Revenue Procedure 2024-28 ended a practice most holders did not know they were relying on.
Until then, people commonly tracked basis universally: one pool across all their holdings, wherever those holdings sat. From 1 January 2025, basis has to be tracked per wallet and per account, each treated separately.
That creates a problem for anybody who had been doing it the old way, because their basis was attached to a pool rather than to particular wallets, and the pool no longer exists as a unit.
So the procedure provided a one-time safe harbour. A taxpayer could allocate unused basis to specific wallets and accounts, by a reasonable method, documented, and be protected from penalties for how they allocated it.
It required action before 1 January 2025.
There was no reminder. No form arrived. No exchange emailed anybody. It applied in full to people who had never heard of it.
Nothing was taken and nobody was penalised on the day. What happened is that a rule changed the unit of account for a number most holders had never written down, and attached the fix to a date that passed quietly.
The people who acted were the ones already keeping records. The people who most needed the relief were the ones least likely to know it existed.
This lesson is US federal only, and it is education rather than advice. F108-01's callout applies to every lesson in this course.
Basis is the number the whole system runs on
Basis is what you paid, in the currency you report in, plus the costs of acquiring it.
Gain is proceeds minus basis. That is the entire calculation, and it means basis is doing half the work in every disposal you will ever report.
Which produces the rule that makes this lesson urgent:
A basis you cannot substantiate is, in practice, treated as zero.
Not because anybody believes the asset was free. Because the burden of proof sits with the taxpayer, and an unsupported number is not evidence. Zero basis means the entire proceeds are gain.
You dispose of an asset for $180,000. You actually paid $150,000 for it, four years earlier, through an exchange that has since shut down.
With substantiated basis:
Gain = 180,000 - 150,000 = $30,000
At an illustrative long-term rate of 20 percent:
30,000 x 0.20 = $6,000
With no substantiated basis, treated as zero:
Gain = 180,000 - 0 = $180,000
180,000 x 0.20 = $36,000
Difference: $30,000, which is exactly the tax rate applied to the entire amount you paid for the asset.
Now put it as a ratio, because the ratio is what should change your behaviour:
$36,000 / $6,000 = six times the liability
And note where that six came from. It is not a penalty and there is no wrongdoing anywhere in the story. It is the arithmetic of proceeds minus basis when the second term is missing, and the missing term is a record you did not keep from four years ago.
Now scale it. On the same asset the difference is proportional to what you paid, so the more you paid, and therefore the more successful the position was, the more an absent record costs. The exposure grows with exactly the thing you were hoping would grow.
Per wallet, not per person
The change in the autopsy sounds administrative and it is not.
Before: one pool. If you had 10 BTC across four wallets, you had a single stack of acquisition lots, and disposing of 1 BTC drew from that stack according to whichever identification method you used.
Now: four pools. Each wallet and account has its own lots and its own basis, and a disposal from wallet C uses wallet C's lots only.
Three consequences that matter more than the rule sounds.
Your records have to be per location. A spreadsheet that says "bought 2 BTC at $30,000" is no longer sufficient. It has to say where.
Transfers between your own wallets carry basis with them, and you have to be able to show that. F108-01 established that a transfer is not a disposal. It is also the moment where basis silently migrates, and the moment a broker loses sight of it, which is the course autopsy.
F104-02's three tiers are now three sets of books. The architecture that improves your security also multiplies your accounting, and that is a real cost of the design that this Academy should say out loud rather than discover for you in April.
Covered and uncovered
The 2026 regime introduces a distinction that decides who is responsible for the number.
A covered digital asset is one acquired on or after 1 January 2026 in an account where the broker provides custodial services. For these, the broker reports both proceeds and adjusted basis.
Everything else is uncovered. Acquired before 2026. Acquired elsewhere and transferred in. Held in self-custody. For these the proceeds may be reported and the basis is yours to prove.
The reporting timeline, which is F108-03's subject in detail:
- 2025 transactions: brokers report gross proceeds only. Forms furnished in early 2026.
- 2026 transactions onward: brokers also report basis, for covered assets. Forms in early 2027.
Follow the definitions through and the conclusion is uncomfortable for everything else this Academy teaches.
F104-02 tells you to hold long-term assets in a vault that connects to nothing. F108's rules say that anything acquired outside a broker's custody, or moved out of it, is uncovered, so nobody but you is tracking its basis.
Both are correct and they point in opposite directions, and pretending otherwise would be dishonest. Self-custody is the right security answer and it transfers the entire record-keeping burden onto you, permanently, with no statement arriving to check your work against.
This is not an argument against self-custody. It is the reason F108-04 exists and the reason the record habit has to be built at the same time as the wallet architecture, rather than reconstructed later from a block explorer and memory.
Identification method
When you dispose of part of a holding acquired at different prices, which lots did you sell? The answer changes the gain, sometimes enormously.
First in, first out is the common default: the oldest lots go first.
Specific identification lets you choose which lots, if you can identify them adequately and did so at the time. This is the flexible option and it has real requirements about contemporaneous records, which is another instance of the same theme.
The mechanics here are genuinely intricate, they interact with the per-wallet rule, and the difference between methods on a large position is not small. This is a question for a professional, and the thing you can do without one is keep records good enough that the choice remains available to you, because a method you cannot substantiate is a method you do not have.
The exchange has all my data, so I can always get my basis from them later.
Three separate problems, and the third is the one that ends badly.
They only have their own part. An exchange knows what happened on its platform. It does not know what you paid on a different platform, what you paid on-chain, or what something was worth when you received it in a wallet it has never seen. The course autopsy is precisely this gap.
They may not have it for long. Exchanges close, get acquired, change systems and purge old data, and no obligation runs to keeping your history available for the years you might need it. F107-04's counterparty exposures apply to your records as much as to your balances.
And their number can be wrong. Reported basis on a covered asset is the broker's calculation from what it observed, and it can be right, incomplete, or wrong. If it is wrong and you have nothing to compare it against, you will not know, and F108-03 covers what to do when the form disagrees with reality.
The realistic position is that a broker's data is a useful source to reconcile against, and F108-L asks you to do exactly that. It is not a system of record, and treating it as one puts your ability to prove a six-figure number inside a company you have no control over.
Basis is what you paid and gain is proceeds minus basis, so a basis you cannot substantiate behaves as zero, which on a $180,000 disposal of a $150,000 position is six times the liability with no wrongdoing anywhere in the story. Since 1 January 2025 that number is tracked per wallet and per account rather than universally, which means your records have to say where as well as what, and which quietly turns F104's three tiers into three sets of books. From 2026 brokers report basis for assets acquired in their own custody, and everything else is uncovered, so the moment you self-custody you become the system of record permanently and no statement arrives to check your work.