraph (c)(2) of this section.
* * * * *
(j) Time and place for filing; cross-ref-
erences to penalty and magnetic media
filing requirements. Forms 1096 and 1099
required under this section shall be filed
after the last calendar day of the report-
ing period elected by the broker or bar-
ter exchange and on or before February
28 of the following calendar year with
the appropriate Internal Revenue Service
Center, the address of which is listed in
the instructions for Form 1096. For a dig-
ital asset sale effected prior to January 1,
2025, for which a broker chooses under
paragraph (d)(2)(iii)(B) of this section to
file an information return, Form 1096 and
the Form 1099-B, Proceeds From Broker
and Barter Exchange Transactions, or
the Form 1099-DA, Digital Asset Pro-
ceeds from Broker Transactions, must
be filed on or before February 28 of the
calendar year following the year of that
sale. See paragraph (l) of this section for
the requirement to file certain returns on
magnetic media. For provisions relating to
the penalty provided for the failure to file
timely a correct information return under
section 6045(a), see §301.6721-1 of this
chapter. See §301.6724-1 of this chapter
for the waiver of a penalty if the failure is
due to reasonable cause and is not due to
willful neglect.
* * * * *
(m) * * *
(1) In general. This paragraph (m)
provides rules for a broker to determine
and report the information required under
this section for an option that is a covered
security under paragraph (a)(15)(i)(E) or
(H) of this section.
(2) * * *
(ii) * * *
(C) Notwithstanding paragraph (m)(2)
(i) of this section, if an option is an option
on a digital asset or an option on deriva-
tives with a digital asset as an underlying
property, this paragraph (m) applies to the
option if it is granted or acquired on or
after January 1, 2026.
* * * * *
(n) * * *
(6) * * *
(i) Sale. A broker must report the
amount of market discount that has
accrued on a debt instrument as of the
date of the instrument’s sale, as defined
in paragraph (a)(9)(i) of this section. See
paragraphs (n)(5) and (n)(11)(i)(B) of this
section to determine whether the amount
reported should take into account a cus-
tomer election under section 1276(b)(2).
See paragraph (n)(8) of this section to
determine the accrual period to be used to
compute the accruals of market discount.
This paragraph (n)(6)(i) does not apply
if the customer notifies the broker under
the rules in paragraph (n)(5) of this sec-
tion that the customer elects under section
1278(b) to include market discount in
income as it accrues.
* * * * *
(q) Applicability dates. Except as other-
wise provided in paragraphs (d)(6)(ix), (m)
(2)(ii), and (n)(12)(ii) of this section, and in
this paragraph (q), this section applies on
or after January 6, 2017. Paragraphs (k)(4)
and (l) of this section apply with respect to
information returns required to be filed and
payee statements required to be furnished
on or after January 1, 2024. (For rules that
apply after June 30, 2014, and before Jan-
uary 6, 2017, see 26 CFR 1.6045–1, as
revised April 1, 2016.) Except in the case

July 29, 2024 294 Bulletin No. 2024–31
of a sale of digital assets for real property
as described in paragraph (a)(9)(ii)(B) of
this section, this section applies to sales of
digital assets on or after January 1, 2025.
In the case of a sale of digital assets for real
property as described in paragraph (a)(9)
(ii)(B) of this section, this section applies
to sales of digital assets on or after January
1, 2026. For assets that are commodities
pursuant to the Commodity Futures Trad-
ing Commission’s certification procedures
described in 17 CFR 40.2, this section
applies to sales of such commodities on
or after January 1, 2025, without regard to
the date such certification procedures were
undertaken.
(r) Cross-references. For provisions
relating to backup withholding for report-
able transactions under this section, see
§31.3406(b)(3)-2 of this chapter for rules
treating gross proceeds as reportable pay-
ments, §31.3406(d)-1 of this chapter for
rules with respect to backup withholding
obligations, and §31.3406(h)-3 of this
chapter for the prescribed form for the
certification of information required under
this section.
Par. 7. Section 1.6045-4 is amended
by:
1. Revising the section heading and
paragraph (b)(1);
2. Removing the period at the end of
paragraph (c)(2)(i) and adding a semico-
lon in its place;
3. Removing the word “or” from the
end of paragraph (c)(2)(ii);
4. Removing the period at the end of
paragraph (c)(2)(iii) and adding “; or” in
its place;
5. Adding paragraph (c)(2)(iv);
6. Revising paragraph (d)(2)(ii)(A);
7. In paragraphs (e)(3)(iii)(A) and (B),
adding the words “or digital asset” after
the word “cash”;
8. Revising and republishing para-
graphs (g) and (h)(1);
9. Adding paragraphs (h)(2)(iii) and (h)
(3);
10. Revising paragraphs (i)(1) and (2),
(i)(3)(ii), and (o);
11. In paragraph (r):
a. Redesignating Examples 1 through
9 as paragraphs (r)(1) through (9), respec-
tively;
b. In newly redesignated paragraph (r)
(3), removing “section (b)(1)” and adding
“paragraph (b)(1)” in its place;
c. Removing the heading in newly
redesignated reserved paragraph (r)(5);
d. Revising newly redesignated para-
graph (r)(7);
e. In the first sentence of newly redesig-
nated paragraph (r)(8), removing “exam-
ple (6)” and adding “paragraph (r)(6) of
this section (the facts in Example 6)” in
its place;
f. In the first sentence of newly redesig-
nated paragraph (r)(9), removing “exam-
ple (8)” and adding “paragraph (r)(8) of
this section (the facts in Example 8)” in
its place; and
g. Adding paragraph (r)(10).
12. Adding a sentence to the end of
paragraph (s).
The revisions and additions read as fol-
lows:
§1.6045-4 Information reporting on
real estate transactions.
* * * * *
(b) * * *
(1) In general. A transaction is a real
estate transaction under this section if
the transaction consists in whole or in
part of the sale or exchange of reportable
real estate (as defined in paragraph (b)(2)
of this section) for money, indebtedness,
property other than money, or services.
The term sale or exchange shall include
any transaction properly treated as a sale
or exchange for Federal income tax pur-
poses, whether or not the transaction is
currently taxable. Thus, for example, a
sale or exchange of a principal residence
is a real estate transaction under this sec-
tion even though the transferor may be
entitled to the special exclusion of gain
up to $250,000 (or $500,000 in the case
of married persons filing jointly) from the
sale or exchange of a principal residence
provided by section 121 of the Code.
* * * * *
(c) * * *
(2) * * *
(iv) A principal residence (including
stock in a cooperative housing corpora-
tion) provided the reporting person obtain
from the transferor a written certification
consistent with guidance that the Sec-
retary has designated or may designate
by publication in the Federal Register
or in the Internal Revenue Bulletin (see
§601.601(d)(2) of this chapter). If a res-
idence has more than one owner, a real
estate reporting person must either obtain
a certification from each owner (whether
married or not) or file an information
return and furnish a payee statement for
any owner that does not make the certifi-
cation. The certification must be retained
by the reporting person for four years after
the year of the sale or exchange of the res-
idence to which the certification applies.
A reporting person who relies on a cer-
tification made in compliance with this
paragraph (c)(2)(iv) will not be liable for
penalties under section 6721 of the Code
for failure to file an information return, or
under section 6722 of the Code for fail-
ure to furnish a payee statement to the
transferor, unless the reporting person has
actual knowledge or reason to know that
any assurance is incorrect.
(d) * * *
(2) * * *
(ii) * * *
(A) The United States or a State, the
District of Columbia, the Commonwealth
of Puerto Rico, Guam, the Common-
wealth of Northern Mariana Islands, the
U.S. Virgin Islands, or American Samoa,
a political subdivision of any of the fore-
going, or any wholly owned agency or
instrumentality of any one or more of the
foregoing; or
* * * * *
(g) Prescribed form. Except as oth-
erwise provided in paragraph (k) of this
section, the information return required
by paragraph (a) of this section shall be
made on Form 1099-S, Proceeds From
Real Estate Transactions or any successor
form.
(h) * * *
(1) In general. The following informa-
tion must be set forth on the Form 1099-S
required by this section:
(i) The name, address, and taxpayer
identification number (TIN) of the trans-
feror (see also paragraph (f)(2) of this sec-
tion);
(ii) A general description of the real
estate transferred (in accordance with
paragraph (h)(2)(i) of this section);
(iii) The date of closing (as defined in
paragraph (h)(2)(ii) of this section);
(iv) To the extent required by the Form
1099-S and its instructions, the entire
gross proceeds with respect to the trans-
action (as determined under the rules of

Bulletin No. 2024–31 295 July 29, 2024
paragraph (i) of this section), and, in the
case of multiple transferors, the gross
proceeds allocated to the transferor (as
determined under paragraph (i)(5) of this
section);
(v) To the extent required by the Form
1099-S and its instructions, an indication
that the transferor—
(A) Received (or will, or may, receive)
property (other than cash, consideration
treated as cash, and digital assets in com-
puting gross proceeds) or services as part
of the consideration for the transaction; or
(B) May receive property (other than
cash and digital assets) or services in sat-
isfaction of an obligation having a stated
principal amount; or
(C) May receive, in connection with
a contingent payment transaction, an
amount of gross proceeds that cannot
be determined with certainty using the
method described in paragraph (i)(3)(iii)
of this section and is therefore not included
in gross proceeds under paragraphs (i)(3)
(i) and (iii) of this section;
(vi) The real estate reporting person’s
name, address, and TIN;
(vii) In the case of a payment made
to the transferor using digital assets, the
name and number of units of the digital
asset, and the date the payment was made;
(viii) [Reserved]
(ix) Any other information required by
the Form 1099-S or its instructions.
(2) * * *
(iii) Digital assets. For purposes of this
section, a digital asset has the meaning set
forth in §1.6045-1(a)(19).
(3) Limitation on information provided.
The information required in the case of
payment made to the transferor using dig-
ital assets under paragraph (h)(1)(vii) of
this section and the portion of any gross
proceeds attributable to that payment
required to be reported by paragraph (h)
(1)(iv) of this section is not required unless
the real estate reporting person has actual
knowledge or ordinarily would know that
digital assets were received by the trans-
feror as payment. For purposes of this
limitation, a real estate reporting person is
considered to have actual knowledge that
payment was made to the transferor using
digital assets if the terms of the real estate
contract provide for payment using digital
assets.
(i) * * *
(1) In general. Except as otherwise pro-
vided in this paragraph (i), the term gross
proceeds means the total cash received,
including cash received from a processor
of digital asset payments as described in
§1.6045-1(a)(22), consideration treated as
cash received, and the value of any digital
asset received by or on behalf of the trans-
feror in connection with the real estate
transaction.
(i) Consideration treated as cash. For
purposes of this paragraph (i), consid-
eration treated as cash received by or on
behalf of the transferor in connection with
the real estate transaction includes the fol-
lowing amounts:
(A) The stated principal amount of any
obligation to pay cash to or for the benefit
of the transferor in the future (including
any obligation having a stated principal
amount that may be satisfied by the deliv-
ery of property (other than cash) or ser-
vices);
(B) The amount of any liability of the
transferor assumed by the transferee as
part of the consideration for the trans-
fer or of any liability to which the real
estate acquired is subject (whether or not
the transferor is personally liable for the
debt); and
(C) In the case of a contingent payment
transaction, as defined in paragraph (i)(3)
(ii) of this section, the maximum deter-
minable proceeds, as defined in paragraph
(i)(3)(iii) of this section.
(ii) Digital assets received. For pur-
poses of this paragraph (i), the value of
any digital asset received means the fair
market value in U.S. dollars of the digital
asset actually received. Additionally, if the
consideration received by the transferor
includes an obligation to pay a digital
asset to, or for the benefit of, the transferor
in the future, the value of any digital asset
received includes the fair market value,
as of the date and time the obligation is
entered into, of the digital assets to be paid
as stated principal under such obligation.
The fair market value of any digital asset
received must be determined based on the
valuation rules provided in §1.6045-1(d)
(5)(ii).
(iii) Other property. Gross proceeds
does not include the value of any prop-
erty (other than cash, consideration
treated as cash, and digital assets) or
services received by, or on behalf of, the
transferor in connection with the real
estate transaction. See paragraph (h)(1)
(v) of this section for the information that
must be included on the Form 1099-S
required by this section in cases in which
the transferor receives (or will, or may,
receive) property (other than cash, con-
sideration treated as cash, and digital
assets) or services as part of the consider-
ation for the transfer.
(2) Treatment of sales commissions and
similar expenses. In computing gross pro-
ceeds, the total cash, consideration treated
as cash, and digital assets received by or
on behalf of the transferor shall not be
reduced by expenses borne by the trans-
feror (such as sales commissions, amounts
paid or withheld from consideration
received to effect the digital asset transfer
as described in §1.1001-7(b)(2), expenses
of advertising the real estate, expenses of
preparing the deed, and the cost of legal
services in connection with the transfer).
(3) * * *
(ii) Contingent payment transaction.
For purposes of this section, the term con-
tingent payment transaction means a real
estate transaction with respect to which
the receipt, by or on behalf of the trans-
feror, of cash, consideration treated as
cash under paragraph (i)(1)(i)(A) of this
section, or digital assets under paragraph
(i)(1)(ii) of this section is subject to a con-
tingency.
* * * * *
(o) No separate charge. A reporting
person may not separately charge any per-
son involved in a real estate transaction for
complying with any requirements of this
section. A reporting person may, however,
take into account its cost of complying
with such requirements in establishing its
fees (other than in charging a separate fee
for complying with such requirements) to
any customer for performing services in
the case of a real estate transaction.
* * * * *
(r) * * *
(7) Example 7: Gross proceeds (contingen-
cies). The facts are the same as in paragraph (r)(6)
of this section (the facts in Example 6), except that
the agreement does not provide for adequate stated
interest. The result is the same as in paragraph (r)(6)
of this section (the results in Example 6).
* * * * *
(10) Example 10: Gross proceeds (exchange
involving digital assets)—(i) Facts. K, an individual,
agrees in a contract for sale to pay 140 units of digital
asset DE with a total fair market value of $280,000

July 29, 2024 296 Bulletin No. 2024–31
to J, an unmarried individual who is not an exempt
transferor, in exchange for Whiteacre, which has a
fair market value of $280,000. No liabilities are
involved in the transaction. P is the reporting person
with respect to both sides of the transaction.
(ii) Analysis. P has actual knowledge that pay-
ment was made to J using digital assets because the
terms of the real estate contract provide for payment
using digital assets. Accordingly, with respect to the
payment by K of 140 units of digital asset DE to J, P
must report gross proceeds received by J of $280,000
(140 units of DE) on Form 1099-S, Proceeds From
Real Estate Transactions. Additionally, to the extent
K is not an exempt recipient under §1.6045-1(c)
or an exempt foreign person under §1.6045-1(g),
P is required to report gross proceeds paid to K on
Form 1099-DA, Digital Asset Proceeds from Broker
Transactions, with respect to K’s sale of 140 units of
digital asset DE, in the amount of $280,000 pursuant
to §1.6045-1.
(s) * * * The amendments to paragraphs (b)(1),
(c)(2)(iv), (d)(2)(ii), (e)(3)(iii), (h)(1)(v) through
(ix), (h)(2)(iii), (i)(1) and (2), (i)(3)(ii), (o), and (r)
of this section apply to real estate transactions with
dates of closing occurring on or after January 1,
2026.
Par. 8. Section 1.6045A-1 is amended
by:
1. In paragraph (a)(1)(i), in the first
sentence, removing “paragraphs (a)(1)(ii)
through (v) of this section,” and adding
“paragraphs (a)(1)(ii) through (vi) of this
section,” in its place; and
2. Adding paragraph (a)(1)(vi).
The addition reads as follows:
§1.6045A-1 Statements of information
required in connection with transfers
of securities.
(a) * * *
(1) * * *
(vi) Exception for transfers of spec-
ified securities that are reportable as
digital assets. No transfer statement is
required under paragraph (a)(1)(i) of this
section with respect to a specified secu-
rity, the sale of which is reportable as a
digital asset after the application of the
special coordination rules under §1.6045-
1(c)(8). A transferor that chooses to pro-
vide a transfer statement with respect to
a specified security described in the pre-
ceding sentence that is a tokenized secu-
rity described in §1.6045-1(c)(8)(i)(D)
that reports some or all of the information
described in paragraph (b) of this section
is not subject to penalties under section
6722 of the Code for failure to report this
information correctly.
* * * * *
Par. 9. Section 1.6045B-1 is amended
by:
1. Revising paragraph (a)(1) introduc-
tory text;
2. Adding paragraph (a)(6);
3. Removing the word “and” from the
end of paragraph (j)(5);
4. Removing the period from the end
of paragraph (j)(6) and adding in its place
“; and”;
5. Adding paragraph (j)(7).
The revision and additions read as fol-
lows:
§1.6045B-1 Returns relating to actions
affecting basis of securities.
(a) * * *
(1) Information required. Except as
provided in paragraphs (a)(4) and (5) of
this section, an issuer of a specified secu-
rity within the meaning of §1.6045-1(a)
(14)(i) through (iv) that takes an organi-
zational action that affects the basis of the
security must file an issuer return setting
forth the following information and any
other information specified in the return
form and instructions:
* * * * *
(6) Reporting for certain specified
securities that are digital assets. Unless
otherwise excepted under this section, an
issuer of a specified security described in
paragraph (a)(1) of this section is required
to report under this section without regard
to whether the specified security is also
described in §1.6045-1(a)(14)(v) or (vi).
If a specified security is described in
§1.6045-1(a)(14)(v) or (vi) but is not also
described in §1.6045-1(a)(14)(i), (ii), (iii)
or (iv), the issuer of that specified security
is permitted, but not required, to report
under this section. An issuer that chooses
to provide the reporting and furnish state-
ments for a specified security described
in the previous sentence is not subject to
penalties under section 6721 or 6722 of
the Code for failure to report this informa-
tion correctly.
* * * * *
(j) * * *
(7) Organizational actions occurring
on or after January 1, 2025, that affect
the basis of digital assets described in
§1.6045-1(a)(14)(v) or (vi) that are also
described in one or more paragraphs of
§1.6045-1(a)(14)(i) through (iv).
Par. 10. Section 1.6050W-1 is amended
by adding a sentence to the end of para-
graph (a)(2), adding paragraph (c)(5), and
revising paragraph (j) to read as follows:
§1.6050W-1 Information reporting
for payments made in settlement of
payment card and third party network
transactions.
(a) * * *
(2) * * * In the case of a third party
settlement organization that has the con-
tractual obligation to make payments to
participating payees, a payment in settle-
ment of a reportable payment transaction
includes the submission of instructions to
a purchaser to transfer funds directly to
the account of the participating payee for
purposes of settling the reportable pay-
ment transaction.
* * * * *
(c) * * *
(5) Coordination with information
returns required under section 6045 of
the Code--(i) Reporting on exchanges
involving digital assets. Notwithstanding
the provisions of this paragraph (c), the
reporting of a payment made in settle-
ment of a third party network transaction
in which the payment by a payor is made
using digital assets as defined in §1.6045-
1(a)(19) or the goods or services provided
by a payee are digital assets must be as
follows:
(A) Reporting on payors with respect
to payments made using digital assets. If
a payor makes a payment using digital
assets and the exchange of the payor’s dig-
ital assets for goods or services is a sale of
digital assets by the payor under §1.6045-
1(a)(9)(ii), the amount paid to the payor
in settlement of that exchange is subject
to the rules as described in §1.6045-1
(including any exemption from reporting
under §1.6045-1) and not this section.
(B) Reporting on payees with respect
to the sale of goods or services that are
digital assets. If the goods or services
provided by a payee in an exchange are
digital assets, the exchange is a sale of
digital assets by the payee under §1.6045-
1(a)(9)(ii), and the payor is a broker under
§1.6045-1(a)(1) that effected the sale of
such digital assets, the amount paid to
the payee in settlement of that exchange
is subject to the rules as described in

