Do I need to report a "free" NFT?

[TomInVA]

Hi,

I have an account with a company called Nifty Gateway.  As part of their marketing efforts (i.e., getting people to sign up), they ran a sweepstakes where 10,000 new users were given a free Non-Fungible Token (NFT). I was awarded a free NFT.

Is this NFT taxable? The NFT is just sitting in my account.  I haven't sold it, even though I know people are offering me money to buy it.

Thanks,

RB

[LeonardS]

Yes, the NFT will be taxable when you sell or exchange it.  Currently, the IRS treats the sale or exchange of an NFT as a capital sale.

[TomInVA]

Thanks Leonard.

Do I need to report the FMV of the NFT (when it was given to me) on my 2021 taxes?

[ColeenD3]

No, you do not report it when received, only when sold. In that way, it is like any other asset; a house, stock, collectibles.