The Internal Revenue Service (IRS) of the United States released a memorandum in October addressing the tax obligations of digital asset rewards held in frozen accounts due to bankruptcy. The guidance was sent to Michael R. Fiore of the IRS Small Business/Self-Employed Division and examines a hypothetical taxpayer (referred to as "Taxpayer A") who holds cryptocurrency in a bankruptcy platform account and received rewards such as staking bonuses before the account was frozen.
According to IRS regulations:
Taxpayer A received the reward in the first year before the account was frozen and must include the fair market value of the date and time of receipt of the reward in the total income of the first year...even if the account remains frozen on December 31 of the first year.
This explanation follows provisions in Section 61 and Section 451 of the Internal Revenue Code, which require income to be recognized in the year received, regardless of whether it is later unobtainable.