Bulletin No. 2024–31 297 July 29, 2024
§1.6045-1 (including any exemption from
reporting under §1.6045-1) and not this
section.
(ii) Examples. The following examples
illustrate the rules of this paragraph (c)(5).
(A) Example 1—(1) Facts. CRX is a shared-ser-
vice organization that performs accounts payable
services for numerous purchasers that are unrelated
to CRX. A substantial number of sellers of goods
and services, including Seller S, have established
accounts with CRX and have agreed to accept pay-
ment from CRX in settlement of their transactions
with purchasers. The agreement between sellers
and CRX includes standards and mechanisms for
settling the transactions and guarantees payment to
the sellers, and the arrangement enables purchasers
to transfer funds to providers. Pursuant to this seller
agreement, CRX accepts cash from purchasers as
payment as well as digital assets, which it exchanges
into cash for payment to sellers. Additionally, CRX
is a processor of digital asset payments as defined
in §1.6045-1(a)(22) and a broker under §1.6045-
1(a)(1). P, an individual not otherwise exempt from
reporting, purchases one month of services from S
through CRX’s organization. S is also an individual
not otherwise exempt from reporting. S’s services
are not digital assets under §1.6045-1(a)(19). To
effect this transaction, P transfers 100 units of DE,
a digital asset as defined in §1.6045-1(a)(19), to
CRX. CRX, in turn, exchanges the 100 units of DE
for $1,000, based on the fair market value of the DE
units, and pays $1,000 to S.
(2) Analysis with respect to CRX’s status. CRX’s
arrangement constitutes a third party payment net-
work under paragraph (c)(3) of this section because
a substantial number of persons that are unrelated to
CRX, including S, have established accounts with
CRX, and CRX is contractually obligated to settle
transactions for the provision of goods or services by
these persons to purchasers, including P. Thus, under
paragraph (c)(2) of this section, CRX is a third party
settlement organization and the transaction involving
P’s purchase of S’s services using 100 units of digital
asset DE is a third party network transaction under
paragraph (c)(1) of this section.
(3) Analysis with respect to the reporting on P.
P’s payment of 100 units of DE to CRX in return
for the payment by CRX of $1,000 in cash to S is
a sale of the DE units as defined in §1.6045-1(a)(9)
(ii)(D) that is effected by CRX, a processor of dig-
ital asset payments and broker under §1.6045-1(a)
(1). Accordingly, pursuant to the rules under para-
graph (c)(5)(i)(A) of this section, CRX must file an
information return under §1.6045-1 with respect to
P’s sale of the DE units and is not required to file
an information return under paragraph (a)(1) of this
section with respect to P.
(4) Analysis with respect to the reporting on
S. S’s services are not digital assets as defined in
§1.6045-1(a)(19). Accordingly, pursuant to the rules
under paragraph (c)(5)(i)(B) of this section, CRX’s
payment of $1,000 to S in settlement of the report-
able payment transaction is subject to the reporting
rules under paragraph (a)(1) of this section and not
the reporting rules as described in §1.6045-1.
(B) Example 2—(1) Facts. CRX is an entity that
owns and operates a digital asset trading platform
and provides digital asset custodial services and digi-
tal asset broker services under §1.6045-1(a)(1). CRX
also exchanges on behalf of customers digital assets
under §1.6045-1(a)(19), including nonfungible
tokens, referred to as NFTs, representing ownership
in unique digital artwork, video, or music. Exchange
transactions undertaken by CRX on behalf of its cus-
tomers are considered sales under §1.6045-1(a)(9)
(ii) that are effected by CRX and subject to report-
ing by CRX under §1.6045-1. A substantial number
of NFT sellers have accounts with CRX, into which
their NFTs are deposited for sale. None of these sell-
ers are related to CRX, and all have agreed to settle
transactions for the sale of their NFTs in digital asset
DE, or other forms of consideration, and according
to the terms of their contracts with CRX. Buyers of
NFTs also have accounts with CRX, into which dig-
ital assets are deposited for later use as consideration
to acquire NFTs. Once a buyer decides to purchase
an NFT for a price agreed to by the NFT seller, CRX
effects the requested exchange of the buyer’s con-
sideration for the NFT, which allows CRX to guar-
antee delivery of the bargained for consideration to
both buyer and seller. CRX charges a transaction fee
on every NFT sale, which is paid by the buyer in
additional units of digital asset DE. Seller J, an indi-
vidual not otherwise exempt from reporting, sells
NFTs representing digital artwork on CRX’s digital
asset trading platform. J does not perform any other
services with respect to these transactions. Buyer B,
also an individual not otherwise exempt from report-
ing, seeks to purchase J’s NFT-4 using units of DE.
Using CRX’s platform, buyer B and seller J agree to
exchange J’s NFT-4 for B’s 100 units of DE (with a
value of $1,000). At the direction of J and B, CRX
executes this exchange, with B paying CRX’s trans-
action fee using additional units of DE.
(2) Analysis with respect to CRX’s status. CRX’s
arrangement with J and the other NFT sellers consti-
tutes a third party payment network under paragraph
(c)(3) of this section because a substantial number
of providers of goods or services who are unrelated
to CRX, including J, have established accounts with
CRX, and CRX is contractually obligated to settle
transactions for the provision of goods or services,
such as NFTs representing goods or services, by
these persons to purchasers. Thus, under paragraph
(c)(2) of this section, CRX is a third party settlement
organization and the sale of J’s NFT-4 for 100 units
of DE is a third party network transaction under
paragraph (c)(1) of this section. Therefore, CRX is
a payment settlement entity under paragraph (a)(4)
(i)(B) of this section.
(3) Analysis with respect to the reporting on B.
The exchange of B’s 100 units of DE for J’s NFT-4
is a sale under §1.6045-1(a)(9)(ii)(A)(2) by B of the
100 DE units that was effected by CRX. Accord-
ingly, under paragraph (c)(5)(i)(A) of this section,
the amount paid to B in settlement of the exchange
is subject to the rules as described in §1.6045-1, and
CRX must file an information return under §1.6045-1
with respect to B’s sale of the 100 DE units. CRX is
not required to also file an information return under
paragraph (a)(1) of this section with respect to the
amount paid to B even though CRX is a third party
settlement organization.
(4) Analysis with respect to the reporting on J.
The exchange of J’s NFT-4 for 100 units of DE is
a sale under §1.6045-1(a)(9)(ii) by J of a digital
asset under §1.6045-1(a)(19) that was effected by
CRX. Accordingly, under paragraph (c)(5)(i)(B)
of this section, the amount paid to J in settlement
of the exchange is subject to the rules as described
in §1.6045-1, and CRX must file an information
return under §1.6045-1 with respect to J’s sale
of the NFT-4. CRX is not required to also file an
information return under paragraph (a)(1) of this
section with respect to the amount paid to J even
though CRX is a third party settlement organiza-
tion.
* * * * *
(j) Applicability date. Except with
respect to payments made using digital
assets, the rules in this section apply to
returns for calendar years beginning after
December 31, 2010. For payments made
using digital assets, this section applies on
or after January 1, 2025.
PART 31—EMPLOYMENT TAXES
AND COLLECTION OF INCOME
TAX AT SOURCE
Par. 11. The authority citation for part
31 continues to read in part as follows:
Authority: 26 U.S.C. 7805.
Par. 12. Section 31.3406-0 is amended
by:
1. Revising the heading for the entry
for §31.3406(b)(3)-2;
2. Adding entries for §§31.3406(b)(3)-
2(b)(6), 31.3406(g)-1(e)(1) and (2); and
3. Revising the entry for
§31.3406(g)-1(f).
The additions and revision read as fol-
lows:
§31.3406-0 Outline of the backup
withholding regulations.
* * * * *
31.3406(b)(3)-2 Reportable barter
exchanges and gross proceeds of sales of
securities, commodities, or digital assets
by brokers.
* * * * *
(b) * * *
(6) Amount subject to backup with-
holding in the case of reporting under
§1.6045-1(d)(2)(i)(C) and (d)(10) of this
chapter.
(i) Optional reporting method for sales
of qualifying stablecoins and specified
nonfungible tokens.
(A) In general.

July 29, 2024 298 Bulletin No. 2024–31
(B) Backup withholding on non-desig-
nated sales of qualifying stablecoins.
(1) In general.
(2) Non-qualifying events.
(ii) Applicable threshold for sales by
processors of digital asset payments.
* * * * *
§31.3406(g)-1 Exception for payments
to certain payees and certain other
payments.
* * * * *
(e) * * *
(1) Reportable payments other than
gross proceeds from sales of digital assets.
(2) Reportable payments of gross pro-
ceeds from sales of digital assets.
(i) [Reserved]
(ii) [Reserved]
(f) Applicability date.
* * * * *
Par. 13. Section 31.3406(b)(3)-2 is
amended by revising the section heading
and adding paragraphs (b)(6) and (c) to
read as follows:
§31.3406(b)(3)-2. Reportable barter
exchanges and gross proceeds of sales
of securities, commodities, or digital
assets by brokers.
* * * * *
(b) * * *
(6) Amount subject to backup with-
holding in the case of reporting under
§1.6045-1(d)(2)(i)(C) and (d)(10) of this
chapter--(i) Optional reporting method
for sales of qualifying stablecoins and
specified nonfungible tokens--(A) In gen-
eral. The amount subject to withhold-
ing under section 3406 for a broker that
reports sales of digital assets under the
optional method for reporting qualify-
ing stablecoins or specified nonfungible
tokens under §1.6045-1(d)(10) of this
chapter is the amount of gross proceeds
from designated sales of qualifying sta-
blecoins as defined in §1.6045-1(d)(10)(i)
(C) of this chapter and sales of specified
nonfungible tokens without regard to the
amount which must be paid to the broker’s
customer before reporting is required.
(B) Backup withholding on non-desig-
nated sales of qualifying stablecoins--(1)
In general. A broker is not required to
withhold under section 3406 on non-des-
ignated sales of qualifying stablecoins as
defined under §1.6045-1(d)(10)(i)(C) of
this chapter.
(2) Non-qualifying events. In the case
of a digital asset that would satisfy the
definition of a non-designated sale of a
qualifying stablecoin as defined under
§1.6045-1(d)(10)(i)(C) of this chapter
for a calendar year but for a non-qualify-
ing event during that year, a broker is not
required to withhold under section 3406
on such sale if it occurs no later than the
end of the day that is 30 days after the first
non-qualifying event with respect to such
digital asset during such year. A non-qual-
ifying event is the first date during a calen-
dar year on which the digital asset no lon-
ger satisfies all three conditions described
in §1.6045-1(d)(10)(ii)(A) through (C) of
this chapter to be a qualifying stablecoin.
For purposes of this paragraph (b)(6)(i)
(B)(2), the date on which a non-qualifying
event has occurred with respect to a digital
asset and the date that is no later than 30
days after such non-qualifying event must
be determined using Coordinated Univer-
sal Time (UTC).
(ii) Applicable threshold for sales by
processors of digital asset payments. For
purposes of determining the amount sub-
ject to withholding under section 3406, the
amount subject to reporting under section
6045 is determined without regard to the
minimum gross proceeds which must be
paid to the customer under §1.6045-1(d)
(2)(i)(C) of this chapter before reporting
is required.
(c) Applicability date. This section
applies to reportable payments made on or
after January 1, 2025. For the rules appli-
cable to reportable payments made prior
to January 1, 2025, see §31.3406(b)(3)-2
in effect and contained in 26 CFR part 1
revised April 1, 2024.
Par. 14. Section 31.3406(g)-1 is
amended by revising paragraphs (e) and
(f) to read as follows:
§31.3406(g)-1 Exception for payments
to certain payees and certain other
payments.
* * * * *
(e) Certain reportable payments made
outside the United States by foreign per-
sons, foreign offices of United States banks
and brokers, and others--(1) Reportable
payments other than gross proceeds from
sales of digital assets. For reportable pay-
ments made after June 30, 2014, other than
gross proceeds from sales of digital assets
(as defined in §1.6045-1(a)(19) of this
chapter), a payor or broker is not required
to backup withhold under section 3406
of the Code on a reportable payment that
is paid and received outside the United
States (as defined in §1.6049-4(f)(16) of
this chapter) with respect to an offshore
obligation (as defined in §1.6049-5(c)(1)
of this chapter) or on the gross proceeds
from a sale effected at an office outside
the United States as described in §1.6045-
1(g)(3)(iii) of this chapter (without regard
to whether the sale is considered effected
inside the United States under §1.6045-
1(g)(3)(iii)(B) of this chapter). The excep-
tion to backup withholding described in the
preceding sentence does not apply when a
payor or broker has actual knowledge that
the payee is a United States person. Fur-
ther, no backup withholding is required
on a reportable payment of an amount
already withheld upon by a participating
FFI (as defined in §1.1471-1(b)(91) of this
chapter) or another payor in accordance
with the withholding provisions under
chapter 3 or 4 of the Code and the reg-
ulations under those chapters even if the
payee is a known U.S. person. For exam-
ple, a participating FFI is not required to
backup withhold on a reportable payment
allocable to its chapter 4 withholding rate
pool (as defined in §1.6049-4(f)(5) of this
chapter) of recalcitrant account holders
(as described in §1.6049-4(f)(11) of this
chapter), if withholding was applied to the
payment (either by the participating FFI
or another payor) pursuant to §1.1471-
4(b) or §1.1471-2(a) of this chapter. For
rules applicable to notional principal con-
tracts, see §1.6041-1(d)(5) of this chap-
ter. For rules applicable to reportable
payments made before July 1, 2014, see
§31.3406(g)-1(e) in effect and contained
in 26 CFR part 1 revised April 1, 2013.
(2) [Reserved]
(f) Applicability date. This section
applies to payments made on or after Jan-
uary 1, 2025. (For payments made before
January 1, 2025, see §31.3406(g)-1 in
effect and contained in 26 CFR part 1
revised April 1, 2024.)
Par. 15. Section 31.3406(g)-2 is
amended by adding a sentence to the end

Bulletin No. 2024–31 299 July 29, 2024
of paragraphs (e) and (h) to read as fol-
lows:
§31.3406(g)-2 Exception for reportable
payment for which withholding is
otherwise required.
* * * * *
(e) * * * Notwithstanding the previ-
ous sentence, a real estate reporting per-
son must withhold under section 3406 of
the Code and pursuant to the rules under
§31.3406(b)(3)-2 on a reportable pay-
ment made in a real estate transaction
with respect to a purchaser that exchanges
digital assets for real estate to the extent
that the exchange is treated as a sale of
digital assets subject to reporting under
§1.6045-1 of this chapter.
* * * * *
(h) * * * For sales of digital assets, this
section applies on or after January 1, 2026.
PART 301— PROCEDURE AND
ADMINISTRATION
Par. 16. The authority citation for part
301 continues to read in part as follows:
Authority: 26 U.S.C. 7805.
Par. 17. Section 301.6721-1 is amended
by revising paragraph (h)(3)(iii) and add-
ing a sentence to the end of paragraph (j)
to read as follows:
§301.6721-1 Failure to file correct
information returns.
* * * * *
(h) * * *
(3) * * *
(iii) Section 6045(a) or (d) of the Code
(relating to returns of brokers, generally
reported on Form 1099-B, Proceeds From
Broker and Barter Exchange Transac-
tions, for broker transactions not involv-
ing digital assets; Form 1099-DA, Digital
Asset Proceeds from Broker Transactions
for broker transactions involving digital
assets; Form 1099-S, Proceeds From Real
Estate Transactions, for gross proceeds
from the sale or exchange of real estate;
and Form 1099-MISC, Miscellaneous
Income, for certain substitute payments
and payments to attorneys); and
* * * * *
(j) * * * Paragraph (h)(3)(iii) of this
section applies to returns required to be
filed on or after January 1, 2026.
Par. 18. Section 301.6722-1 is amended
by revising paragraph (e)(2)(viii) and add-
ing a sentence to the end of paragraph (g)
to read as follows:
§301.6722-1 Failure to furnish correct
payee statements.
* * * * *
(e) * * *
(2) * * *
(viii) Section 6045(a) or (d) (relating
to returns of brokers, generally reported
on Form 1099-B, Proceeds From Broker
and Barter Exchange Transactions, for
broker transactions not involving digital
assets; Form 1099-DA, Digital Asset Pro-
ceeds From Broker Transactions, for bro-
ker transactions involving digital assets;
Form 1099-S, Proceeds From Real Estate
Transactions, for gross proceeds from the
sale or exchange of real estate; and Form
1099-MISC, Miscellaneous Income, for
certain substitute payments and payments
to attorneys);
* * * * *
(g) * * * Paragraph (e)(2)(viii) of
this section applies to payee statements
required to be furnished on or after Jan-
uary 1, 2026.
Douglas W. O’ Donnell,
Deputy Commissioner.
Approved: June 17, 2024.
Aviva R. Aron-Dine,
Acting Assistant Secretary of
the Treasury (Tax Policy).
(Filed by the Office of the Federal Register June 28,
2024, 4:15 p.m., and published in the issue of the
Federal Register for July 9, 2024, 89 FR 56480)

July 29, 2024 300 Bulletin No. 2024–31
Part III
NOTE. This revenue procedure will be reproduced as the next revision of IRS Publication 1141, General Rules and Specifications for Substitute Forms W-2 and W-3.
26 CFR 601.602: Tax forms and instructions. (Also Part I, Sections 6041, 6051, 6071, 6081, 6091; 1.6041-1, 1.6041-2, 31.6051-1, 31.6051-2, 31.6071(a)-1, 31.6081(a)-
1, 31.6091-1.)
Rev. Proc. 2024-27
TABLE OF CONTENTS
Part 1 – GENERAL
Section 1.1 – Purpose ................................................................................301
Section 1.2 – What’s New .............................................................................303
Section 1.3 – Reminders ..............................................................................303
Section 1.4 – General Rules for Paper Forms W-2 and W-3 ...................................................303
Section 1.5 – General Rules for Filing Forms W-2 (Copy A) Electronically ......................................305
Part 2 – SPECIFICATIONS FOR SUBSTITUTE FORMS W-2 AND W-3
Section 2.1 – Specifications for Red-Ink Substitute Form W-2 (Copy A) and Form W-3 Filed With the SSA ............306
Section 2.2 – Specifications for Substitute Black-and-White Form W-2 (Copy A) and Form W-3 Filed With the SSA .....309
Section 2.3 – Requirements for Substitute Forms Furnished to Employees (Copies B, C, and 2 of Form W-2) ...........311
Section 2.4 – Electronic Delivery of Forms W-2 and W-2c Recipient Statements ..................................315
Part 3 – ADDITIONAL INSTRUCTIONS
Section 3.1 – Additional Instructions for Form Printers ......................................................316
Section 3.2 – Instructions for Employers .................................................................317
Section 3.3 – OMB Requirements for Both Red-Ink and Black-and-White Substitute Forms W-2 and W-3 .............317
Section 3.4 – Order Forms and Instructions ...............................................................318
Section 3.5 – Effect on Other Documents .................................................................318
Section 3.6 – Exhibits ................................................................................318

Bulletin No. 2024–31 301 July 29, 2024
Part 1
General
Section 1.1 – Purpose
.01 The purpose of this revenue procedure is to state the requirements of the Internal Revenue
Service (IRS) and the Social Security Administration (SSA) regarding the preparation and use of
substitute forms for Form W-2, Wage and Tax Statement, and Form W-3, Transmittal of Wage and
Tax Statements, for wages paid during the 2024 calendar year.
.02 For purposes of this revenue procedure, substitute Form W-2 (Copy A) and substitute Form W-3
are forms that are not printed by the IRS. Copy A or any other copies of a substitute Form W-2 or a
substitute Form W-3 must conform to the specifications in this revenue procedure to be acceptable
to the IRS and the SSA. No IRS office is authorized to allow deviations from this revenue procedure.
Preparers should also refer to the 2024 General Instructions for Forms W-2 and W-3 for details on
how to complete these forms. See Section 3.4, later, for information on obtaining the official IRS
forms and instructions. See Sections 2.3 and 2.4, later, for requirements for the copies of substitute
forms furnished to employees and for electronic delivery of employee copies.
.03 For purposes of this revenue procedure, the official IRS-printed red dropout ink Forms W-2
(Copy A) and Form W-3, and their exact substitutes, are referred to as “red-ink.” The SSA-
approved black-and-white Forms W-2 (Copy A) and Form W-3 are referred to as “substitute
black-and-white Forms W-2 (Copy A)” and “substitute black-and-white Form W-3,” respectively.
Any questions about the red-ink Form W-2 (Copy A) and Form W-3 and the substitute employee
statements should be emailed to substituteforms@irs.gov. Please enter “Substitute Forms” on the
subject line. Or send your questions to:
Internal Revenue Service
Attn: Substitute Forms Program
SE:W:CAR:MP:P:TP:TP
ATSC
4800 Buford Highway
Mail Stop 061-N
Chamblee, GA 30341
Note. Do not send completed forms to the Substitute Forms Program via email or mail as they are
unable to process those forms. Any examples/samples of substitute forms sent to the Substitute
Forms Program should not contain taxpayer information.
Any questions about the black-and-white Form W-2 (Copy A) and Form W-3 should be emailed to
copy.a.forms@ssa.gov or sent to:
Social Security Administration
Direct Operations Center
Attn: Substitute Black-and-White Copy A Forms, Room 341
1150 E. Mountain Drive
Wilkes-Barre, PA 18702-7997
Note. You should receive a response from either the IRS or the SSA within 30 days.

