The cost basis calculation for gifts can be tricky. Generally, the receiver of the gift will take on the cost basis of the person who gifted the cryptocurrency. 

There is an exception to this rule if the donor’s cost basis was higher than the market value of the cryptocurrency at the time of the gift. If the market value of now lower than the gifter’s cost basis then the receiver’s cost basis is instead the fair market value of the cryptocurrency at the time of the gift. If the receiver of the gift then receives a gain from subsequently selling the cryptocurrency then the receiver is allowed to disregard the sale and not report it.

The purpose of the exception is to disallow the sharing of capital losses through gifts.

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