Ask the Taxman: Does gifting appreciated cryptocurrency to someone result in the gift giver not paying taxes based using the annual exclusion? Does the cost basis reset?
When you give appreciated assets (a house, stocks, cryptocurrency, artwork, etc.) the giver’s cost basis becomes the recipient’s cost basis* so if you give $10,000 in cryptocurrency that cost you $5,000, the cost for recipient/donee purposes of calculating capital gains remains $5,000 and they would use your date of purchase.
* except in certain circumstances such as if the value is less at the time of the gift than the original cost or if the property is sold for less than the value on the date of gift.
Since the gift giver no longer owns the cryptocurrency when sold, they would not be responsible for reporting the gain/loss.
Remember, you can only gift up to $15,000 in 2021 and it is raised to $16,000 in 2022. If you make a give with a value of more than these amount to any one person, you will need to file a gift tax return.
Answer requested by Larry Boyer