July 29, 2024 302 Bulletin No. 2024–31
.04 Forms W-2 and envelopes containing Forms W-2 that include logos, slogans, and
advertisements (including advertisements for tax preparation software) may be considered as
suspicious or altered Forms W-2 (also known as questionable Forms W-2). An employee may not
recognize the importance (or legitimacy) of the employee copy for tax reporting purposes due to
the use of logos, slogans, and advertisements. Thus, the IRS has determined that logos, slogans,
and advertising will not be allowed on Copy A of Forms W-2, Forms W-3, or any employee copies
reporting wages, or on an envelope or enclosed in an envelope containing any of those documents,
with the following exceptions for the employee copies.
• Forms and envelopes may include the exact name of the employer or agent, primary trade
name, trademark, service mark, or symbol of the employer or agent.
• Forms and envelopes may include an embossment or watermark on the information return
(and copies) that is a representation of the name, a primary trade name, trademark, service
mark, or symbol of the employer or agent.
• Presentation may be in any typeface, font, stylized fashion, or print color normally used by
the employer or agent, and used in a nonintrusive manner.
• These items must not materially interfere with the ability of the recipient to recognize,
understand, and use the tax information on the employee copies.
The IRS e-file logo on the IRS official employee copies may be included, but it is not required, on
any of the substitute form copies.
The information return and employee copies must clearly identify the employer’s name associated
with its employer identification number (EIN).
Logos and slogans may be used on permissible enclosures, such as a check or account statement,
but not on information returns and employee copies.
Forms W-2 and W-3 are subject to annual review and possible change. This revenue procedure
may be revised to state other requirements of the IRS and the SSA regarding the preparation and
use of substitute forms for Form W-2 and Form W-3 for wages paid during the 2024 calendar
year at a future date. If you have comments about the restrictions on including logos, slogans, and
advertising on information returns and employee copies, send or email your comments to Internal
Revenue Service, Attn: Substitute Forms Program, SE:W:CAR:MP:P:TP:TP, ATSC, 4800 Buford
Highway, Mail Stop 061-N, Chamblee, GA 30341, or substituteforms@irs.gov.
.05 The Internal Revenue Service/Technical Service Operation (IRS/TSO) maintains a centralized
customer service call site to answer questions related to information returns (Forms W-2, W-3,
W-2c, W-3c, 1099 series, 1096, etc.). You can reach the TSO at 866-455-7438 (toll free) or 304-
263-8700 (not a toll-free number). Deaf or hard-of-hearing customers may call any of our toll-free
numbers using their choice of relay service. Questions regarding the filing of information returns
can be emailed to fire@irs.gov. When you send emails concerning specific file information,
include the company name and the electronic file name or Transmitter Control Code (TCC).
Do not include taxpayer identification numbers (TINs) or attachments in email correspondence
because electronic mail is not secure.
File paper or electronic Forms W-2 (Copy A) with the SSA. The IRS/TSO does not process Forms
W-2 (Copy A). However, the IRS/TSO does process Form 8508, Application for a Waiver from
Electronic Filing of Information Returns, and Form 8809, Application for Extension of Time To
File Information Returns, for Forms W-2 (Copy A) and requests for an extension of time to furnish
the employee copies of Form W-2. See Publication 1220, Specifications for Electronic Filing of

Bulletin No. 2024–31 303 July 29, 2024
Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G, for information on waivers and extensions
of time. See Regulations section 301.6011-2 for information on when you are required to file
electronically and the exclusions from the electronic filing requirements.
.06 The following form instructions and publications provide more detailed filing procedures for
certain information returns.
• General Instructions for Forms W-2 and W-3 (Including Forms W-2AS, W-2CM, W-2GU,
W-2VI, W-3SS, W-2c, and W-3c).
• Publication 1223, General Rules and Specifications for Substitute Forms W-2c and W-3c.
Section 1.2 – What’s New
.01 Form W-2, new box 12, code II, for Medicaid waiver payments excluded from gross
income under Notice 2014-7. There is a new code II for box 12 used to report Medicaid waiver
payments not included in box 1 of Form W-2. See the 2024 General Instructions for Forms W-2
and W-3 for more information.
.02 Exhibits. All of the exhibits in this publication were updated per the 2024 revisions of those
forms.
.03 Editorial changes. We made editorial changes throughout, including updated references.
Redundancies were eliminated as much as possible.
Section 1.3 – Reminders
.01 Electronic filing of returns. If you file 10 or more information returns, you must file
electronically. See Regulations section 301.6011-2 for more information, including exclusions
from the electronic filing requirements.
Section 1.4 – General Rules for Paper Forms W-2 and W-3
.01 Employers not filing electronically must file paper Forms W-2 (Copy A) along with Form
W-3 with the SSA by using either the official IRS form or a substitute form that exactly meets the
specifications shown in Parts 2 and 3 of this revenue procedure.
Note. Substitute territorial forms (W-2AS, W-2GU, W-2VI, W-3SS) must also conform to the
specifications as outlined in this revenue procedure. These forms require the form designation
(“W-2AS,” “W-2GU,” “W-2VI”) on Form W-2 (Copy A) to be in black ink. If you are an employer
in the Commonwealth of the Northern Mariana Islands, you must contact Department of Finance,
Division of Revenue and Taxation, Commonwealth of the Northern Mariana Islands, P.O. Box
5234 CHRB, Saipan, MP 96950 or www.finance.gov.mp/forms.php to get Form W-2CM and
instructions for completing and filing the form. For information on Forms 499R-2/W-2PR, go to
www.hacienda.pr.gov.

July 29, 2024 304 Bulletin No. 2024–31
Employers may design their own statements to furnish to employees. Employee statements
designed by employers must comply with the requirements shown in Parts 2 and 3.
.02 Red-ink substitute forms that completely conform to the specifications contained in this
revenue procedure may be privately printed without prior approval from the IRS or the SSA. Only
the substitute black-and-white Forms W-2 (Copy A) and Form W-3 need to be submitted to the
SSA for approval prior to their use (see Section 2.2).
.03 SSA-approved black-and-white Forms W-2 (Copy A) and Form W-3 may be generated using a
printer by following all guidelines and specifications (also see Section 2.2). In general, regardless
of the method of entering data, use black ink on Forms W-2 (Copy A) and Form W-3, which
provides better readability for processing by scanning equipment. Colors other than black are
not easily read by the scanner and may result in delays or errors in the processing of Forms W-2
(Copy A) and Form W-3. The printing of the data should be centered within the boxes. The size of
the variable data must be printed in a font no smaller than 10 points.
Note. With the exception of the identifying number, the year, the form number for Form W-3, and
the corner register marks, the preprinted form layout for the red-ink Forms W-2 (Copy A) and
Form W-3 must be in Flint J-6983 red OCR dropout ink or an exact match.
.04 Substitute forms filed with the SSA and substitute copies furnished to employees that do not
conform to these specifications are unacceptable. Penalties may be assessed for not complying
with the form specifications. Forms W-2 (Copy A) and Form W-3 filed with the SSA that do not
conform may be returned.
.05 Substitute red-ink forms should not be submitted to either the IRS or the SSA for specific
approval. If you are uncertain of any specification and want clarification, do the following.
• Submit a letter or email to the appropriate address in Section 1.4.06 (listed next) citing the
specification.
• State your understanding of the specification.
• Enclose an example (if appropriate) of how the form would appear if produced using your
understanding. Do not use actual employee information in the example.
• Be sure to include your name, complete address, and phone number with your correspon-
dence. If you want the IRS to contact you via email, also provide your email address.
.06 Any questions about the specifications, especially those for the red-ink Form W-2 (Copy A)
and Form W-3, should be emailed to substituteforms@irs.gov. Please enter “Substitute Forms” on
the subject line. Or send your questions to:
Internal Revenue Service
Attn: Substitute Forms Program
SE:W:CAR:MP:P:TP:TP
ATSC
4800 Buford Highway
Mail Stop 061-N
Chamblee, GA 30341

Bulletin No. 2024–31 305 July 29, 2024
Note. Do not send completed forms to the Substitute Forms Program via email or mail as they are
unable to process those forms. Any examples/samples of substitute forms sent to the Substitute
Forms Program should not contain taxpayer information.
Any questions about the substitute black-and-white Form W-2 (Copy A) and Form W-3 should be
emailed to copy.a.forms@ssa.gov or sent to:
Social Security Administration
Direct Operations Center
Attn: Substitute Black-and-White Copy A Forms, Room 341
1150 E. Mountain Drive
Wilkes-Barre, PA 18702-7997
Note. You should receive a response within 30 days from either the IRS or the SSA.
.07 Forms W-2 and W-3 are subject to annual review and possible change. Therefore, employers
are cautioned against overstocking supplies of privately printed substitutes.
.08 Separate instructions for Forms W-2 and W-3 are provided in the 2024 General Instructions
for Forms W-2 and W-3. Form W-3 should be used only to transmit paper Forms W-2 (Copy A).
Form W-3 is a single sheet including only essential filing information. Be sure to make a copy of
your completed Form W-3 for your records. You can order current year official IRS Forms W-2,
W-2AS, W-2GU, W-2VI, W-3, and W-3SS, and the 2024 General Instructions for Forms W-2 and
W-3, online at IRS.gov/OrderForms. The IRS provides only cut sheet sets of Forms W-2 and cut
sheets of Form W-3.
.09 Because substitute Forms W-2 (Copy A) and Form W-3 are machine imaged and scanned by
the SSA, the forms must meet the same specifications as the official IRS Forms W-2 and Form
W-3 (as shown in the exhibits).
Section 1.5 – General Rules for Filing Forms W-2 (Copy A) Electronically
.01 Employers must file Forms W-2 (Copy A) with the SSA electronically if they are required
to file 10 or more information returns unless the IRS grants a waiver or the employer claims an
exemption from the electronic filing requirement. See Regulations section 301.6011-2 for more
information. The SSA publication EFW2, Specifications for Filing Forms W-2 Electronically,
contains specifications and procedures for electronic filing of Form W-2 information with the
SSA. Employers are cautioned to obtain the most recent revision of EFW2 (and supplements) in
case there are any subsequent changes in specifications and procedures.
.02 You may obtain a copy of the EFW2 by accessing the SSA website at www.ssa.gov/employer/
EFW2&EFW2C.htm.
.03 Electronic filers do not file a paper Form W-3. See the SSA publication EFW2 for guidance on
transmitting Form W-2 (Copy A) information to the SSA electronically.
.04 Employers are encouraged to electronically file Forms W-2 (Copy A) with the SSA even if not
required. Doing so will enhance the timeliness and accuracy of forms processing. You may visit the

July 29, 2024 306 Bulletin No. 2024–31
SSA’s employer website at www.ssa.gov/employer. This helpful site has links to Business Services
Online (BSO) and tutorials on creating an account and using BSO to file your Forms W-2.
.05 Employers who do not comply with the electronic filing requirements for Form W-2 (Copy
A) and who are not granted a waiver by or claim an exemption from the IRS may be subject to
penalties. Employers who file Form W-2 information with the SSA electronically must not send
the same data to the SSA on paper Forms W-2 (Copy A). Any duplicate reporting may subject
filers to unnecessary contacts by the SSA or the IRS.
Part 2
Specifications for Substitute Forms W-2 and W-3
Section 2.1 – Specifications for Red-Ink Substitute Form W-2 (Copy A) and Form W-3 Filed With the SSA
.01 The official IRS-printed red dropout ink Form W-2 (Copy A) and Form W-3 and their exact
substitutes are referred to as “red-ink” in this revenue procedure. Employers may file substitute Forms
W-2 (Copy A) and Form W-3 with the SSA. The substitute forms must be exact replicas of the official
IRS forms with respect to layout and content because they will be read by scanner equipment.
Note. Even the slightest deviation can result in incorrect scanning and may affect money amounts
reported for employees.
.02 Paper used for cut sheets and continuous-pinfed forms for substitute Forms W-2 (Copy A) and
Form W-3 that are to be filed with the SSA must be white 100% bleached chemical wood, 18–20
pound paper only, optical character recognition (OCR) bond produced in accordance with the
following specifications.
•Acidity: Ph value, average, not less than . . . . . . . . . . . . . . . . . . . . .4.5
•Basis weight: 17 x 22 inch 500 cut sheets, pound . . . . . . . . . . . . . . . . .18–20
•Metric equivalent—gm./sq. meter
(a tolerance of +5 pct. is allowed) . . . . . . . . . . . . . . . . . . . . . . . .68–75
•Stiffness: Average, each direction, not less than—milligrams
Cross direction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
Machine direction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .80
•Tearing strength: Average, each direction, not less than—grams . . . . . . . .40
•Opacity: Average, not less than—percent . . . . . . . . . . . . . . . . . . . . .82
•Reflectivity: Average, not less than—percent . . . . . . . . . . . . . . . . . . .68
•Thickness: Average—inch . . . . . . . . . . . . . . . . . . . . . . . . . . . .0.0038
Metric equivalent—mm . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0.097
(a tolerance of +0.0005 inch (0.0127 mm) is allowed). Paper cannot vary
more than 0.0004 inch (0.0102 mm) from one edge to the other.
•Porosity: Average, not less than—seconds . . . . . . . . . . . . . . . . . . . . 10
•Finish (smoothness): Average, each side—seconds . . . . . . . . . . . . . . . .20–55
(for information only) the Sheffield equivalent—units . . . . . . . . . . . . .170-d200
•Dirt: Average, each side, not to exceed—parts per million . . . . . . . . . . .8

Bulletin No. 2024–31 307 July 29, 2024
Note. Reclaimed fiber in any percentage is permitted, provided the requirements of this standard
are met.
.03 All printing of red-ink substitute Forms W-2 (Copy A) and Form W-3 must be in Flint red OCR
dropout ink except as specified below. The following must be printed in nonreflective black ink.
•
Identifying number “22222” for Forms W-2 (Copy A) and “33333” for
Form W-3 at the top
of the forms.
•
Tax year at the bottom of the forms.
•
The four (4) corner register marks on the forms.
•
The form identification number (“W-3”) at the bottom of Form W-3.
•
All the instructions below Form W-3 beginning with “Send this entire
page. . . . ” line to the
bottom of Form W-3.
.04 The vertical and horizontal spacing for all federal payment and data boxes on Forms W-2 and
W-3 must meet specifications. On Form W-3 and Form W-2 (Copy A), all the perimeter rules must
be 1 point (0.014 inch), while all other rules must be one-half point (0.007 inch). Vertical rules
must be parallel to the left edge of the form; horizontal rules parallel to the top edge.
.05 The official red-ink Form W-3 and Form W-2 (Copy A) are 7.50 inches wide. Employers
filing Forms W-2 (Copy A) with the SSA on paper must also file a Form W-3. Form W-3 must be
the same width (7.50 inches) as the Form W-2. One Form W-3 is printed on a standard size 8.5
x 11-inch page. Two official Forms W-2 (Copy A) are contained on a single 8.5 x 11-inch page
(exclusive of any snap-stubs).
.06 The top, left, and right margins for the Form W-2 (Copy A) and Form W-3 are 0.50 inches
(½ inch). All margins must be free of printing except for the words “DO NOT STAPLE” on red-
ink Form W-3. The space between the two Forms W-2 (Copy A) is 1.33 inches.
.07 The identifying numbers are “22222” for Form W-2 (Copy A (and 1)) and “33333” for Form
W-3. No printing should appear anywhere near the identifying numbers.
Note. The identifying number must be printed in nonreflective black ink in OCR-A font of 10
characters per inch.
.08 The depth of the individual scannable image on a page must be the same as that on the official
IRS forms. The depth from the top line to the bottom line of an individual Form W-2 (Copy A)
must be 4.17 inches and the depth from the top line to the bottom line of Form W-3 must be 4.67
inches.
.09 Continuous-pinfed Forms W-2 (Copy A) must be separated into 11-inch-deep pages. The
pinfed strips must be removed when Forms W-2 (Copy A) are filed with the SSA. The two Forms
W-2 (Copy A) on the 11-inch page must not be separated (only the pages are to be separated
(burst)). The words “Do Not Cut, Fold, or Staple Forms on This Page” must be printed twice
between the two Forms W-2 (Copy A) in Flint red OCR dropout ink. All other copies (Copies 1,
B, C, 2, and D) must be able to be distinguished and separated into individual forms.

July 29, 2024 308 Bulletin No. 2024–31
.10 Box 12 of Form W-2 (Copy A) contains four entry boxes—12a, 12b, 12c, and 12d. Do not
make more than one entry per box. Enter your first code in box 12a (for example, enter code D
in box 12a, not 12d, if it is your first entry). If more than four items need to be reported in box
12, use a second Form W-2 to report the additional items (see Multiple forms in the 2024 General
Instructions for Forms W-2 and W-3). Do not report the same federal tax data to the SSA on
more than one Form W-2 (Copy A). However, repeat the identifying information (employee’s
name, address, and social security number (SSN); employer’s name, address, and EIN) on each
additional form.
.11 The checkboxes in box 13 of Form W-2 (Copy A) and in box b of Form W-3 must be 0.14
inches each. The space before the first checkbox is 0.24 inches; the spaces between the first
and second checkboxes and between the second and third checkboxes must be 0.36 inches;
the space between the third checkbox to the right border of box 13 should be 0.32 inches (see
Exhibit A).
Note. More than 50% of an applicable checkbox must be covered by an “X.”
.12 All substitute Forms W-2 (Copy A) and Form W-3 in the red-ink format must have the tax year,
form number, and form title printed on the bottom face of each form using type identical to that
of the official IRS form. The red-ink substitute Form W-2 (Copy A) and Form W-3 must have the
form producer’s EIN entered directly to the left of “Department of the Treasury,” in red.
.13 The words “For Privacy Act and Paperwork Reduction Act Notice, see the separate
instructions.” must be printed in Flint red OCR dropout ink in the same location as on the official
Form W-2 (Copy A). The words “For Privacy Act and Paperwork Reduction Act Notice, see the
separate instructions.” must be printed at the bottom of the page of Form W-3 in black ink.
.14 The Office of Management and Budget (OMB) Number must be printed on substitute Forms
W-3 and W-2 (on each ply) in the same location as on the official IRS forms.
.15 All substitute Forms W-3 must include the instructions that are printed on the same sheet below
the official IRS form.
.16 The back of substitute Form W-2 (Copy A) and Form W-3 must be free of all printing.
.17 All copies must be clearly legible. Fading must be minimized to assure legibility.
.18 Chemical transfer paper is permitted for Form W-2 (Copy A) only if the following standards
are met.
• Only chemically backed paper is acceptable for Form W-2 (Copy A). Front and back chem-
ically treated paper cannot be processed properly by scanning equipment.
• Chemically transferred images must be black.
• Carbon-coated forms are not permitted.
.19 The Government Printing Office (GPO) symbol and the Catalog Number (Cat. No.) must be
deleted from substitute Form W-2 (Copy A) and Form W-3.

