Definition ∞ Noncovered Securities refers to financial assets for which a broker is not legally obligated to report cost basis information to the Internal Revenue Service (IRS). In the context of digital assets, many cryptocurrencies currently fall into this category, meaning investors must independently track and report their own cost basis for tax purposes. This classification places a greater burden on individual taxpayers to maintain accurate records. The distinction impacts tax reporting obligations.
Context ∞ The classification of digital assets as Noncovered Securities is a key discussion point in crypto tax news, particularly as regulatory bodies seek to clarify reporting requirements. The IRS has been working to update guidance, potentially shifting more digital assets into the “covered” category in the future. This ongoing evolution affects compliance strategies for both individuals and institutional investors in the crypto space.
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