A noncovered digital asset is a digital asset sold through a broker for which the broker is not required to report cost basis on Form 1099-DA. It includes units acquired at the broker before January 1, 2026, units transferred into the account from a wallet or another broker, and any unit for which the broker holds no acquisition record.
When a broker sells a noncovered unit for a customer, the Form 1099-DA line carries the proceeds and, in most cases, an empty basis field with the form marked to show that basis was not reported to the IRS. The broker is not saying the units had no cost; it is saying it does not hold, or is not required to report, the acquisition record. Under the rules a broker may still report basis for a noncovered unit where it has the information, but the customer cannot rely on it happening.
Most digital assets held in early 2026 are noncovered, because anything bought before January 1, 2026 is noncovered by date, and anything moved in from self-custody is noncovered by origin. Covered lots build up over time as new purchases are made at a broker. Until then the taxpayer, not the broker, holds the basis for the bulk of what is sold.
The taxpayer. Under Regulations section 1.6045-1 basis reporting for sales on or after January 1, 2026 is mandatory only for covered digital assets. For a noncovered unit the return still has to show the correct basis under section 1012, and the source is the taxpayer's own records: the original purchase confirmation, the exchange history where the units were first bought, the on-chain record of a swap, or the fair market value on receipt where the units came in as income. The sale is entered on Form 8949 in the box for basis not reported to the IRS, with the taxpayer's figure in the basis column.
Where the basis cannot be substantiated, the position defaults against the taxpayer: a unit with no evidence of cost is treated as having no cost, and the whole of the proceeds is gain. That is why the acquisition history matters more for noncovered units than for covered ones. A transferred-in digital asset arrives at the broker with no basis attached, and the record that supports its basis lives in the wallet or exchange it came from. Building that record after the fact is portfolio reconstruction, and it is easier the closer it is done to the original transactions.
The responsibility does not change when the broker chooses to report a basis voluntarily. A figure a broker reports for a noncovered unit, whether from its own partial records or from information the customer gave it, is still the taxpayer's number to verify, and the return carries the taxpayer's cost basis, adjusted on Form 8949 where the broker's figure is wrong.
Tax software reads an exchange deposit with no matching withdrawal in the imported data as a new acquisition at zero cost. A noncovered lot that was bought for $30,000 in a self-custody wallet, transferred in, and sold for $32,000 then shows as a $32,000 gain instead of $2,000. The broker's blank basis field and the software's zero basis reinforce each other, and nothing in either source flags that the purchase record exists elsewhere.
Read our 1099-DA accounting and cost basis reconciliation
CountDeFi establishes basis for noncovered digital assets from your complete transaction history, including transfer matching, purchase records from prior years and Form 8949 preparation. See pricing.