Bulletin No. 2024–31 309 July 29, 2024
Section 2.2 – Specifications for Substitute Black-and-White Form W-2 (Copy A) and Form W-3 Filed With the SSA
.01 Specifications for the SSA-approved substitute black-and-white Forms W-2 (Copy A) and
Form W-3 are similar to the red-ink forms (Section 2.1) except for the items that follow (see
Exhibits D and E). Exhibits are samples only and may not show the required typeface and/or font.
Exhibits must not be downloaded to meet tax obligations.
1. Forms must be printed on 8.5 x 11-inch single-sheet paper only. There must be two Forms
W-2 (Copy A) printed on a page. There must be no horizontal perforations between the two
Forms W-2 (Copy A) on each page.
2. All forms and data must be printed in nonreflective black ink only.
3. The data and forms must be programmed to print simultaneously. Forms cannot be produced
separately from wage data entries.
4. The forms must not contain corner register marks.
5. The forms must not contain any shaded areas, including those boxes that are entirely shaded
on the red-ink forms.
6. Identifying numbers on both Form W-2 (Copy A) (“22222”) and Form W-3 (“33333”) must
be preprinted in 14-point Arial bold font or a close approximation.
7. The form numbers (“W-2” and “W-3”) must be in 18-point Arial font or a close approxima-
tion. The tax year (for example, “2024”) on Forms W-2 (Copy A) and Form W-3 must be in
20-point Arial bold font or a close approximation.
8. No part of the box titles or the data printed on the forms may touch any of the vertical or
horizontal lines, nor should any of the data intermingle with the box titles. The data should
be centered in the boxes.
9. Do not print any information in the margins of the substitute black-and-white Forms W-2
(Copy A) and Form W-3 (for example, do not print “DO NOT STAPLE” in the top margin of
Form W-3).
10. The word “Code” must not appear in box 12 on Form W-2 (Copy A).
11. A 4-digit vendor code preceded by four zeros and a slash (for example, 0000/9876) must
appear in 12-point Arial font, or a close approximation, under the tax year in place of the Cat.
No. on Form W-2 (Copy A) and in the bottom right corner of the “For Official Use Only” box
at the bottom of Form W-3. Do not display the form producer’s EIN to the left of “Depart-
ment of the Treasury.” The vendor code will be used to identify the form producer.
12. Do not print Catalog Numbers (Cat. No.) on either Form W-2 (Copy A) or Form W-3.
13. Do not print the checkboxes in box 13 of Form W-2 (Copy A). The “X” should be pro-
grammed to be printed and centered directly below the applicable box title.
14. Do not print dollar signs. If there are no money amounts being reported, the entire field
should be left blank.
15. The space between the two Forms W-2 (Copy A) is 1.33 inches.
.02 You must submit samples of your substitute black-and-white Forms W-2 (Copy A) and Form
W-3 to the SSA. Only black-and-white substitute Forms W-2 (Copy A) and Form W-3 for tax year

July 29, 2024 310 Bulletin No. 2024–31
2024 will be accepted for approval by the SSA. Questions regarding other red-ink forms (that is,
red-ink Forms W-2c, W-3c, 1099 series, 1096, etc.) must be directed to the IRS only.
.03 You will be required to send one set of blank and one set of dummy-data substitute black-
and-white Forms W-2 (Copy A) and Forms W-3 for approval. Data entries on the sample forms
must fill the length for each box, preferably using numeric data or alpha data, depending on
the requirements. The “VOID” checkbox must be electronically checked on the dummy-data
substitute black-and-white Form W-2 (Copy A). All “Xs” must show in box 13 centered under the
applicable checkbox titles on the dummy-data substitute black-and-white Form W-2 (Copy A).
All checkboxes on the dummy-data substitute black-and-white Form W-3 must be electronically
checked in box b (Kind of Payer, Kind of Employer, and Third-party sick pay). Include in your
submission the name, telephone number, fax number, and email address of a contact person who
can answer questions regarding your sample forms.
.04 To receive approval, you may first contact the SSA via email at copy.a.forms@ssa.gov to obtain
a template and further instructions. You can either submit your 2024 sample substitute black-and-
white Forms W-2 (Copy A) and Forms W-3 in a PDF version electronically for approval to the
copy.a.forms@ssa.gov mailbox or send your paper 2024 sample substitute black-and-white Forms
W-2 (Copy A) and Forms W-3 to:
Social Security Administration
Direct Operations Center
Attn: Substitute Black-and-White Copy A Forms, Room 341
1150 E. Mountain Drive
Wilkes-Barre, PA 18702-7997
Send your sample forms via private mail carrier or certified mail in order to verify their receipt.
You can expect approval (or disapproval) by the SSA within 30 days of receipt of your sample
forms.
.05 Vendor codes from the National Association of Computerized Tax Processors (NACTP) are
required by those companies producing the W-2 family of forms as part of a product for resale
to be used by multiple employers and payroll professionals. Employers developing Form W-2
or W-3 to be used only for their individual company require a vendor code issued by the SSA.
.06 The 4-digit vendor code preceded by four zeros and a slash (0000/9876) must be preprinted on
the sample substitute black-and-white Forms W-2 (Copy A) and Forms W-3. Forms not containing
a vendor code will be rejected and will not be submitted for testing or approval. If you have a valid
vendor code provided to you through the NACTP, you should use that code. If you do not have
a valid vendor code, contact the SSA via email at copy.a.forms@ssa.gov to obtain an SSA-issued
code. (Additional information on vendor codes may be obtained from the SSA or the NACTP via
email at president@nactp.org.)
.07 If you use forms produced by a vendor and have questions concerning approval, do not
send the forms to the SSA for approval. Instead, you may contact the software vendor to obtain a
copy of the SSA’s dated approval notice supplied to that vendor.
.08 In response to feedback from the user community, the SSA (and the IRS) have added a 2-D
barcoded version for the substitute Form W-2 and Form W-3 to the list of acceptable submission
formats. This version is an optional alternative to the nonbarcoded substitute Forms W-2 and W-3.

Bulletin No. 2024–31 311 July 29, 2024
Both versions are fully supported by the SSA. At this time, neither the IRS nor the SSA mandates
the use of 2-D barcoded substitute forms.
Note. The data contained in the barcode must not differ from the data displayed on the form. If they
differ, the data in the barcode will be ignored and the data displayed on the form will be considered
the submission. This also occurs when the barcode is not read correctly. The information on the
form needs to be manually keyed into the database.
To get the barcode information:
•
See the SSA’s BSO website at www.ssa.gov/bso,
•
Request the PDF version of the specifications by emailing
copy.a.forms@ssa.gov, and
•
Download the Substitute Forms W3/W2 2-D Barcoding Standards from
www.ssa.gov/
employer/subBarCodeStd.pdf.
If you are using a form produced by another vendor that contains a 2-D barcode, you must submit
the form for approval using your own NACTP code. Prior to sending your first submission for
approval, contact the SSA via email at copy.a.forms@ssa.gov to register your NACTP code and
explain what forms you want to submit.
Section 2.3 – Requirements for Substitute Forms Furnished to Employees (Copies B, C, and 2 of Form W-2)
Note. Rules in Section 2.3 apply only to employee copies of Form W-2 (Copies B, C, and 2).
Printers are cautioned that the paper filers who send Forms W-2 (Copy A) to the SSA must follow
the requirements in Sections 2.1 and/or 2.2 above.
.01 All employers (including those who file electronically) must furnish employees with at least
two copies of Form W-2 (three or more for employees required to file a state, city, or local income
tax return). The following rules are guidelines for preparing employee copies.
The dimensions of these copies (Copies B, C, and 2), but not Copy A, may differ from the
dimensions of the official IRS form to allow space for reporting additional information, including
additional entries such as withholding for health insurance, union dues, bonds, or charity in box
14. The limitation of a maximum of four items in box 12 of Form W-2 applies only to Copy A,
which is filed with the SSA.
Note. Employee copies (Copies B, C, and 2 of Form W-2) may be furnished electronically if
employees give their consent (as described in Regulations section 31.6051-1(j)). See also
Publication 15-A, Employer’s Supplemental Tax Guide.
.02 The minimum dimensions for employee copies only (not Copy A) of Form W-2 should be 2.67
inches deep by 4.25 inches wide. The maximum dimensions should be no more than 6.50 inches
deep by no more than 8.50 inches wide.
Note. The maximum and minimum size specifications in this document are for tax year 2024 only
and may change in future years.

July 29, 2024 312 Bulletin No. 2024–31
.03 Either horizontal or vertical format is permitted (see Exhibit F).
.04 The paper for all copies must be white and printed in black ink. The substitute Copy B,
which employees are instructed to attach to their federal income tax returns, should be at least
9-pound paper (basis 17 x 22-500). Other copies furnished to employees should also be at
least 9-pound paper (basis 17 x 22-500) unless a state, city, or local government provides other
specifications.
.05 Employee copies of Form W-2 (Copies B, C, and 2), including those that are printed on
a single sheet of paper, must be easily separated. The best method of separation is to provide
perforations between the individual copies. Whatever method of separation is used, each copy
should be easily distinguished.
Note. Perforation does not apply to printouts of copies of Forms W-2 that are furnished
electronically to employees (as described in Regulations section 31.6051-1(j)). However, these
employees should be cautioned to carefully separate the copies of Form W-2. See Publication
15-A for information on electronically furnishing Forms W-2 to employees.
.06 Interleaved carbon and chemical transfer paper employee copies must be clearly legible.
Fading must be minimized to assure legibility.
.07 The electronic tax logo on the IRS official employee copies is not required on any of the
substitute form copies. To avoid confusion and questions by employees, employers are encouraged
to delete the identifying number (“22222”) from the employee copies of Form W-2.
.08 All substitute employee copies must contain boxes, box numbers, and box titles that match
the official IRS Form W-2. Boxes that do not apply can be deleted. However, certain core
boxes must be included. The placement, numbering, and size of this information is specified as
follows.
• The core boxes must be printed in the exact order shown on the official IRS form. The items
and box numbers that constitute the core data are:
Box 1 — Wages, tips, other compensation
Box 2 — Federal income tax withheld
Box 3 — Social security wages
Box 4 — Social security tax withheld
Box 5 — Medicare wages and tips
Box 6 — Medicare tax withheld
• The core data boxes (1 through 6) must be placed in the upper right of the form. Substitute
vertical-format copies may have the core data across the top of the form. Boxes or other
information will definitely not be permitted to the right of the core data.
• The form title, number, or copy designation (B, C, or 2) may be at the top of the form. Also,
a reversed or blocked-out area to accommodate a postal permit number or other postal con-
siderations is allowed in the upper right.
• Boxes 1 through 6 must each be a minimum of 1 and 1/8 inches wide x 1/4 inch deep.

Bulletin No. 2024–31 313 July 29, 2024
• Other required boxes are:
Box a — Employee’s social security number
Box b — Employer identification number (EIN)
Box c — Employer’s name, address, and ZIP code
Box e — Employee’s name
Box f — Employee’s address and ZIP code
Note. Employers may truncate the employee’s SSN on employee copies of Forms W-2. See the
2024 General Instructions for Forms W-2 and W-3 for more information.
Identifying items must be present on the form and be in boxes similar to those on the official
IRS form. However, they may be placed in any location other than the top or upper right. You
do not need to use the lettering system (a–c, e–f) used on the official IRS form. The employer
identification number (EIN) may be included with the employer’s name and address and not in a
separate box.
Note. Box d (“Control number”) is not required.
.09 All copies of Form W-2 furnished to employees must clearly show the form number, the form
title, and the tax year prominently displayed together in one area of the form. The title of Form
W-2 is “Wage and Tax Statement.” It is recommended (but not required) that this be located on the
bottom left of substitute Forms W-2. The reference to the “Department of the Treasury — Internal
Revenue Service” must be on all copies of substitute Forms W-2 furnished to employees. It is
recommended (but not required) that this be located on the bottom right of Form W-2.
.10 If the substitute employee copies are labeled, the forms must contain the applicable description.
• “Copy B, To Be Filed With Employee’s FEDERAL Tax Return.”
• “Copy C, For EMPLOYEE’S RECORDS.”
• “Copy 2, To Be Filed With Employee’s State, City, or Local Income Tax Return.”
It is recommended (but not required) that these be located on the lower left of Form W-2. If
the substitute employee copies are not labeled as to the disposition of the copies, then written
notification using similar wording must be provided to each employee.
.11 The tax year (for example, “2024”) must be clearly printed on all copies of substitute Form
W-2. It is recommended (but not required) that this information be in the middle at the bottom of
the Form W-2. The use of 24-point OCR-A font is recommended (but not required).
.12 Boxes 1 and 2 (if applicable) on Copy B must be outlined in bold 2-point rule or highlighted in
some manner to distinguish them. If “Allocated tips” are being reported, it is recommended (but
not required) that box 8 also be outlined. If reported, “Social security tips” (box 7) must be shown
separately from “Social security wages” (box 3).
Note. Box 8 may be omitted if not applicable.

July 29, 2024 314 Bulletin No. 2024–31
.13 If employers are required to withhold and report state or local income tax, the applicable
boxes are also considered core information and must be placed at the bottom of the form. State
information is included in:
•
Box 15 (State, Employer’s state ID number),
•
Box 16 (State wages, tips, etc.), and
•
Box 17 (State income tax).
Local information is included in:
•
Box 18 (Local wages, tips, etc.),
•
Box 19 (Local income tax), and
•
Box 20 (Locality name).
.14 Boxes 7 through 14 may be omitted from substitute employee copies unless the employer must
report any of that information to the employee. For example, if an employee did not have “Social
security tips” (box 7), the form could be printed without that box. But, if an employer provided
dependent care benefits, the amount must be reported separately, shown in box 10, and labeled
“Dependent care benefits.”
.15 Employers may enter more than four codes in box 12 of substitute Copies B, C, and 2 (and 1
and D) of Form W-2, but each entry must use codes A–II (see the 2024 General Instructions for
Forms W-2 and W-3).
.16 If an employer has employees in any of the three categories in box 13, all checkbox headings
must be shown and the proper checkmark made, when applicable.
.17 Employers may use box 14 for any other information that they wish to give to their employees.
Each item must be labeled. (See the instructions for box 14 in the 2024 General Instructions for
Forms W-2 and W-3.)
.18 The front of Copy C of a substitute Form W-2 must contain the note “This information
is being furnished to the Internal Revenue Service. If you are required to file a tax return, a
negligence penalty or other sanction may be imposed on you if this income is taxable and you
fail to report it.”
.19 Instructions similar to those contained on the back of Copies B, C, and 2 of the official IRS
Form W-2 must be provided to each employee. An employer may modify or delete instructions
that do not apply to its employees. (For example, remove Railroad Retirement Tier 1 and Tier
2 compensation information for nonrailroad employees or information about dependent care
benefits that the employer does not provide.)
.20 Employers must notify their employees who have no income tax withheld that they may be
able to claim a tax refund because of the earned income tax credit (EITC). They will meet this
notification requirement if they furnish a substitute Form W-2 with the EITC notice on the back
of Copy B; IRS Notice 797, Possible Federal Tax Refund Due to the Earned Income Credit (EIC);
or on their own statement containing the same wording. They may also change the font on Copies
B, C, and 2 so that the EITC notification and Form W-2 instructions fit differently. For more

Bulletin No. 2024–31 315 July 29, 2024
information about the EITC notification requirements, see section 10 in Publication 15 (Circular
E), Employer’s Tax Guide.
Note. An employer does not have to notify any employee who claimed exemption from withholding
on Form W-4, Employee’s Withholding Certificate, for the calendar year.
Section 2.4 – Electronic Delivery of Forms W-2 and W-2c Recipient Statements
.01 If you are required to furnish a Form W-2 or W-2c written statement (Copy B or an acceptable
substitute) to a recipient, you may furnish the statement electronically instead of on paper.
If you meet the requirements listed below, you are treated as furnishing the statement timely.
.02 The recipient must consent in the affirmative and not have withdrawn the consent before the
statement is furnished. The consent by the recipient must be made electronically in a way that
shows that they can access the statement in the electronic format in which it will be furnished.
You must notify the recipient of any hardware or software changes prior to furnishing the
statement. A new consent to receive the statement electronically is required after any new hardware
or software is put into service.
To furnish Forms W-2 electronically, you must meet the following disclosure requirements,
as described in Regulations section 31.6051-1(j) and Publication 15-A and provide a clear and
conspicuous statement of each requirement to your employees before or at the time consent is
provided.
•
The employee must be informed that they will receive a paper Form
W-2 if consent isn’t
given to receive it electronically.
•
The employee must be informed of the scope and duration of the
consent.
•
The employee must be informed of any procedure for obtaining a paper
copy of their Form
W-2 and whether or not the request for a paper statement is treated as a withdrawal of the
employee’s consent to receiving their Form W-2 electronically.
•
The employee must be notified of the right to withdraw a consent, in
writing (electronically
or on paper), and the employer must confirm the withdrawal in writing (electronically or on
paper), as well as the date the withdrawal takes effect.
•
The employee must also be notified that the withdrawn consent doesn’t
apply to the previ-
ously issued Forms W-2.
•
The employee must be informed about any conditions under which
electronic Forms W-2
will no longer be furnished (for example, termination of employment).
•
The employee must be informed of any procedures for updating their
contact information
that enables the employer to provide electronic Forms W-2.
•
The employer must notify the employee of any changes to the
employer’s contact informa-
tion.
•
The employee must be provided with a description of the hardware and
software used to
access the Form W-2 and the date when the Form W-2 will no longer be available on the
website.
•
The employee must be informed that they may be required to print the
Form W-2 and attach
it to a federal, state, or local income tax return.

July 29, 2024 316 Bulletin No. 2024–31
.03 Additionally, you must do the following.
•
Ensure the electronic format complies with the guidelines in this
document and contains all
the required information described in the 2024 General Instructions for Forms W-2 and W-3.
•
If posting the statement on a website, post it for the recipient to access
on or before the Jan-
uary 31 due date through October 15 of that year.
•
Inform the recipient in person, electronically, or by mail of the posting
and how to access and
print the statement.
Part 3
Additional Instructions
Section 3.1 – Additional Instructions for Form Printers
.01 If paper copies are used for filing with the SSA, the substitute copies of Forms W-2 (either
red-ink or substitute black-and-white forms) must be assembled in the same order as the official
IRS Forms W-2. Copy A must be first, followed sequentially by perforated sets (Copies 1, B, C,
2, and D).
.02 The substitute form to be filed by the employer with the SSA must carry the designation “Copy
A.”
Note. Electronic filers do not submit either red-ink or substitute black-and-white paper Form W-2
(Copy A) or Form W-3 to the SSA.
.03 Employers must retain a copy of Forms W-2 and W-3 (or be able to reconstruct the information)
for at least 4 years. Employers must also be able to generate Forms W-2 (Copy A) that meet the
requirements of this revenue procedure in case of loss.
.04 Except for copies in the official assembly, described in Section 3.1.01 above, no additional
copies that may be prepared by employers should be placed ahead of Form W-2 (Copy C) “For
EMPLOYEE’S RECORDS.”
.05 You must provide instructions similar to those contained on the back of Copies B, C, and 2
of the official IRS Form W-2 to each employee. You may print them on the back of the substitute
Copies B, C, and 2 or provide them to employees on a separate statement. You do not need to use
the back of Copy 2. If you do not use Copy 2, you may include all the information that appears
on the back of the official Copies B, C, and 2 on the back of your substitute Copies B and C only.
As an example, you may use the “Note” on the back of the official Copy C as the dividing point
between the text for your substitute Copies B and C. Do not print these instructions on the back of
Copy 1. Any Forms W-2 (Copy A) and Form W-3 that are filed with the SSA must have no printing
on the reverse side.

