Do I need to report a "free" NFT?

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,

1333

Expert Alumni

Feb 27, 2022 8:38:01 AM

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.

Level 2

Feb 27, 2022 9:34:51 AM

Thanks Leonard.

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

Expert Alumni

Feb 28, 2022 6:01:23 AM

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

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Do I need to report a "free" NFT?