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Do NFTs Get a Step-Up in Cost Basis at Death?

Apr 6, 2022 | Financial Concepts

With the adoption of digital assets such as non-fungible tokens, or NFTs, questions around estate planning will become more prevalent. At the date of death, many assets “step-up” in basis, effectively wiping away any unrealized gains.

NFTs are treated as either property or as a collectible depending on the type of asset it is. Both property and real estate are eligible for a step-up in basis at the date of death for the beneficiary. 

That means that if you bought your Bored Ape Yacht Club NFT for the low price of $50,000, and it’s now worth $500,000, the basis resets at $500,000 when you pass away (or whatever the equivalent is in ETH at the time should you prefer to value things in ether). 

One exception to this: If you happen to own your NFT inside of an individual retirement account (most likely in a “self-directed IRA”), such as an IRA or Roth IRA, this step-up in basis would not occur.

Additional reading: Here a blog post that does a good job of giving examples of what NFTs could be considered property and real estate.

Clint Walkner

Note: We are not CPAs. Please consult a tax professional if you have any tax questions specific to your own personal situation.

Walkner Condon Financial Advisors is a registered investment advisor with the SEC and the opinions expressed by Walkner Condon Financial Advisors and its advisors in this piece are their own. Registration with the SEC does not imply a certain level of skill or training. All statements and opinions expressed are based upon information considered reliable although it should not be relied upon as such. Any statements or opinions are subject to change without notice.

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