Bulletin No. 2024–31 317 July 29, 2024
Section 3.2 – Instructions for Employers
.01 Only originals of Form W-2 (Copy A) and Form W-3 may be filed with the SSA. Carbon copies
and photocopies are unacceptable.
.02 Employers should type or machine-print data entries on plain paper forms whenever possible.
Ensure good quality by using a high-quality typeface, inserting data in the middle of blocks that
are well separated from other printing and guidelines, and taking any other measures that will
guarantee clear, sharp images. Black ink must be used with no script type, inverted font, italics, or
dual-case alpha characters.
Note. 12-point Courier font is preferred by the SSA.
.03 Form W-2 (Copy A) requires decimal entries for wage data. Do not print dollar signs with
money amounts on Forms W-2 (Copy A) and Form W-3.
.04 The employer must provide a machine-scannable Form W-2 (Copy A). The employer must
also provide employee copies (Copies B, C, and 2) that are legible and able to be photocopied (by
the employee). Do not print any data in the top margin of the payee copies of the forms.
Note. Do not print Forms W-2 (Copy A) on double-sided paper.
.05 Any printing in box d (Control number) on Form W-2 or box a (Control number) on Form W-3
may not touch any vertical or horizontal lines and should be centered in the box.
.06 The filer’s employer identification number (EIN) must be entered in box b of Form W-2 and
box e of Form W-3. The EIN entered on Form(s) W-2 (box b) and Form W-3 (box e) must be the
same as on Forms 941, 943, 944, and CT-1; Schedule H (Form 1040); or any other corresponding
forms filed with the IRS. Be sure to use EIN format (00-0000000) rather than SSN format (000-
00-0000).
.07 The employer’s name, address, and EIN may be preprinted.
.08 Employers must not truncate the employee’s SSN on Copy A of Forms W-2. See the 2024
General Instructions for Forms W-2 and W-3 for more information.
Section 3.3 – OMB Requirements for Both Red-Ink and Black-and-White Substitute Forms W-2 and W-3
.01 The Paperwork Reduction Act (the Act) of 1995 (Public Law 104-13) requires that:
•
The Office of Management and Budget (OMB) approves all IRS tax
forms that are subject to
the Act;
•
Each IRS form contains (in or near the upper right corner) the OMB
approval number, if
assigned — the official OMB numbers may be found on the official IRS printed forms and
are also shown on the forms in the Exhibits in Section 3.6; and

July 29, 2024 318 Bulletin No. 2024–31
•
Each IRS form (or its instructions) states:
1. Why the IRS needs the information,
2. How it will be used, and
3. Whether or not the information is required to be furnished to the IRS.
.02 This information must be provided to any users of official or substitute IRS forms or instructions.
.03 The OMB requirements for substitute IRS Form W-2 and Form W-3 are the following.
•
Any substitute form or substitute statement to a recipient must show the
OMB number as it
appears on the official IRS form.
•
The OMB number for both Form W-2 (Copy A) and Form W-3 is
1545-0008 and must
appear exactly as shown on the official IRS form.
•
For any copy of Form W-2 other than Copy A, the OMB number must
use one of the follow-
ing formats.
1. OMB No. 1545-0008 (preferred).
2. OMB # 1545-0008 (acceptable).
.04 Any substitute Form W-2 (Copy A only) and Form W-3 must state “For Privacy Act and
Paperwork Reduction Act Notice, see the separate instructions.” If no instructions are provided to
users of your forms, you must furnish them with the exact text of the Privacy Act and Paperwork
Reduction Act Notice in the 2024 General Instructions for Forms W-2 and W-3.
Section 3.4 – Order Forms and Instructions
.01 You can order IRS Forms W-2, Forms W-3, the General Instructions for Forms W-2 and W-3,
and other tax material online at IRS.gov/OrderForms.
.02 Copies of Form W-2 (Copy A) and Form W-3 downloaded from IRS.gov cannot be used for
filing with the SSA. These copies of Forms W-2 and W-3 are for information purposes only.
Section 3.5 – Effect on Other Documents
.01 Revenue Procedure 2023-25, I.R.B. 2023-31, dated July 31, 2023 (reprinted as Publication
1141, Revised 07-2023), is superseded.
Section 3.6 – Exhibits
Exhibits A through F provide the general measurements for Forms W-2 and W-3, as discussed in
this revenue procedure. Exhibits are samples only and may not show the required typeface and/or
font. Exhibits must not be downloaded to meet tax obligations. Certain exhibits show a 0000/ in

Bulletin No. 2024–31 319 July 29, 2024
the location designated for your vendor code. See Section 2.2.01, item 11, and Section 2.2.05 for
more information.
Exhibit A — Form W-2 (Copy A) (Red-Ink) 2024
Exhibit B — Form W-2 (Copy B) 2024
Exhibit C — Form W-3 (Red-Ink) 2024
Exhibit D — Form W-2 (Copy A) (Substitute Black-and-White) 2024
Exhibit E — Form W-3 (Substitute Black-and-White) 2024
Exhibit F — Form W-2 Alternative Employee Copies (Illustrating Horizontal and Vertical
Formats) 2024

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July 29, 2024 326 Bulletin No. 2024–31
26 CFR 1.1012: GUIDANCE FOR TAXPAYERS TO
ALLOCATE BASIS IN DIGITAL ASSETS TO WAL-
LETS OR ACCOUNTS AS OF JANUARY 1, 2025
(Also: Part I, §§ 1012, 6045, 1.1012-1, 1.6045-1)
Rev. Proc. 2024-28
SECTION 1. PURPOSE
This revenue procedure provides a safe
harbor under § 1012(c)(1) of the Internal
Revenue Code (Code)
1
on which taxpay-
ers may rely to allocate unused basis of
digital assets to digital assets held within
each wallet or account of the taxpayer as
of January 1, 2025.
SECTION 2. BACKGROUND
On October 9, 2019, the Internal Reve-
nue Service (IRS) posted Virtual Currency
FAQs (“FAQs”) on https://www.irs.gov
2

explaining how existing tax principles
apply to virtual currency, including cryp-
tocurrency, held by taxpayers as capital
assets. FAQs 39-40 explain that a taxpayer
may choose the units of virtual currency
deemed to be sold, exchanged, or other-
wise disposed of if the taxpayer can spe-
cifically identify which unit or units are
involved in the transaction and is able to
substantiate the basis of those units either
by documenting the specific unit’s unique
identifier or by records of the units held
within a single account, wallet, or address
showing:
(1) the date and time each unit was
acquired;
(2) the taxpayer’s basis and the fair
market value of each unit at the time it
was acquired;
(3) the date and time each unit was
sold, exchanged, or otherwise disposed
of; and
(4) the fair market value of each unit
when it was sold, exchanged, or disposed
of, and the amount of money or the value
of property received for each unit.
FAQ 41 further explains that if a tax-
payer does not identify specific units
of virtual currency as the units sold,
exchanged, or otherwise disposed of, then
the units are deemed to have been sold
in chronological order beginning with
the earliest unit the taxpayer purchased
or acquired; that is, on a first in, first out
(FIFO) basis.
Section 1012(c)(1) requires that in the
case of the sale, exchange, or other dispo-
sition of a specified security on or after
the applicable date for that security, the
conventions prescribed by the regulations
must be applied on an account-by-account
basis. Section 1012(c)(3) defines, for pur-
poses of this section, the terms “specified
security” and “applicable date” by incor-
porating the definitions for these terms in
section 6045(g)(3). Section 80603 of the
Infrastructure Investment and Jobs Act,
Pub. L. No. 117-58, 135 Stat. 429, 1339
(2021) expanded the definition of a speci-
fied security to include digital assets with
an applicable date of January 1, 2023.
Section 6045(g)(3)(D) generally
defines a digital asset, for purposes of
information reporting by brokers, as any
digital representation of value which is
recorded on a cryptographically secured
distributed ledger or any similar technol-
ogy as specified by the Secretary.
On August 29, 2023, the Department of
the Treasury and the IRS published in the
Federal Register (88 FR 59576) proposed
regulations (REG-122793-19) (2023 pro-
posed regulations) under sections 6045,
1001, and 1012, among others. The 2023
proposed regulations, in part, clarified the
statutory requirements for determining
and identifying the cost basis of digital
assets. Consistent with section 1012(c)
(2), the proposed regulations would
have required basis determination on an
account-by-account basis.
For units left in the custody of a broker,
proposed § 1.1012-1(j)(3)(ii) provided
that the taxpayer can make an adequate
identification of the units sold, disposed
of, or transferred, if the taxpayer specifies
to the broker, no later than the date and
time of such disposition, the particular
units of the digital asset to be disposed
of by reference to any identifier (such as
purchase date and time or purchase price
paid for the units) that the broker desig-
nates as sufficiently specific to allow it to
determine the basis and holding period
of those units. For units left in the cus-
tody of a broker for which the taxpayer
does not specifically identify the units to
be sold, disposed of, or transferred, pro-
posed § 1.1012-1(j)(3)(i) provided that the
determination of which units are disposed
of for purposes of determining the basis
and holding period of such units is made
in order of time from the earliest units of
that same digital asset acquired in the tax-
payer’s account with the broker.
For units not held in the custody of a
broker, such as in an unhosted wallet, pro-
posed § 1.1012-1(j)(1) provided that if a
taxpayer sells, disposes of, or transfers less
than all the units of the same digital asset
held within a single wallet or account,
the determination of which units are dis-
posed of for purposes of determining basis
and holding period is made by a specific
identification of the units of the particular
digital asset in the wallet or account that
the taxpayer intends to sell, dispose of, or
transfer. Proposed § 1.1012-1(j)(2) pro-
vided that a specific identification of the
units of a digital asset sold, disposed of,
or transferred is made if, no later than the
date and time of sale, disposition, or trans-
fer, the taxpayer identifies on its books and
records the particular units to be disposed
of by reference to any identifier, such as
purchase date and time or the purchase
price for the unit, that is sufficient to iden-
tify the basis and holding period of the
units sold, disposed of, or transferred. A
specific identification could be made only
if adequate records are maintained for all
units of a specific digital asset held in a
single wallet or account to establish that a
unit is removed from the wallet or account
for purposes of subsequent transactions.
For units not held in the custody of a bro-
ker and for which a taxpayer does not spe-
cifically identify the units to be sold, dis-
posed of, or transferred, the determination
of which units in the wallet or account are
disposed of is made in order of time from
the earliest purchase date of the units of
that same digital asset.
In response to the 2023 proposed reg-
ulations, some comments addressed the
need for transitional guidance, stating
that many taxpayers have interpreted
1
Unless otherwise specified, all “section” or “§” references are to sections of the Internal Revenue Code or the Income Tax Regulations (26 CFR part 1).
2
Since October 9, 2019, the FAQs have been revised and renumbered. References to FAQ numbers in this revenue procedure are to the numbering in the version of the FAQs as of June 6,
2024.

Bulletin No. 2024–31 327 July 29, 2024
FAQs 39-41 as permitting, or at least
not prohibiting, specific identification of
units or application of the FIFO rule based
on a so-called universal or multi-wal-
let approach because the FAQs do not
explicitly limit the specific identification
or FIFO rule to units held within a single
account, wallet, or address, and noting
that the rules of proposed § 1.1012-1(j)
would apply differently from the basis
identification rules adopted by those tax-
payers based on their reading of FAQs
39-41. The comments expressed the
view that transitioning from the univer-
sal or multi-wallet approach to the sin-
gle wallet or account-based rules in the
2023 proposed regulations, if adopted in
the final regulations, could lead to ongo-
ing discrepancies between a taxpayer’s
basis records and the basis reported to
the taxpayer by brokers on Forms 1099-
DA, Digital Asset Proceeds From Broker
Transactions, and that these discrepan-
cies could be further exacerbated by the
limitations of current basis-tracking soft-
ware.
On June 28, 2024, final regulations
(T.D. 10000) were filed with the Fed-
eral Register (89 FR 56480) (2024 final
regulations). The 2024 final regulations
adopted the 2023 proposed regulations
with certain modifications in response to
comments and public hearing testimony.
Section 1.1012-1(h) and (j) of the 2024
final regulations will apply to all acquisi-
tions and dispositions of digital assets on
or after January 1, 2025. This revenue pro-
cedure is being issued contemporaneously
with the 2024 final regulations to assist
taxpayers who may have specifically iden-
tified units or applied the FIFO rule based
on a universal or multi-wallet approach
in transitioning to the rules in § 1.1012-
1(j) of the 2024 final regulations, which
apply the specific identification or FIFO
rules to units held within a single wallet
or account. Subject to the requirements set
forth below, this revenue procedure gener-
ally permits taxpayers to rely on any rea-
sonable allocation of units of unused basis
to a wallet or account that holds the same
number of remaining digital asset units
based on the taxpayer’s records of such
unused basis and remaining units. The
allocation must be a reasonable allocation
within the meaning of section 5.02 of this
revenue procedure and must be made as
of January 1, 2025; however, the taxpayer
may identify the method of allocation and
may comply with the requirements set
forth in section 4.02 of this revenue pro-
cedure at a later date to the extent permit-
ted by section 5.02(4) or 5.02(5)(b) of this
revenue procedure.
SECTION 3. DEFINITIONS
Except as otherwise provided, the fol-
lowing definitions apply solely for pur-
poses of this revenue procedure:
.01 Digital asset. A “digital asset” has
the meaning provided in § 1.6045-1(a)(19)
of the 2024 final regulations other than
digital assets not required to be reported
as digital assets pursuant to § 1.6045-1(c)
(8)(ii), (iii) and (iv) of the 2024 final reg-
ulations.
.02 Basis. “Basis” has the meaning pro-
vided in section 1012.
.03 Original basis. “Original basis”
means the taxpayer’s cost of the digital
asset unit as provided in section 1012 as
adjusted by section 1016; if the digital
asset unit is substituted basis property
within the meaning of section 7701(a)
(42), the taxpayer’s substituted basis, as
defined in section 1016(b); if the digital
asset is acquired by gift, the basis deter-
mined under section 1015; or, if the digital
asset is acquired from a decedent, the fair
market value of the digital asset at the date
of death, unless the alternative valuation
date is elected within the meaning of sec-
tion 1014. When a taxpayer receives digi-
tal asset units that constitute gross income
under section 61, the taxpayer’s basis in
the digital asset units received is generally
determined by reference to the amount
includable in gross income. See generally
§ 1.61-2(d)(2)(i). The acquisition date of
a digital asset unit must remain with the
original basis of that unit.
.04 Acquisition date. The “acquisition
date” of a digital asset unit is the date on
which the taxpayer acquires, including by
purchase, gift, reward, or airdrop, or from
a decedent, the unit of the digital asset. If
the acquisition is the result of a gift or the
death of a decedent, the “acquisition date”
is determined under section 1223. The
acquisition date of a unit of unused basis
is the acquisition date of the digital asset
unit to which the unit of unused basis was
originally attached.
.05 Pre-2025 transaction. A “pre-2025
transaction” means the sale, disposition, or
transfer by the taxpayer of a digital asset
unit in a transaction completed before Jan-
uary 1, 2025.
.06 Unhosted wallet. An “unhosted
wallet” has the same meaning as in
§ 1.6045-1(a)(25)(iii) of the 2024 final
regulations.
.07 Remaining digital asset units. A
“remaining digital asset unit” refers to a
digital asset unit that a taxpayer:
(1) acquires or receives in a transfer
before January 1, 2025, and
(2) holds in the taxpayer’s wallet or
account as of January 1, 2025.
.08 Previously identified and used
basis. “Previously identified and used
basis” means the original basis (along
with the associated acquisition date) of a
digital asset unit that was identified and
attached to a digital asset unit that was
sold, disposed of, or transferred by the
taxpayer in a pre-2025 transaction. Thus,
for example, previously identified and
used basis is reflected in both (1) a digital
asset unit purchased for $10 on January 1,
2024, and then sold by the taxpayer before
January 1, 2025, treating $10 as the unit’s
basis and January 1, 2024, as its acquisi-
tion date, and (2) a digital asset unit pur-
chased for $15 on January 30, 2024, and
then sold by the taxpayer before January
1, 2025, treating $10 (from another unit)
as the unit’s basis and January 1, 2024
(from the other unit), as its acquisition
date. In both of these cases, the $10 basis
is previously identified and used basis.
.09 Unit of unused basis. “Unit of
unused basis” refers to the original, per
unit basis of a digital asset unit other
than any unit of previously identified and
used basis. Accordingly, all units of digi-
tal asset basis held by the taxpayer as of
January 1, 2025, are treated as units of
unused basis for purposes of this revenue
procedure, even if the taxpayer is able to
factually attribute some units of basis to
specific units of digital assets.
.10 As of January 1, 2025. “As of Janu-
ary 1, 2025” means immediately after the
close of the taxpayer’s day on December
31, 2024.
.11 Transfer. “Transfer ” means the
conveyance, other than a sale or disposi-
tion, of digital asset units by one taxpayer
to another taxpayer, including a completed

