Disposal
TAXDEFINITION
Any event that ends your ownership of a specific bitcoin lot — selling, spending, or swapping it — the trigger that turns an unrealized gain into a taxable one.
The IRS defines disposal broadly: selling for dollars, spending at a merchant, and trading for another crypto asset all count equally. Each is treated as if you sold the bitcoin for its fair market value at that moment, then immediately used the proceeds for whatever came next.
What doesn't count matters just as much. Moving bitcoin between wallets you control, or into cold storage, is not a disposal — no coins changed ownership, so nothing is taxable. The confusion is common enough that keeping a clear withdrawal record showing your own address is the single best way to avoid a transfer being misread as a sale.
IN A SENTENCE
“Buying a car with bitcoin is a disposal, even though no dollars ever touched a bank account.”
Key facts
Common questions
Does gifting bitcoin count as a disposal?
Not for the giver below the annual gift exclusion — no gain is realized, though the recipient inherits your original cost basis.
What about losing bitcoin to a hack or scam?
Theft losses are a separate, more limited deduction than capital losses since 2018 tax law changes — track them but expect stricter rules.