IRS: Crypto Rewards Taxable Despite Account Lockdowns, Warns Memo
The IRS has clarified that crypto rewards received before an account freeze are taxable in the year they are received, even if holders are unable to access their funds later on. In a memorandum issued in October, the IRS addressed the tax obligations of digital asset rewards in accounts frozen due to bankruptcy. The guidance stated that taxpayers must include the fair market value of the rewards, at the time of receipt, in their gross income, despite the account remaining frozen. The IRS stressed the importance of understanding tax obligations in cases of digital asset holdings, especially in situations involving platform bankruptcies and account freezes.