July 29, 2024 328 Bulletin No. 2024–31
gift, donation, contribution, or distribution
of digital asset units.
.12 Taxpayer. “Taxpayer” means any
person described in section 7701(a)(1) but
does not include an entity disregarded as
an entity separate from its owner under
§ 301.7701-3. Any remaining digital
assets or units of unused basis held by a
disregarded entity are treated as held by
its owner.
SECTION 4. SCOPE
.01 In General.
(1) The safe harbor described in section
5.01 of this revenue procedure is available
only to a taxpayer who holds remaining
digital asset units and has units of unused
basis as of January 1, 2025.
(2) The taxpayer may not apply the
safe harbor described in this revenue pro-
cedure to any digital assets acquired by or
transferred to the taxpayer on or after Jan-
uary 1, 2025. Section 1.1012-1(j) of the
2024 final regulations generally applies to
digital assets acquired by or transferred to
a taxpayer on or after January 1, 2025.
(3) The safe harbor described in this
revenue procedure does not apply to any
allocation of units of unused basis the
amount or the availability of which is
under consideration before any court of
the United States; before the IRS Inde-
pendent Office of Appeals; or subject to
an examination by the IRS, about which
the IRS first contacts the taxpayer prior
to January 1, 2025; unless, in each case,
a final determination has been made with
respect to the amount or the availability
of such basis before the date the specific
unit allocation or global allocation must
be completed pursuant to section 5.02(4)
or 5.02(5)(b) of this revenue procedure,
respectively.
(4) The taxpayer may apply the safe
harbor described in this revenue proce-
dure to one or more types of digital assets
held by the taxpayer prior to January 1,
2025, separately with respect to each such
type of digital asset. For example, Bitcoin
is one type of digital asset, and Ether is
another type of digital asset.
(5) The safe harbor described in section
5.01 of this revenue procedure is avail-
able only to a taxpayer who satisfies the
requirements of section 4.02 of this reve-
nue procedure. The failure to meet all the
requirements with respect to one type of
digital asset, however, does not impact the
taxpayer’s ability to apply the safe harbor
with respect to any other type of digital
asset for which the taxpayer is able to sat-
isfy the requirements.
.02 Requirements.
(1) Each remaining digital asset unit
must be a capital asset in the hands of the
taxpayer. See section 1221.
(2) Each unit of unused basis must
have been originally attached to a digital
asset unit that was a capital asset in the
hands of a taxpayer.
(3) The digital asset unit from which the
unused basis is derived and the remaining
digital asset unit must be the same type of
digital asset.
(4) The taxpayer must be able to iden-
tify and maintain records sufficient to
show the total number of remaining dig-
ital asset units in each of the wallets or
accounts held by the taxpayer.
(5) The taxpayer must be able to iden-
tify and maintain records sufficient to
show the number of units of unused basis,
the original cost basis of each such unit of
unused basis, and the acquisition date of
the digital asset unit to which the unused
basis was originally attached.
(6) A taxpayer must treat any allocation
under this revenue procedure as irrevoca-
ble for all purposes of section 1012.
SECTION 5. SNAPSHOT AS OF
JANUARY 1, 2025, AND SAFE
HARBOR SCOPE
.01 Safe harbor. The taxpayer may
make any reasonable allocation as of Jan-
uary 1, 2025, of units of unused basis to
a wallet or account that holds the same
number of remaining digital asset units
with respect to any type of digital asset
for which the taxpayer is relying on this
revenue procedure, provided the taxpayer
satisfies the requirements of section 4.02
of this revenue procedure.
.02 Reasonable Allocation. To make
a reasonable allocation within the mean-
ing of section 5.01 of this revenue proce-
dure, the taxpayer must comply with the
requirements set forth in sections 5.02(1)
through 5.02(7) of this revenue procedure.
(1) The taxpayer must identify the
remaining digital asset units and main-
tain records sufficient to show the units of
unused basis within the meaning of sec-
tions 4.02(4) and 4.02(5) of this revenue
procedure, respectively, by the applicable
date set forth in section 5.02(4) or 5.02(5)
of this revenue procedure.
(2) The taxpayer must complete the
allocations of all units of unused basis
to the same number of remaining digital
asset units within all wallets or accounts
held by the taxpayer by the applicable date
set forth in section 5.02(4) or 5.02(5) of
this revenue procedure. A taxpayer may
make such allocations on a specific unit
basis or on a global basis.
(a) Specific unit allocation. A taxpayer
may make an allocation of specifically
identified units of unused basis (specific
unit allocation), by reference to charac-
teristics that distinguish those units from
other units of unused basis, to either a pool
of remaining digital assets units within
each wallet or account or, if the taxpayer
is able to identify each remaining digital
asset within each wallet or account, to the
specific units of remaining digital assets
within each wallet or account. A specific
unit allocation is complete on the date
that the taxpayer’s books and records first
record the specific characteristics of the
units of unused basis allocated to each
pool of digital assets in the taxpayer’s
wallets or accounts on a wallet-by-wal-
let or account-by-account basis, or, if the
taxpayer is able to identify each remain-
ing digital asset within each wallet or
account, to the specific units of remain-
ing digital assets within each wallet or
account.
(b) Global allocation. A taxpayer may,
alternatively, make an allocation based on
a rule prescribing the manner by which
units of unused basis will be ordered
and then allocated to a pool of remaining
digital assets units within each wallet or
account (global allocation). A global allo-
cation must identify and order all units
of unused basis by reference to charac-
teristics that distinguish those units from
all other units of unused basis and must
allocate those ordered identified units to
a pool of remaining digital asset units in
each of the taxpayer’s wallets or accounts
on a prescribed basis set forth in the rule.
For example, a global allocation might
identify those units of unused basis that
have the earliest or latest acquisition dates
and, for each of those dates, the highest

Bulletin No. 2024–31 329 July 29, 2024
or lowest amounts of unused basis, and
allocate such units successively to wallet
A, wallet B, and wallet C. An allocation
that permits the taxpayer to exercise dis-
cretion on or after January 1, 2025, with
respect to how units of unused basis are
allocated to remaining digital asset units
or to the taxpayer’s wallets or accounts is
not a global allocation within the mean-
ing of this revenue procedure. A global
allocation is complete on the date that the
taxpayer’s books and records first record
the specific characteristics of the units
of unused basis allocated to each pool of
digital assets in the taxpayer’s wallets or
accounts on a wallet-by-wallet or account-
by-account basis.
(3) Until such time as the taxpayer has
completed the allocations as set forth in
section 5.02(4) or 5.02(5)(b) of this rev-
enue procedure, the taxpayer must sep-
arately account for any acquisitions or
transfers to the taxpayer of digital asset
units on or after January 1, 2025, held
within the same wallet or account as
remaining digital asset units and units of
unused basis.
(4) A taxpayer making a specific unit
allocation must satisfy the requirements
set forth in section 5.02(1) of this revenue
procedure and complete the specific unit
allocations described in section 5.02(2)(a)
of this revenue procedure before the ear-
lier of:
(a) The date and time of the first sale,
disposition, or transfer by the taxpayer of
the same type of digital asset completed
on or after January 1, 2025, or
(b) Either:
(i) The due date (including by exten-
sion) of the taxpayer’s Federal income
tax return or Form 1065, U.S. Return of
Partnership Income, for the taxable year
that includes January 1, 2025 (the 2025
return); or
(ii) If the taxpayer is not otherwise
required to file a 2025 return, the last date
for filing the 2025 return (without exten-
sions) of the type of return that would be
applicable to the taxpayer if the taxpayer
were required to file a 2025 return.
(5) A taxpayer making a global alloca-
tion described in section 5.02(2)(b) of this
revenue procedure:
(a) Must describe the global alloca-
tion method in the taxpayer’s books and
records before January 1, 2025;
(b) Must satisfy the requirements set
forth in sections 5.02(1) of this revenue
procedure and complete the allocations
of all units of unused basis to the pools
of remaining digital asset units within
each of the taxpayer’s wallets or accounts
before the later of the dates set forth in
section 5.02(4)(a) and (b) of this revenue
procedure, as applicable; and
(c) Must comply with the following
rules with respect to sales, dispositions or
transfers of any remaining digital assets
units on or after January 1, 2025. If such
sale, disposition or transfer occurs after
the taxpayer has completed the global
allocation, the taxpayer is permitted to
identify the units sold, disposed of, or
transferred under § 1.1012-1(j)(2) of the
2024 final regulations (specific identi-
fication of digital asset units held in an
unhosted wallet) or § 1.1012-1(j)(3)
(ii) of the 2024 final regulations (ade-
quate identification of units held in the
custody of a broker). If such sale, dis-
position or transfer occurs before the
taxpayer has completed the global allo-
cation, the taxpayer may make a specific
identification (or adequate identification)
of any remaining digital asset units that
are sold, disposed of, or transferred only
by using a standing order or instruction
communicated to the taxpayer’s broker
or a standing instruction recorded in the
taxpayer’s books and records. This stand-
ing order must be applied to select any
remaining digital asset units sold, dis-
posed of, or transferred after the global
allocation is complete. Any other type
of specific identification by the taxpayer
will not be treated as sufficient to iden-
tify any remaining digital asset units
sold, disposed of, or transferred under
§ 1.1012-1(j)(2) of the 2024 final regu-
lations (specific identification of digital
asset units held in an unhosted wallet) or
§ 1.1012-1(j)(3)(ii) of the 2024 final reg-
ulations (adequate identification of units
held in the custody of a broker) before
the date that the taxpayer has completed
the allocation of units of unused basis to
the pools of remaining digital asset units
within each of the taxpayer’s wallets or
accounts.
(6) The determination of whether
a taxpayer’s allocations to wallets or
accounts is reasonable with respect to
one type of digital asset held by the tax-
payer prior to January 1, 2025, does not
impact whether the taxpayer’s alloca-
tions to other wallets or accounts is rea-
sonable with respect to another type of
digital asset held by the taxpayer prior
to January 1, 2025.
(7) Any allocation of previously identi-
fied and used basis to digital assets held by
the taxpayer as of January 1, 2025, does
not constitute a reasonable allocation.
.03 Failure to Comply. If a taxpayer
makes a reasonable allocation described
in section 5.02 of this revenue procedure
but fails to comply with the requirements
of section 4.02 of this revenue procedure,
the taxpayer cannot rely on the safe har-
bor set forth in this revenue procedure,
and such failure may result in the assess-
ment of additional tax, penalties, and
interest.
.04 Not applicable to determining
amount of basis. This safe harbor does not
apply to the taxpayer’s calculation of the
amount of unused basis, which must be
substantiated separately by the taxpayer
pursuant to section 6001.
SECTION 6. EXAMPLES
The following examples illustrate the
application of this revenue procedure to
a single type of digital asset (referred to
as digital asset DE). For purposes of these
examples, no transaction fees are paid or
incurred to effect the purchase or sale of
any of the digital asset units, and neither
the number of remaining digital asset units
nor the units of unused basis is under con-
sideration before any court of the United
States or the IRS Independent Office of
Appeals, or subject to an examination by
the IRS.
.01 Example 1.
(1) Facts. B, an individual and calendar year tax-
payer, holds in B’s unhosted wallet (“XYZ Wallet”)
10 units of digital asset DE that B acquired for $1 per
unit on July 1, 2019. B holds in a second unhosted
wallet (“GHI Wallet”) 20 units of digital asset DE
acquired on September 1, 2020, for $5 per unit. On
December 1, 2024, B sells all 30 units of digital
asset DE in a transaction completed before January
1, 2025.
(2) Analysis. Neither the 10 units of digital asset
DE acquired on July 1, 2019, nor the 20 units of
digital asset DE acquired on September 1, 2020,
are remaining digital asset units within the meaning
of section 3.07 of this revenue procedure, because
B does not hold any digital asset units of DE as
of January 1, 2025. Accordingly, B may not make
allocations described in section 5.02 of this revenue

July 29, 2024 330 Bulletin No. 2024–31
procedure to determine the basis of the units from
either lot.
.02 Example 2.
(1) Facts. The facts are the same as in Example
1 except that B sells only six units from B’s XYZ
Wallet on December 1, 2024, and B maintain records
sufficient to show that B specifically identified and
attached the original basis of six units from the 20
units acquired on September 1, 2020, in B’s GHI
Wallet as the six units sold. As of January 1, 2025,
B has 24 remaining digital asset units and 24 units
of unused basis.
(2) Analysis.
(a) B’s sale of six units from B’s XYZ wallet on
December 1, 2024, is a pre-2025 transaction with
previously identified and used basis of $30 (6 units
each with a per unit basis of $5). As of January 1,
2025, B has 24 units of unused basis (consisting of
10 units of unused basis in the amount of $1 per unit
with an acquisition date of July 1, 2019, originally
from B’s XYZ Wallet, and 14 units of unused basis in
the amount of $5 per unit with an acquisition date of
September 1, 2020, originally from B’s GHI Wallet).
B also has 24 remaining digital asset units (consist-
ing of four DE remaining digital asset units in B’s
XYZ Wallet and 20 remaining digital asset units in
B’s GHI Wallet).
(b) B may use the safe harbor described in sec-
tion 5.02 of this revenue procedure to make a rea-
sonable allocation of B’s 24 units of unused basis to
the pool of remaining digital asset units in B’s XYZ
and GHI Wallets as of January 1, 2025, provided that
B maintains records sufficient to show the units of
unused basis and completes the allocations by the
dates set forth in sections 5.02(4) (specific unit allo-
cation) or 5.02(5)(b) (global allocation) of this reve-
nue procedure, as applicable.
.03 Example 3.
(1) Facts. The facts are the same as in Example
2. In addition, on March 1, 2025, B sells two units
from B’s XYZ Wallet. Before B’s sale of those two
units from B’s XYZ Wallet on March 1, 2025, B
identifies and maintains records sufficient to show
that B has four remaining digital asset units in B’s
XYZ Wallet and 20 remaining digital asset units
in B’s GHI Wallet. B’s records also show that B
has 10 units of unused basis in the amount of $1
per unit with an acquisition date of July 1, 2019,
and 14 units of unused basis in the amount of $5
per unit with an acquisition date of September 1,
2020. Also, before B’s sale of the two units from
B’s XYZ wallet, B makes a specific unit alloca-
tion, of two units of unused basis in the amount
of $1 per unit and an acquisition date of July 1,
2019, and two units of unused basis in the amount
of $5 per unit and an acquisition date of Septem-
ber 1, 2020, to the pool of four remaining digital
asset units held in B’s XYZ Wallet. B allocates the
remainder of the eight units of unused basis (in the
amount of $1 per unit and an acquisition date of
July 1, 2019), and the 12 units of unused basis (in
the amount of $5 per unit and an acquisition date
of September 1, 2020) to the pool of 20 remaining
digital asset units held in B’s GHI Wallet. Prior to
B’s sale of the two units from B’s XYZ Wallet, B
specifically identifies in B’s books and records that
one of the units sold was from one unit of unused
basis in the amount of $1 per unit with an acqui-
sition date of July 1, 2019, and the other unit sold
was from one unit of unused basis in the amount of
$5 per unit with an acquisition date of September
1, 2020.
(2) Analysis.
(a) B made a specific unit allocation as described
in section 5.02(2)(a) of this revenue procedure.
(b) B’s specific unit allocation is reasonable
within the meaning of section 5.02 of this revenue
procedure for the following reasons:
(i) B identified and maintained records sufficient
to show the number of remaining digital asset units
in B’s XYZ and GHI Wallets as required by section
5.02(1) of this revenue procedure.
(ii) B identified and maintained records sufficient
to show the number of units of unused basis, the
amount of each such unit, and the acquisition date
of the digital asset unit to which the unit of unused
basis was originally attached as required by section
5.02(1) of this revenue procedure.
(iii) B’s allocation of units of unused basis to the
XYZ and GHI Wallets was made by reference to the
original, per unit basis and acquisition date of the
digital asset unit to which the unit of unused basis
was originally attached. This reference is to charac-
teristics that distinguish those units of unused basis
from B’s other units of unused basis. B’s specific unit
allocations were completed before March 1, 2025,
which is the date and time of the taxpayer’s first sale
of the digital asset units completed on or after Janu-
ary 1, 2025, as required by section 5.02(4)(a) of this
revenue procedure.
(iv) B did not allocate any previously identified
and used basis to the remaining digital asset units.
(c) B’s identification of the two units sold on
March 1, 2025, is a specific identification under §
1.1012-1(j)(2) of the 2024 final regulations.
.04 Example 4.
(1) Facts. The facts are the same as in Example
3, except B does not make a specific unit alloca-
tion. Instead, before January 1, 2025, B describes
an ordering rule in B’s books and records, which
identifies and orders the units of unused basis in a
manner that is based first on the highest basis units
and second (if there are multiple units with the
same basis) on the units with the earliest acquisi-
tion dates. B’s ordering rule also directs that these
ordered units of unused basis will be allocated first
to the remaining digital asset units in B’s XYZ
Wallet and then to the remaining digital asset units
in B’s GHI Wallet. Additionally, B identifies and
maintains records sufficient to show B’s 24 remain-
ing digital asset units and B’s 24 units of unused
basis as of January 1, 2025, respectively, before
April 15, 2026, which is the due date for filing B’s
Federal income tax return for B’s 2025 taxable
year. B also completes the allocations of units of
unused basis to remaining digital assets after March
1, 2025, but before April 15, 2026, such that B’s
books and records record the specific characteris-
tics of the units of unused basis allocated to each
pool of digital assets in B’s wallets or accounts on
a wallet-by-wallet or account-by-account basis.
Finally, instead of selling the two units from B’s
XYZ Wallet, B sells the two units from B’s GHI
Wallet. Prior to B’s sale of the two units from B’s
GHI Wallet, B specifically identifies in B’s books
and records that one of the units sold was from one
unit of unused basis in the amount of $1 per unit
with an acquisition date of July 1, 2019, and the
other unit sold was from one unit of unused basis in
the amount of $5 per unit with an acquisition date
of September 1, 2020.
(2) Analysis.
(a) B’s ordering rule is a global allocation as
described in section 5.02(2)(b) of this revenue
procedure. This global allocation when completed
results in: four of the 14 units of unused basis
with the highest basis (the units with a basis in the
amount of $5 per unit) have been allocated to the
pool of remaining digital asset units held in B’s
XYZ Wallet and 10 units of unused basis (the units
with a basis in the amount of $5 per unit) and 10
units of unused basis (the units with basis in the
amount of $1 per unit) have been allocated to the
pool of remaining digital asset units held in B’s
GHI Wallet.
(b) B’s global allocation as described in section
5.02(2)(b) of this revenue procedure is reasonable
within the meaning of section 5.02 of this revenue
procedure for the following reasons:
(i) B identified and maintained records sufficient
to show the number of remaining digital asset units
in B’s XYZ and GHI Wallets as required by section
5.02(1) of this revenue procedure.
(ii) B identified and maintained records sufficient
to show the number of units of unused basis, the
amount of each such unit, and the acquisition date of
the digital asset unit to which the unused basis was
originally attached as required by section 5.02(1) of
this revenue procedure.
(iii) B’s global allocation applies a rule that iden-
tifies and orders the units of unused basis by refer-
ence first to the highest basis units and second to the
units with the earliest acquisition dates. These char-
acteristics are sufficient to distinguish each of the
units from the other units of unused basis. B’s global
allocation then allocates the ordered units of unused
basis to a pool of remaining digital asset units in each
of B’s XYZ and GHI Wallets on a prescribed basis.
B’s global allocation does not permit B to exercise
discretion on or after January 1, 2025, with respect
to how the units of unused basis are allocated to B’s
remaining digital assets or to its XYZ and GHI Wal-
lets.
(iv) B described the global allocation method in
B’s books and records before January 1, 2025.
(v) B did not allocate any previously identified
and used basis to the remaining digital asset units.
(c) Under section 5.02(5)(c) of this revenue
procedure, a global allocation must be completed
before a taxpayer is permitted to make a specific
identification of units sold on or after January 1,
2025, other than by reference to a standing order
or instruction. B did not complete its global allo-
cation prior to March 1, 2025. Additionally, B’s
identification of the units sold on March 1, 2025,
was based on the amount (and acquisition date)
of specific units of unused basis before the global
allocation was complete, and the identification was
not a standing instruction. Therefore, B’s specific
identification of the units sold on March 1, 2025,
will not be treated as sufficient to identify the units

Bulletin No. 2024–31 331 July 29, 2024
sold within the meaning of § 1.1012-1(j)(2) of the
2024 final regulations. Instead, under § 1.1012-1(j)
(1) of the 2024 final regulations, B must treat the
units with the earliest acquisition dates within B’s
GHI Wallet as sold. Accordingly, the two units that
B must treat as sold are the two units with unused
basis in the amount of $1 per unit with acquisition
dates of July 1, 2019.
.05 Example 5.
(1) Facts. The facts are the same as in Example
4, except instead of selling two digital asset units on
March 1, 2025, B transfers those two units to a fam-
ily member, C, as a completed gift.
(2) Analysis. The analysis set forth in Example
4 remains the same. Accordingly, the 2 units trans-
ferred by B to C on March 1, 2025, are the two units
with unused basis in the amount of $1 per unit with
acquisition dates of July 1, 2019.
SECTION 7. EFFECTIVE DATE
This revenue procedure is effective
June 28, 2024, the date this revenue pro-
cedure was released to the public.
SECTION 8. DRAFTING
INFORMATION
The principal author of this revenue
procedure is the Office of Associate Chief
Counsel (Income Tax and Accounting).
For further information regarding this rev-
enue procedure, contact the Office of the
Associate Chief Counsel (Income Tax and
Accounting) at (202) 317-5436 (not a toll-
free number).

