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IRS: Frozen Crypto Rewards Taxable Despite Account Lockdowns

Author: Content Editor
The IRS has stated that crypto rewards received before an account freeze are taxable in the year they are received, even if holders cannot access their funds later. The guidance from the IRS addresses the tax obligations of digital asset rewards in accounts that have been frozen due to bankruptcy. The IRS explains that income must be recognized in the year it is received, regardless of later inaccessibility. The IRS also clarifies that the value of the rewards is determined at the date and time they were credited to the account. Only rewards that have not yet been credited before the freeze are exempt from taxation until they are accessible. This ruling emphasizes the importance of understanding tax obligations in cases of digital asset holdings.

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