Cost basis: Simple Essential Guide (2026)

Cost basis lot selection matters in a divorce because the same coin can be bought in several lots at different prices, so which lot is transferred changes the basis the other spouse receives. This article reports the IRS rules I could verify, then gives my own reasoning with assumed numbers. I’m not a lawyer or tax professional.

Why “the Crypto” Can Be Several Different Purchases

In my view, a position built up over time usually consists of separate purchases at different prices. The IRS rules below treat units individually, so each unit’s own purchase price matters when it is sold or transferred.

What the IRS Says About Which Units Are Disposed Of

Specific identification: for units in an unhosted wallet, you may specifically identify the units you sell, dispose of or transfer if you identify them no later than the date and time of the sale, disposition or transfer, and keep records showing the units left the wallet. Identifiers can include the purchase date and time or the purchase price (IRS digital asset FAQ 82).
Default: if you don’t meet the identification requirements, units are treated as sold in time order, starting from the earliest date on which units of the same asset in that wallet were acquired (IRS FAQ 86).
Brokers: for sales after 2025, you specify units to your broker using the broker’s designated identifiers (IRS FAQ 85).
2025 relief: Notice 2025-7 provides temporary relief, allowing identification in your own books, including through a standing order entered before the sale (IRS FAQ 84 and 88).

The IRS page indicates the identification and default rules operate per wallet or account, and that keeping a duplicate record of private keys doesn’t combine wallets into one for tax purposes (IRS FAQ 96). In my reading, a settlement that names a lot but not the wallet may leave some discretion open. That is my reading, not an IRS statement.

How Divorce Transfers Fit In

IRS Publication 504 says that, generally, no gain or loss is recognized on a transfer to a spouse or former spouse if the transfer is incident to divorce, and the recipient’s basis is a carryover of the transferor’s adjusted basis (IRS Publication 504). The publication notes the nonrecognition rule doesn’t apply if the spouse or former spouse is a nonresident alien.

My reasoning is that a transfer can move specific units, so the basis of the units chosen could determine the basis the receiving spouse takes.

An Assumed Example

If the $10,000 lot is transferred, the receiving spouse’s basis would carry over at $10,000, an embedded gain of $110,000.
If the $110,000 lot is transferred, the basis would be $110,000, an embedded gain of $10,000.

Say a couple holds two lots of the same coin, one purchased for $10,000 and one for $110,000, and the settlement transfers one coin worth $120,000. The settlement worksheet shows $120,000 either way. At an assumed 15% rate, the embedded tax would be $16,500 versus $1,500, a difference of $15,000. That is the $15,000 question in the title.

The prices and rate are made up, and your actual rate depends on your income and how long the coin was held. The difference comes from which lot is chosen, not from the dollar amount, which is why I’d name the lot in the settlement.

Why This Might Go Unnoticed (My View)

If a settlement says only “transfer 2 BTC” or “transfer crypto worth $80,000,” then, in my view, it may not say which lot satisfies it. I can’t say how often that happens. A receiving spouse might not see the difference until a later sale.

A clause could specify the lot, for example: “the transferred 2 BTC shall carry a cost basis of no less than $[X] per coin, substantiated by documented purchase records.” That is an illustrative idea for a family law attorney to review, not legal advice.

What the Transferring Spouse Must Hand Over: Basis and Holding Period Records

The temporary regulation under section 1041 gives the receiving spouse a right that makes the lot question much easier to solve. At the time of the transfer, the transferor must give the transferee records showing the property’s adjusted basis and holding period as of the transfer date, and the transferee must keep those records and make them accessible (Temporary Treas. Reg. § 1.1041-1T). For crypto, that means lot-level purchase dates and prices, which is the same information the IRS identification rules use.

The regulation also explains why the carryover rule matters. The transferee recognizes no gain or loss on receipt, and takes the transferor’s adjusted basis immediately before the transfer, whether that basis is lower than, equal to, or higher than fair market value (Temporary Treas. Reg. § 1.1041-1T). That is the rule behind the $16,500 versus $1,500 difference in the example above, so the records requirement is the practical way to see which side of that gap you are on.

Timing is part of the answer. A transfer is incident to divorce if it occurs within one year after the marriage ends, or if it is related to the end of the marriage. A transfer is related to the end of the marriage if it is made under a divorce or separation instrument and occurs within six years after the marriage ends. A transfer not made under such an instrument, or made more than six years after, is presumed unrelated (Temporary Treas. Reg. § 1.1041-1T). With an assumed marriage end date of March 15, 2026, the one-year mark is March 15, 2027 and the six-year mark is March 15, 2032. Putting the crypto transfer in the written settlement and completing it inside those windows keeps it in the category the regulation describes.

A clear next step: when you negotiate the transfer, ask in writing for the lot-by-lot basis and holding period records the regulation describes, and attach them to the settlement file so they are in hand on the day of the transfer.

A Practical Way to Handle This

Request the lot-by-lot purchase history for crypto bought over time, from exchange records or wallet history. Without it, you can’t see what’s being transferred.
Ask which lots and which wallets are involved, not only the total value.
Put the lot or basis in the settlement language, as in my example above.
If you’re transferring, document your identification when you transfer, as the IRS FAQ above describes.
If you’re receiving, ask for the purchase date and price of each lot.

Questions About Cost Basis Lot Selection in Divorce

Is choosing a specific lot allowed? The IRS FAQ above describes specific identification for digital assets when its requirements are met.

What if no lot is specified? The IRS says units are treated as disposed of in time order, from the earliest acquisition date in that wallet, if identification requirements aren’t met. I can’t say how that works for a divorce transfer.

Does this apply to all crypto? The IRS FAQ discusses digital assets generally, and in my view the lot idea applies to any asset bought in several purchases.

The One-Line Version

In my view, a settlement that names only a dollar amount or coin count can leave out which purchase is being transferred, and under the carryover rule that can change the tax the receiving spouse inherits. Naming the lot in writing is a simple way to close the gap.

Sources

This article offers general information and my own opinions, not financial, tax, or legal advice. The figures in worked examples are assumed. Laws, tax rules, and products change and can differ by location, so check current official sources and talk to a qualified professional about your own situation.

The $15,000 Question Nobody Asks in a Crypto Divorce: Which Lot Are You Actually Transferring?