July 29, 2024 332 Bulletin No. 2024–31
Part IV
Notice of Proposed
Rulemaking
Recapture of Interest on
Excess Credits under the
Families First Act, CARES
Act, and ARP
REG-109032-23
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemak-
ing.
SUMMARY: This document sets forth
proposed regulations providing that the
IRS will assess as an underpayment of
tax any overpayment interest paid to
a taxpayer on an erroneous refund of
the employment tax credits provided
under the Families First Coronavirus
Response Act, the Coronavirus Aid,
Relief, and Economic Security Act, and
the American Rescue Plan Act of 2021.
These proposed regulations affect busi-
nesses, tax-exempt organizations, and
certain governmental entities that claim
the paid sick leave credit and the paid
family leave credit under the Families
First Coronavirus Response Act and the
American Rescue Plan Act of 2021, and
that claim the employee retention credit
under the Coronavirus Aid, Relief, and
Economic Security Act and the American
Rescue Plan Act of 2021.
DATES: Written or electronic comments
and requests for a public hearing must be
received by August 16, 2024.
ADDRESSES: Commenters are strongly
encouraged to submit public comments
electronically via the Federal eRulemak-
ing Portal at http://www.regulations.
gov (indicate IRS and REG-109032-23)
by following the online instructions for
submitting comments. Requests for a
public hearing must be submitted as pre-
scribed in the “Comments and Requests
for a Public Hearing” section. Once
submitted to the Federal eRulemaking
Portal, comments cannot be edited or
withdrawn. The Department of the Trea-
sury (Treasury Department) and the IRS
will publish for public availability any
comments submitted to the IRS’s pub-
lic docket. Send paper submissions to
CC:PA:01:PR (REG-109032-23), Room
5203, Internal Revenue Service, P.O.
Box 7604, Ben Franklin Station, Wash-
ington, DC 20044.
FOR FURTHER INFORMATION CON-
TACT: Concerning these proposed regu-
lations, Andrew Holubeck at (202) 317-
4774 (not a toll-free number); concerning
submissions of comments and/or requests
for a public hearing, Vivian Hayes by
email at publichearings@irs.gov (pre-
ferred) or by phone at (202) 317-6901 (not
a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
I. Statutes Providing Employment Tax
Credits for COVID-19 Relief
The Families First Coronavirus
Response Act (Families First Act), Public
Law 116-127, 134 Stat. 178 (March 18,
2020), as amended and extended by the
COVID-related Tax Relief Act of 2020
(Tax Relief Act), enacted as Subtitle B of
Title II of Division N of the Consolidated
Appropriations Act, 2021, Public Law
116-260, 134 Stat.1182 (December 27,
2020), provided COVID-19 related eco-
nomic relief that included paid sick and
family leave credits to eligible employers
with respect to qualified leave wages paid
for a period of leave taken beginning April
1, 2020, and ending March 31, 2021. The
American Rescue Plan Act of 2021 (ARP),
Public Law 117-2, 135 Stat. 4 (March 11,
2021), provided similar paid leave credits
under sections 3131, 3132, and 3133 of
the Code with respect to qualified leave
wages paid for a period of leave taken
beginning April 1, 2021, and ending Sep-
tember 30, 2021.
The Coronavirus Aid, Relief, and
Economic Security Act (CARES Act),
Public Law 116-136, 134 Stat. 281
(March 27, 2020), as amended and
extended by the Taxpayer Certainty and
Disaster Tax Relief Act of 2020 (Relief
Act), enacted as Division EE of the
Consolidated Appropriations Act, 2021,
provided an employee retention credit
(ERC) with respect to qualified wages
paid after March 12, 2020, and before
July 1, 2021, respectively. The ARP pro-
vided a substantially similar ERC under
section 3134 of the Code with respect to
qualified wages paid after June 30, 2021,
and before January 1, 2022.
1

The paid sick and family leave cred-
its under the Families First Act and sec-
tions 3131 through 3133 of the Code
and the ERC under the CARES Act and
section 3134 of the Code (collectively,
COVID-19 credits) are refundable credits,
meaning that if the amount of the credits
exceeds the taxes against which the credits
are taken, then this excess is treated as an
overpayment that is refunded under sec-
tions 6402(a) and 6413(b). Any amount
of the COVID-19 credits claimed by a
taxpayer that is treated as an overpayment
under section 6402(a) or section 6413(b),
is refunded or credited to the taxpayer.
Any such refund to which the taxpayer is
not entitled, is an erroneous refund that
the taxpayer must repay.
II. Assessment Authority
Section 6201 authorizes and requires
the Secretary to determine and assess tax
liabilities, including interest, additional
1
Section 80604 of the Infrastructure Investment and Jobs Act (Infrastructure Act), Public Law 117-68, 135 Stat. 429 (November 15, 2021), amended section 3134(n) of the Code to provide
that the ERC under section 3134 applies only to wages paid after June 30, 2021, and before October 1, 2021 (or, in the case of wages paid by an eligible employer which is a recovery startup
business, January 1, 2022). Therefore, the only type of employer eligible for the ERC for wages paid after September 30, 2021, and before January 1, 2022, is an employer that meets the
definition of a recovery startup business under section 3134(c)(5). See Notice 2021-65, 2021-51 IRB 880 (December 20, 2021) for guidance for employers that received an advance payment
of the ERC or reduced tax deposits in anticipation of the credit for the fourth quarter of 2021 prior to the amendments made by the Infrastructure Act.

Bulletin No. 2024–31 333 July 29, 2024
amounts, additions to the tax, and assess-
able penalties. The Code or other statutory
authority described herein provides for the
administrative recapture of certain erro-
neous refunds of the COVID-19 credits
either by directly authorizing the assess-
ment of the erroneous refunds or by autho-
rizing the promulgation of regulations or
other guidance to do so.
Specifically, regarding paid sick and
family leave credits, sections 7001(f)
and 7003(f) of the Families First Act
and sections 3131(g) and 3132(g) of the
Code provide, in relevant part, that the
Secretary shall provide such regulations
or other guidance as may be necessary
to carry out the purposes of the credits,
including regulations or other guidance
to prevent the avoidance of the purposes
of the limitations under those provisions
and to recapture the benefit of the credit
where there is a subsequent adjustment to
the credit.
Regarding the ERC, section 2301(l)
of the CARES Act, as amended by sec-
tions 206 and 207 of the Relief Act, pro-
vides that the Secretary shall issue such
forms, instructions, regulations, and other
guidance as are necessary to prevent the
avoidance of the purposes of the limita-
tions under section 2301 of the CARES
Act. Correspondingly, section 3134(m)
(3) of the Code provides, in relevant part,
that the Secretary shall issue such forms,
instructions, regulations, and other guid-
ance as are necessary to prevent the avoid-
ance of the purposes of the limitations
under section 3134.
III. Regulations for the Recapture of
Erroneous Refunds of COVID-19 Credits
Under the authority provided by the
Families First Act, the CARES Act, and
the ARP, the Treasury Department and
the IRS published regulations (TD 9978)
in the Federal Register on July 26, 2023
(88 FR 48118) under sections 3111, 3131,
3132, 3134, and 3221 of the Code (collec-
tively, Recapture Regulations) that provide
for the administrative recapture of errone-
ously refunded COVID-19 credits. Under
the Recapture Regulations, erroneous
refunds of COVID-19 credits are treated
as underpayments of the taxes imposed
under section 3111(a) or (b), as applicable,
and so much of the taxes imposed under
section 3221(a) as are attributable to the
rate in effect under section 3111(a) or (b),
as applicable, and are, therefore, subject to
assessment and administrative collection
procedures. The Recapture Regulations
allow the IRS to prevent the avoidance of
the purposes of the limitations under the
credit provisions and to recover the erro-
neous refund amounts efficiently while
also preserving administrative protections
afforded to taxpayers with respect to con-
testing their tax liabilities under the Code
and avoiding unnecessary costs and bur-
dens associated with litigation.
IV. Interest on Overpayments under
Section 6611
Section 6611 provides that interest shall
be allowed and paid on any overpayment
in respect of any Internal Revenue tax at
the overpayment rate established under
section 6621. Section 6611(b)(2) provides
that interest shall be allowed and paid in
the case of a refund from the date of the
overpayment to a date (determined by the
Secretary) preceding the date of the refund
check by not more than 30 days. When a
taxpayer files an amended return, such as
Form 941-X, Adjusted Employer’s Quar-
terly Federal Tax Return or Claim for
Refund, claiming COVID-19 credits that
were not claimed on the originally filed
return and resulting in an overpayment,
interest is allowed under section 6611 on
any overpayment refunded to the taxpayer.
While the Recapture Regulations pro-
vide for the assessment of erroneous
refunds of COVID-19 credits as an under-
payment of certain employment taxes,
they do not address overpayment interest
paid to a taxpayer on an erroneous refund.
These proposed regulations provide for
the assessment of this interest as an under-
payment of tax.
The Families First Act, CARES Act,
and the Code as amended by the ARP
authorize and require the Secretary to
issue regulations to prevent the avoidance
of the limitations placed on the credits by
these statutes. When a taxpayer is issued
an erroneous refund of COVID-19 cred-
its for which the taxpayer is not eligible,
the taxpayer incurs a liability to repay that
refund. The taxpayer also incurs a lia-
bility to repay any overpayment interest
paid on the erroneous refund. In pursuing
collection of these liabilities, the IRS is
enforcing the statutory limitations on the
COVID-19 credits that made the taxpay-
er’s refund, and any accompanying over-
payment interest, erroneous. Regulations
providing for the administrative recapture
of overpayment interest paid on refunds
subsequently determined to be erroneous
assist in resolving taxpayers’ repayment
liabilities while also preserving adminis-
trative protections afforded to these tax-
payers with respect to contesting their tax
liabilities under the Code and avoiding
unnecessary costs and burdens associated
with litigation.
Accordingly, under the authority
granted by the Families First Act, CARES
Act, and the Code, these proposed regula-
tions would amend the Employment Tax
Regulations (26 CFR part 31) under sec-
tions 3111, 3131, 3132, 3134, and 3221 to
provide that overpayment interest paid to
taxpayers on erroneous refunds of COVID-
19 credits is treated as an underpayment of
the applicable employment taxes and may
be assessed and collected by the IRS in the
same manner as the taxes.
Explanation of Provisions
These proposed regulations would pro-
vide that any overpayment interest paid
under section 6611 to an employer for an
erroneous refund of the COVID-19 cred-
its will be treated as an underpayment of
the taxes imposed under section 3111(a)
or (b), as applicable, and so much of the
taxes imposed under section 3221(a) as are
attributable to the rate in effect under sec-
tion 3111(a) or (b), as applicable, and may
be assessed and collected by the Secretary
in the same manner as the taxes. These
proposed regulations would be applicable
to all interest amounts paid under section
6611 on or after July 2, 2024, for any erro-
neous refund of the COVID-19 credits.
Special Analyses
I. Regulatory Planning and Review—
Economic Analysis
Pursuant to the Memorandum of
Agreement, Review of Treasury Regula-
tions under Executive Order 12866 (June
9, 2023), tax regulatory actions issued by
the IRS are not subject to the requirements

July 29, 2024 334 Bulletin No. 2024–31
of section 6 of Executive Order 12866, as
amended. Therefore, a regulatory impact
assessment is not required.
II. Regulatory Flexibility Act
Pursuant to the Regulatory Flexibility
Act (5 U.S.C. chapter 6), the Secretary
certifies that these proposed regulations
would not have a significant economic
impact on a substantial number of small
entities because these proposed regula-
tions impose no compliance burden on
any business entities, including small
entities. Although these proposed reg-
ulations would apply to all taxpayers
eligible for the employment tax credits
under the Families First Act, the CARES
Act, and sections 3131, 3132, and 3134
of the Code, including small businesses
and tax-exempt organizations with fewer
than 500 employees, and would therefore
be likely to affect a substantial number of
small entities, the economic impact would
not be significant. These proposed regula-
tions do not affect the taxpayer’s employ-
ment tax reporting or the necessary infor-
mation to substantiate entitlement to the
credits. Rather, these proposed regulations
merely implement the statutory authority
granted under the Families First Act, the
CARES Act, and the Code as amended
by the ARP to issue regulations or other
guidance to prevent the avoidance of the
purposes of the limitations under these
provisions by providing that overpayment
interest paid to taxpayers on erroneous
refunds of COVID-19 credits is treated
as an underpayment of the applicable
employment taxes and may be assessed
and collected by the IRS in the same man-
ner as the taxes.
III. Section 7805(f)
Pursuant to section 7805(f) of the
Code, these proposed regulations have
been submitted to the Chief Counsel of the
Office of Advocacy of the Small Business
Administration for comment on its impact
on small business.
IV. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates
Reform Act of 1995 requires that agencies
assess anticipated costs and benefits and
take certain other actions before issuing a
final rule that includes any Federal man-
date that may result in expenditures in any
one year by a State, local, or Tribal gov-
ernment, in the aggregate, or by the pri-
vate sector, of $100 million in 1995 dol-
lars, updated annually for inflation. These
proposed regulations do not include any
Federal mandate that may result in expen-
ditures by State, local, or Tribal govern-
ments, or by the private sector, in excess
of that threshold.
V. Executive Order 13132: Federalism
Executive Order 13132 (Federalism)
prohibits an agency from publishing any
rule that has federalism implications
if the rule either imposes substantial,
direct compliance costs on State and
local governments, and is not required
by statute, or preempts State law, unless
the agency meets the consultation and
funding requirements of section 6 of the
Executive order. These proposed regu-
lations do not have federalism implica-
tions, do not impose substantial direct
compliance costs on State and local
governments, and do not preempt State
law within the meaning of the Executive
order.
Statement of Availability of IRS
Documents
IRS notices and other guidance cited in
this preamble are published in the Internal
Revenue Bulletin (or Cumulative Bulletin)
and are available from the Superintendent
of Documents, U.S. Government Publish-
ing Office, Washington, DC 20402, or by
visiting the IRS website at https://www.
irs.gov.
Comments and Requests for a Public
Hearing
Before these proposed amendments
to the final regulations are adopted as
final regulations, consideration will be
given to any comments that are submit-
ted timely to the IRS as prescribed in this
preamble under the ADDRESSES head-
ing. The Treasury Department and the
IRS request comments on all aspects of
the proposed regulations. Any comments
submitted will be available at https://
www.regulations.gov or upon request.
A public hearing will be scheduled if
requested in writing by any person who
timely submits electronic or written com-
ments. Requests for a public hearing are
also encouraged to be made electroni-
cally. If a public hearing is scheduled,
notice of the date, time, and place for
the public hearing will be published in
the Federal Register.
Drafting Information
The principal author of these proposed
regulations is NaLee Park, Office of the
Associate Chief Counsel (Employee Ben-
efits, Exempt Organizations, and Employ-
ment Taxes). However, other personnel
from the Treasury Department and the
IRS participated in the development of
these proposed regulations.
List of Subjects in 26 CFR 31
Employment taxes, Fishing vessels,
Gambling, Income taxes, Penalties, Pen-
sions, Railroad retirement, Reporting and
recordkeeping requirements, Social secu-
rity, Unemployment compensation.
Proposed Amendments to the
Regulations
Accordingly, the Treasury Department
and the IRS propose to amend 26 CFR
part 31 as follows:
PART 31—EMPLOYMENT TAXES
AND COLLECTION OF INCOME
TAX AT SOURCE
Paragraph 1. The authority citation
for part 31 continues to read in part as fol-
lows:
Authority: 26 U.S.C. 7805.
* * * * *
Section 31.3111–6 also issued under
secs. 7001 and 7003, Public Law 116–
127, 134 Stat. 178, and sec. 2301, Public
Law 116–136, 134 Stat. 281.
* * * * *
Section 31.3131-1 also issued under 26
U.S.C. 3131(g).
Section 31.3132-1 also issued under 26
U.S.C. 3132(g).
Section 31.3134-1 also issued under 26
U.S.C. 3134(m)(3).

Bulletin No. 2024–31 335 July 29, 2024
Section 31.3221–5 also issued under
secs. 7001 and 7003, Public Law 116–
127, 134 Stat. 178, and sec. 2301, Public
Law 116–136, 134 Stat. 281.
* * * * *
Par. 2. Section 31.3111-6 is amended
by:
a. Redesignating paragraph (e) as para-
graph (f) and adding new paragraph (e);
and
b. Revising newly redesignated para-
graph (f).
The addition and revision read as fol-
lows:
§31.3111-6 Recapture of credits
under the Families First Coronavirus
Response Act and the Coronavirus Aid,
Relief, and Economic Security Act.
* * * * *
(e) Recapture of interest on errone-
ously refunded credits under the Families
First Act and CARES Act. For purposes
of this section, any overpayment interest
paid under section 6611 to an employer,
or any third party payor as described in
paragraph (d) of this section, with respect
to an erroneous refund amount described
in paragraph (a) or (b) of this section shall
also be treated as an underpayment of the
taxes imposed under section 3111(a) of
the Code and may be assessed and col-
lected by the Secretary in the same man-
ner as the taxes.
(f) Applicability date. This section
applies to all credit refunds under sections
7001 and 7003 of the Families First Act
(including any increases in those credits
under section 7005 of the Families First
Act), as modified by section 3606 of the
CARES Act, advanced or paid on or after
July 24, 2020, and all credit refunds under
section 2301 of the CARES Act advanced
or paid on or after July 24, 2020, except
that paragraph (e) of this section applies
to all interest amounts paid under section
6611 on or after July 2, 2024 for any erro-
neous refund described in paragraph (a) or
(b) of this section.
Par. 3. Section 31.3131-1 is amended
by:
a. Redesignating paragraph (d) as para-
graph (e) and adding new paragraph (d);
and
b. Revising the newly redesignated
paragraph (e).
The addition and revision read as fol-
lows:
§31.3131-1 Recapture of credits.
* * * * *
(d) Recapture of interest on erroneously
refunded credits. For purposes of this sec-
tion, any overpayment interest paid under
section 6611 to an employer, or any third
party payor as described in paragraph (c)
of this section, with respect to an errone-
ous refund amount described in paragraph
(a) of this section shall also be treated as
an underpayment of the taxes imposed
under section 3111(b) and so much of the
taxes imposed under section 3221(a) as
are attributable to the rate in effect under
section 3111(b), as applicable, and may be
assessed and collected by the Secretary in
the same manner as the taxes.
(e) Applicability date. This section
applies to all credit refunds under section
3131 (including any increases in those
credits under section 3133), advanced or
paid on or after September 8, 2021, except
that paragraph (d) of this section applies
to all interest amounts paid under section
6611 on or after July 2, 2024, for any erro-
neous refund described in paragraph (a) of
this section.
Par. 4. Section 31.3132-1 is amended
by:
a. Redesignating paragraph (d) as para-
graph (e) and adding new paragraph (d);
and
b. Revising the newly redesignated
paragraph (e).
The addition and revision read as fol-
lows:
§31.3132-1 Recapture of credits.
* * * * *
(d) Recapture of interest on erroneously
refunded credits. For purposes of this sec-
tion, any overpayment interest paid under
section 6611 to an employer, or any third
party payor as described in paragraph (c)
of this section, with respect to an errone-
ous refund amount described in paragraph
(a) of this section shall also be treated as
an underpayment of the taxes imposed
under section 3111(b) and so much of the
taxes imposed under section 3221(a) as
are attributable to the rate in effect under
section 3111(b), as applicable, and may be
assessed and collected by the Secretary in
the same manner as the taxes.
(e) Applicability date. This section
applies to all credit refunds under section
3132 (including any increases in those
credits under section 3133) advanced or
paid on or after September 8, 2021, except
that paragraph (d) of this section applies
to all interest amounts paid under section
6611 on or after July 2, 2024, for any erro-
neous refund described in paragraph (a) of
this section.
Par. 5. Section 31.3134-1 is amended
by:
a. Redesignating paragraph (d) as para-
graph (e) and adding new paragraph (d);
and
b. Revising the newly redesignated
paragraph (e).
The addition and revision read as fol-
lows:
§31.3134-1 Recapture of credits.
* * * * *
(d) Recapture of interest on erroneously
refunded credits. For purposes of this sec-
tion, any overpayment interest paid under
section 6611 to an employer, or any third
party payor as described in paragraph (c)
of this section, with respect to an errone-
ous refund amount described in paragraph
(a) of this section shall also be treated as
an underpayment of the taxes imposed
under section 3111(b) and so much of the
taxes imposed under section 3221(a) as
are attributable to the rate in effect under
section 3111(b), as applicable, and may be
assessed and collected by the Secretary in
the same manner as the taxes.
(e) Applicability date. This section
applies to all credit refunds under section
3134 advanced or paid on or after Septem-
ber 8, 2021, except that paragraph (d) of
this section applies to all interest amounts
paid under section 6611 on or after July 2,
2024, for any erroneous refund described
in paragraph (a) of this section.
Par. 6. Section 31.3221-5 is amended
by:
a. Redesignating paragraph (e) as para-
graph (f) and adding new paragraph (e);
and
b. Revising the newly redesignated
paragraph (f).
The addition and revision read as fol-
lows:

