BASIS TRACKING · UPDATED FOR 2025

Wallet-by-Wallet vs. Universal Basis Tracking After Rev. Proc. 2024-28

The January 1, 2025 safe harbor changed how crypto basis must be tracked. Choose wrong and you may overpay tax — or trigger an audit.

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What Rev. Proc. 2024-28 Actually Requires

Rev. Proc. 2024-28, issued by the IRS in July 2024, establishes the rules for transitioning digital asset cost basis tracking from a universal (global) pool methodology to a per-account, per-wallet methodology. The transition date was January 1, 2025. The revenue procedure applies to taxpayers who held digital assets at any point during the transition and must file returns that reflect digital asset dispositions in 2025 and beyond.

The core requirement: starting January 1, 2025, digital asset basis must be tracked on a wallet-by-wallet and account-by-account basis. A taxpayer may no longer apply specific identification across wallets — that is, you can no longer say “I am selling the BTC I bought on Kraken in 2021” if that BTC is now sitting in a MetaMask wallet. Within each wallet, specific identification remains available. Across wallets, it does not.

This is not merely a compliance preference. When IRC §6045 brokers begin reporting basis in 2026, they will report on a per-account basis — because that is the only basis they have access to. If your records use universal accounting and your 1099-DA reports per-account basis, you have a structural mismatch that can only be resolved with Code B adjustments, which require documentation you may not have.

The Universal Method: How It Worked and Why It No Longer Does

Under the “universal” or “global pool” method, all units of a given digital asset held by a taxpayer were treated as a single pool of interchangeable units with a blended or FIFO/HIFO cost basis, regardless of where those units were physically held (on exchange A, in wallet B, or deposited in protocol C). Transfers between wallets were treated as non-taxable movements within the same pool. Specific identification was applied across the entire pool at the time of disposition.

This method made intuitive sense when most crypto holders used a single exchange, and it was the de facto standard used by early crypto tax software. But it has a fundamental incompatibility with the 1099-DA reporting regime: brokers can only see what happened in their own accounts. A Coinbase 1099-DA will report basis for assets that were acquired on Coinbase. It has no knowledge of the BTC you bought on Kraken and transferred to Coinbase last year. Under the universal method, those cross-account transfers are treated as non-taxable — but the broker’s records show a new inbound transfer with unknown cost, creating a phantom $0-basis problem.

Rev. Proc. 2024-28 ends the universal method for post-2024 transactions. For pre-2025 history, the procedure provides a safe harbor for allocating your existing universal-pool basis lots to specific wallets as of January 1, 2025.

The Wallet-by-Wallet Method: The New Standard

Under the wallet-by-wallet method, each wallet address and each exchange account maintains its own independent basis pool. Specific identification — choosing which lot to sell — applies within each account. Transfers between wallets are treated as non-taxable movements, but the transferred lots carry their cost basis with them to the receiving wallet.

Example: You own 2 ETH on Coinbase at a cost basis of $1,000 each (total $2,000) and 1 ETH in a MetaMask wallet at a cost basis of $3,500. Under the universal method, you would have a blended basis of $1,833 per ETH. Under the wallet-by-wallet method, Coinbase has a $1,000/ETH basis pool and MetaMask has a $3,500/ETH basis pool. If you sell the MetaMask ETH, your gain is calculated using the $3,500 MetaMask basis — not the blended number.

When Coinbase issues a 2026 1099-DA for a sale from your Coinbase account, it will report the $1,000 basis it has on record — which matches your wallet-by-wallet records. No adjustment needed. Under the universal method, you would need to file a Code B adjustment to reconcile the difference between your blended basis and the broker’s per-account basis.

When the Universal Method Might Still Apply (and When It Doesn’t)

For pre-2025 activity, some taxpayers may still be reporting under the universal method for prior-year returns. This is permissible for years before the Rev. Proc. 2024-28 transition date. However, any amendment of pre-2025 returns should consider whether re-filing under the wallet-by-wallet method is advisable to align with current standards.

For 2025 and forward, the universal method is not available for covered transactions. If you attempt to use it, you will create discrepancies with broker 1099-DA reporting that require costly reconciliation and carry audit risk.

Making the Safe Harbor Election: A Step-by-Step Example

Assume you held assets as of January 1, 2025 across two wallets:

• Coinbase account: 0.5 BTC, with acquisition lots at $15,000 and $30,000 basis
• Ledger wallet: 0.5 BTC, with acquisition lots at $20,000 and $45,000 basis

Under the universal method, you have a pool of 1.0 BTC with four lots totaling $110,000 in basis. Under the wallet-by-wallet method, you need to assign each lot to the specific wallet where it sat as of January 1, 2025.

Rev. Proc. 2024-28 provides a safe-harbor methodology: you allocate lots based on the actual location of each unit as of the transition date, documented by the blockchain record and exchange account balance. The election statement describes the allocation, includes the supporting data, and is attached to your 2025 return.

If you cannot determine exactly which lots are in which wallet (for example, because you used the universal method and did not track transfers), the revenue procedure allows an allocation based on the proportional balance at each location. This is the safe harbor: it is not perfect, but it is defensible.

Common Pitfalls

• Not documenting the January 1, 2025 snapshot. The allocation requires a documented balance at each wallet on the transition date. If you did not capture this, you need to reconstruct it from blockchain data — now, before the snapshot becomes harder to pull.
• Treating DeFi deposits as separate wallets vs. same wallet. Assets deposited into a DeFi protocol (e.g., USDC in Aave, ETH in Lido) are generally treated as held in a separate account from your MetaMask wallet. The basis of the deposited tokens moves with them.
• Forgetting staking rewards. Staking rewards issued to a wallet are new lots at the FMV on the date of receipt. They do not inherit basis from the staked tokens. Under the wallet-by-wallet method, they are a new lot in the wallet where they land.
• Inter-wallet transfers after January 1, 2025. Under the wallet-by-wallet method, when you transfer a BTC lot from Exchange A to Wallet B, the lot — including its specific acquisition cost and date — moves with it. The transfer is not a taxable event, but the basis record must follow the lot.

What This Means for Your 2025 Return

If you held digital assets on January 1, 2025, your 2025 return should include the Rev. Proc. 2024-28 election statement allocating your pre-existing basis lots to specific wallets. This election does not change your total basis — it re-assigns it to locations that align with broker reporting. If the election is not made, the IRS may treat your basis as $0 for any pre-transition lots whose location cannot be documented.

The deadline for making this election is your 2025 return due date (including extensions). If you have not yet made the election and your return has not yet been filed, the window is still open. If your return has already been filed without the election, an amendment may be appropriate in some cases.

IRS references in this article: Rev. Proc. 2024-28, IRC §6045, Form 8949, Code B adjustment