July 29, 2024 336 Bulletin No. 2024–31
§31.3221-5 Recapture of credits
under the Families First Coronavirus
Response Act and the Coronavirus Aid,
Relief, and Economic Security Act.
* * * * *
(e) Recapture of interest on errone-
ously refunded credits under the Families
First Act and CARES Act. For purposes
of this section, any overpayment interest
paid under section 6611 to an employer,
or any third party payor as described in
paragraph (d) of this section, with respect
to an erroneous refund amount described
in paragraph (a) or (b) of this section shall
also be treated as an underpayment of the
taxes imposed under section 3221(a) and
may be assessed and collected by the Sec-
retary in the same manner as the taxes.
(f) Applicability date. This section
applies to all credit refunds under sections
7001 and 7003 of the Families First Act, as
modified by section 3606 of the CARES Act,
advanced or paid on or after July 24, 2020,
and all credit refunds under section 2301 of
the CARES Act advanced or paid on or after
July 24, 2020, except paragraph (e) of this
section applies to all interest amounts paid
under section 6611 on or after July 2, 2024
for any erroneous refund described in para-
graph (a) or (b) of this section.
Douglas W. O’Donnell,
Deputy Commissioner.
(Filed by the Office of the Federal Register July 1,
2024, 8:45 a.m., and published in the issue of the
Federal Register for July 2, 2024, 89 FR 54742)
Notice of Proposed
Rulemaking
REG-120137-19
Update of Regulations
Regarding Payment of
Tax by Commercially
Acceptable Means
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking.
SUMMARY: This document contains
proposed amendments to regulations
regarding the payment of tax by commer-
cially acceptable means. The proposed
amendments would reflect changes to the
law made by the Taxpayer First Act that
would allow the IRS to directly accept
payments of tax by credit or debit card,
without having to connect taxpayers to
third-party payment processors.
DATES: Electronic or written comments
and requests for a public hearing must be
received by September 3, 2024.
ADDRESSES: Commenters are strongly
encouraged to submit public comments
electronically. Submit electronic submis-
sions via the Federal eRulemaking Portal
at https://www.regulations.gov (indicate
IRS and REG-120137-19) by following
the online instructions for submitting com-
ments. Requests for a public hearing must
be submitted as prescribed in the “Com-
ments and Requests for a Public Hearing”
section. Once submitted to the Federal
eRulemaking Portal, comments cannot be
edited or withdrawn. The Department of
the Treasury (Treasury Department) and
the IRS will publish for any comments
submitted electronically or on paper to the
public docket. Send paper submissions to:
CC:PA:01:PR (REG-120137-19), Room
5203, Internal Revenue Service, P.O. Box
7604, Ben Franklin Station, Washington,
DC 20044.
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations, Crystal Jackson-Kaloz of
the Office of the Associate Chief Coun-
sel (Procedure and Administration),
(202) 317-5191 (not a toll-free number);
concerning the submission of comments
and requests for a public hearing, Publi-
cations and Regulations Section at (202)
317-6901 (not a toll-free number), or by
sending an email at publichearings@irs.
gov (preferred).
SUPPLEMENTARY INFORMATION:
Background
This document contains proposed
amendments to the Procedure and Admin-
istration Regulations (26 CFR part 301)
under section 6311 of the Internal Rev-
enue Code (Code). These proposed
regulations would amend provisions of
§301.6311-2 of the existing regulations
(existing §301.6311-2) to implement the
changes made to section 6311 of the Code
by section 2303 of the Taxpayer First Act
(TFA), Public Law 116-25, 133 Stat. 981,
1013 (2019).
Section 6311(a) provides that it is law-
ful for the Secretary of the Treasury or her
delegate (Secretary) to receive payment
for Internal Revenue taxes by any com-
mercially acceptable means that the Sec-
retary deems appropriate to the extent and
under the conditions provided in regula-
tions prescribed by the Secretary. Exist-
ing §301.6311-2, which was adopted by
the publication of TD 8969 in the Federal
Register (66 FR 64740-01) on December
14, 2001, authorizes payment of Internal
Revenue taxes by credit or debit card so
long as such payments are made in the
manner and in accordance with the forms,
instructions, and procedures prescribed
by the Commissioner of Internal Revenue
(Commissioner).
Prior to passage of the TFA, section
6311(d)(2) authorized the Secretary to
enter into contracts to obtain services
related to receiving payment of taxes by
credit card or debit card, or charge card,
but prohibited the Secretary from paying
any fee or other consideration under any
such contract. Existing §301.6311-2(f)
implements this rule. Existing §301.6311-
2(e) prohibits the IRS from imposing any
fee or charge on persons making payment
of taxes by credit card or debit card. Cur-
rently, the IRS utilizes third-party pro-
cessors to process payment of taxes by
credit cards, which includes charge cards,
and debit cards for which taxpayers pay a
processing fee directly to the third-party
processor. Third-party processors charge
a variable percentage fee for payment by
credit card and a flat fee for payment by
debit card.
Section 2303 of the TFA amended
section 6311(d)(2) by adding a discre-
tionary exception whereby the Secretary
is no longer prohibited from paying a fee
under a contract related to receiving pay-
ment of taxes by credit or debit card to the
extent that the Secretary ensures that any
such fee is fully recouped from the per-
sons paying taxes by credit or debit card

Bulletin No. 2024–31 337 July 29, 2024
pursuant to such contract. This provision
enables the IRS to receive similar bene-
fits as other entities that accept credit or
debit cards, including guaranteed receipt
of funds and reduction of paper check pro-
cessing costs. This provision also enables
taxpayers to make a payment more easily
by credit or debit card directly to the IRS,
such as over the telephone, without having
to separately wait for the IRS to connect
them to third-party processors. See H.R.
Rep. 116-39(I), 116th

Cong., 1st Sess.
at 90 (2019).
1
Section 2303 of the TFA
now gives the IRS flexibility to enter into
a contract that would allow taxpayers to
pay taxes by credit or debit card directly
to the IRS.
Explanation of Provisions
The proposed regulations would amend
existing §301.6311-2 to conform to the
TFA’s amendment to section 6311(d)(2).
The proposed regulations would remove
both the prohibition in existing §301.6311-
2(f) on the payment of any fee by the IRS
under any contracts related to payment of
taxes by credit, debit, or charge card, and
the prohibition in existing §301.6311-2(e)
on the IRS imposing any fee or charge on
persons making payment of taxes by credit
or debit card. Under existing §301.6311-
2(e), when a taxpayer pays any Internal
Revenue tax by credit or debit card under
contracts with third-party processors, the
IRS does not charge the taxpayer a fee,
and the IRS does not receive any por-
tion of the fee charged by the third-party
processor. Because the exception added
to section 6311(d)(2) by the TFA is dis-
cretionary, proposed §301.6311-2(e)(1)
would continue to authorize the IRS to
enter into those contracts with third-party
processors in which it does not pay a fee
for services relating to receiving payments
of tax by credit or debit card.
Proposed §301.6311-2(e)(2) would
also authorize the IRS to enter into con-
tracts in which it pays a fee to a third
party to process a payment made by a tax-
payer. Under section 6311(d)(2), the IRS
must seek to minimize any fee the IRS is
required to pay under such a contract. If
the IRS pays a fee under such a contract,
under proposed §301.6311-2(e)(2), the
IRS would fully recoup the amount of the
fee paid to the third-party from the persons
paying taxes by credit or debit card pursu-
ant to the contract as a reimbursement fee.
Proposed §301.6311-2(e)(2) would
require that the reimbursement fee be paid
by the taxpayer at the time of the credit
or debit card tax payment. Section 6402
of the Code allows the Secretary to credit
or refund any overpayment “in respect
of an internal revenue tax.” Because the
reimbursement fee paid by the taxpayer
is not a tax, the Code’s credit and refund
procedures would not apply. Insofar as
a taxpayer is to receive a refund of taxes
paid by credit or debit card under section
6402, the taxpayer cannot receive a refund
of the reimbursement fee paid to the IRS
at the time of the tax payment. If the IRS
pays a fee to a third-party under a con-
tract providing for the payment of taxes
by credit or debit cards, section 6311(d)
(2), as amended by the TFA, requires that
the fee be fully recouped by the Secretary.
The proper regime for adjusting credit or
debit card payment errors, including reim-
bursement fee errors, is found in section
6311(d)(3) and existing §301.6311-2(d)
(1). The TFA does not change those pro-
cedures, although the proposed regula-
tions amend existing §301.6311-2(d)(1) to
include payments of reimbursement fees
under proposed §301.6311-2(e)(2).
Finally, proposed §301.6311-2(e)
would authorize the IRS to enter into
contracts with third parties, regardless
of whether the IRS pays a fee, but only
if the contract provides a cost benefit to
the government. The cost benefit to the
government is derived from a reduction
of check processing costs. In addition,
expanding taxpayers’ payment options
generally encourages tax compliance, so it
is beneficial for both the government and
taxpayers.
Proposed Applicability Date
The regulations are proposed to apply
to payments of taxes and reimbursement
fees made on or after the date the regula-
tions are published as final regulations in
the Federal Register.
Special Analyses
I. Regulatory Planning and Review
Pursuant to the Memorandum of
Agreement, Review of Treasury Regula-
tions under Executive Order 12866 (June
9, 2023), tax regulatory actions issued by
the IRS are not subject to the requirements
of section 6 of Executive Order 12866, as
amended. Therefore, a regulatory impact
assessment is not required.
II. Regulatory Flexibility Act
It is hereby certified that this proposed
regulation will not have a significant eco-
nomic impact on a substantial number of
small entities pursuant to the Regulatory
Flexibility Act (5 U.S.C. chapter 6). This
certification is based on the fact that the
regulation would apply only to the IRS’s
ability to (1) pay a fee under a contract
related to receiving payment of taxes by
credit or debit card, and (2) recoup pro-
cessing fees from the person paying taxes
by credit or debit card. Under current
regulations, the IRS may not do either of
those things. The regulation would also
implement a requirement under the TFA
that the IRS must seek to minimize any
fee the IRS is required to pay under such
a contract. Because persons choosing
to pay taxes by credit or debit card are
ordinarily required to pay processing fees
to a third-party processor, the proposed
regulation, if finalized, would not have a
significant economic impact on such per-
sons.
Pursuant to section 7805(f) of the
Code, this notice of proposed rulemaking
has been submitted to the Chief Counsel
1
In 2019, different versions of the TFA were introduced in the House and Senate and both bills contained provisions to amend section 6311 of the Code. H.R. 1957 was introduced in the
House on March 28, 2019, and passed the House on April 9, 2019, but did not pass the Senate. Section 2303 of H.R. 1957 contained proposed statutory language amending section 6311(d)
that was identical to the statutory language that was enacted a short time later on July 1, 2019, in section 2303 of H.R. 3151. Due to the procedural way in which H.R. 3151 became a
vehicle for enacting the TFA, there are no separate House, Senate, or Conference Reports regarding H.R. 3151, which became the TFA, Public Law 116-25. Therefore, it is appropriate for
the Treasury Department and the IRS to look to the House Ways and Means Committee Report for H.R. 1957, the immediate predecessor to H.R. 3151, to understand the intended scope of
section 2303 of the TFA.

July 29, 2024 338 Bulletin No. 2024–31
for the Office of Advocacy of the Small
Business Administration for comment on
its impact on small business.
III. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates
Reform Act of 1995 (UMRA) requires
that agencies assess anticipated costs and
benefits and take certain other actions
before issuing a final rule that includes
any Federal mandate that may result in
expenditures in any one year by a State,
local, or Tribal government, in the aggre-
gate, or by the private sector, of $100 mil-
lion in 1995 dollars, updated annually for
inflation. This rule does not include any
Federal mandate that may result in expen-
ditures by State, local, or Tribal govern-
ments, or by the private sector in excess of
that threshold.
IV. Executive Order 13132:

Federalism
Executive Order 13132 (Federalism)
prohibits an agency from publishing any
rule that has federalism implications if
the rule either imposes substantial, direct
compliance costs on State and local gov-
ernments, and is not required by statute,
or preempts State law, unless the agency
meets the consultation and funding
requirements of section 6 of the Execu-
tive order. These proposed regulations do
not have federalism implications and do
not impose substantial direct compliance
costs on State and local governments or
preempt State law within the meaning of
the Executive order.
Comments and Requests for Public
Hearing
Before these proposed amendments to
the final regulations are adopted as final
regulations, consideration will be given
to comments that are submitted timely
to the Treasury Department and the IRS
as prescribed in this preamble under the
ADDRESSES heading. The Treasury
Department and the IRS request com-
ments on all aspects of the proposed reg-
ulations. Any electronic and paper com-
ments submitted will be made available
at https://www.regulations.gov or upon
request.
A public hearing will be scheduled if
requested in writing by any person who
timely submits electronic or written com-
ments. Requests for a public hearing are
also encouraged to be made electronically.
If a public hearing is scheduled, notice
of the date, time, and place for the public
hearing will be published in the Federal
Register.
Announcement 2023–16, 2023–20
I.R.B. 854 (May 15, 2023), provides that
public hearings will be conducted in per-
son, although the IRS will continue to pro-
vide a telephonic option for individuals
who wish to attend or testify at a hearing by
telephone. Any telephonic hearing will be
made accessible to people with disabilities.
Drafting Information
The principal author of these regu-
lations is Crystal Jackson-Kaloz of the
Office of the Associate Chief Counsel
(Procedure and Administration). How-
ever, other personnel from the Treasury
Department and the IRS participated in
their development.
List of Subjects in 26 CFR Part 301
Employment taxes, Estate taxes, Excise
taxes, Gift taxes, Income taxes, Penalties,
Reporting and recordkeeping requirements.
Proposed Amendments to the
Regulations
Accordingly, the Treasury Department
and IRS propose to amend 26 CFR part
301 as follows:
Part 301—PROCEDURE AND
ADMINISTRATION
Paragraph 1. The authority citation
for part 301 continues to read in part as
follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 301.6311-2 is amended
by:
1. Revising paragraph (d)(1).
2. Removing paragraph (e).
3. Redesignating paragraphs (f), (g),
and (h) as paragraphs (e), (f), and (g).
4. Revising newly redesignated para-
graph (e).
5. In new paragraph (f), removing the
text “Internal Revenue Service” and add-
ing the text “IRS” in its place.
6. Revising newly redesignated para-
graph (g).
The revisions read as follows:
§301.6311-2 Payment by credit card
and debit card.
* * * * *
(d) * * * (1) In general. Payments
of taxes by credit card or debit card, and
payments of reimbursement fees referred
to in paragraph (e)(2) of this section, are
subject to the applicable error resolution
procedures of section 161 of the Truth in
Lending Act (15 U.S.C. 1666), section
908 of the Electronic Fund Transfer Act
(15 U.S.C. 1693f), or any similar provi-
sions of State or local law, for the purpose
of resolving errors relating to the credit
card or debit card account, but not for the
purpose of resolving any errors, disputes
or adjustments relating to the underlying
tax liability.
* * * * *
(e) Authority to enter into contracts.
(1) In general. The Commissioner may
enter into contracts related to receiving
payments of tax by credit card or debit
card if such contracts are cost beneficial
to the government. The determination
of whether the contract is cost beneficial
will be based on an analysis appropriate
for the contract at issue and at a level of
detail appropriate to the size of the gov-
ernment’s investment or interest.
(2) Contracts under which fees are
prohibited. The Commissioner may enter
into contracts that provide that the Internal
Revenue Service (IRS) will not pay a fee,
charge, or other monetary consideration
under such contracts related to payments
of tax by credit card or debit card. For
payments of tax under such contracts, this
section does not prohibit the imposition of
fees or charges by issuers of credit cards
or debit cards or by any other financial
institutions or persons participating in the
credit card or debit card transaction. The
IRS may not receive any part of any such
fees that may be charged.
(3) Contracts under which fees are per-
mitted and must be recouped. The Com-
missioner may enter into contracts that

Bulletin No. 2024–31 339 July 29, 2024
provide that the IRS will pay a fee, charge,
or other monetary consideration under
such contracts related to payments of tax
by credit card or debit card. If the IRS
pays a fee under such contracts, it must
recoup the full amount paid under such
contracts as a reimbursement fee from
the persons paying tax by credit card or
debit card. The reimbursement fees will
be limited to the amount of the fees that
IRS pays under any such contract and will
be paid at the time of, and in addition to,
the tax payment. The reimbursement fee
is not a tax imposed by the Code, and no
portion of the reimbursement fee is eligi-
ble for refund or credit under section 6402
of the Code. The error resolution proce-
dures described in paragraph (d)(1) of this
section will apply to any errors concern-
ing the reimbursement fee. In negotiating
contracts under paragraph (e)(3) of this
section, the Commissioner will seek to
minimize the amount of the fees paid.
* * * * *
(g) Applicability date. The rules of this
section apply to payments of taxes and
reimbursement fees made on or after [date
of publication of final regulations in the
Federal Register].
Douglas W. O’Donnell,
Deputy Commissioner.
(Filed by the Office of the Federal Register July 1,
2024, 8:45 a.m., and published in the issue of the
Federal Register for July 2, 2024, 89 FR 54746)

Bulletin No. 2024–31 i July 29, 2024
Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus,
if an earlier ruling held that a principle
applied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).
Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.
Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modified is used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified and clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transactions.
This term is most commonly used in a ruling
that lists previously published rulings that
are obsoleted because of changes in laws or
regulations. A ruling may also be obsoleted
because the substance has been included in
regulations subsequently adopted.
Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a
period of time in separate rulings. If the
new ruling does more than restate the sub-
stance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
Suspended is used in rare situations
to show that the previous published rul-
ings will not be applied pending some
future action such as the issuance of new
or amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current
use and formerly used will appear in
material published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.
—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.

July 29, 2024 ii Bulletin No. 2024–31
Numerical Finding List
1
Bulletin 2024–31
Announcements:
2024-26, 2024-27 I.R.B. 14
2024-27, 2024-27 I.R.B. 14
2024-28, 2024-28 I.R.B. 39
2024-29, 2024-29 I.R.B. 71
Notices:
2024-47, 2024-27 I.R.B. 1
2024-52, 2024-27 I.R.B. 2
2024-53, 2024-27 I.R.B. 4
2024-54, 2024-28 I.R.B. 24
2024-55, 2024-28 I.R.B. 31
2024-56, 2024-29 I.R.B. 64
2024-57, 2024-29 I.R.B. 67
2024-58, 2024-30 I.R.B. 120
Proposed Regulations:
REG-124593-23, 2024-28 I.R.B. 40
REG-109032-23, 2024-31 I.R.B. 332
REG-120137-19, 2024-31 I.R.B. 336
Revenue Procedures:
2024-26, 2024-27 I.R.B. 7
2024-29, 2024-30 I.R.B. 121
2024-30, 2024-30 I.R.B. 183
2024-27, 2024-31 I.R.B. 300
2024-28, 2024-31 I.R.B. 326
Revenue Rulings:
2024-13, 2024-28 I.R.B. 18
2024-14, 2024-28 I.R.B. 18
Treasury Decisions:
10002, 2024-29 I.R.B. 56
9999, 2024-30 I.R.B. 72
10000, 2024-31 I.R.B. 185
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2024–27 through 2024–52 is in Internal Revenue Bulletin
2024–52, dated December 30, 2024.

Bulletin No. 2024–31 iii July 29, 2024
Finding List of Current Actions on
Previously Published Items
1
Bulletin 2024–31
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2024–27 through 2024–52 is in Internal Revenue Bulletin
2024–52, dated December 30, 2024.

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