Statutory definition

“2. Acquisition cost under the preceding paragraph shall be: 1. For crypto-assets acquired by gift, inheritance, or bequest, excluding gifts or bequests under Article 40, paragraph 1, item 1 (Inclusion in Gross Receipts upon Gifts of Inventory, etc.), the value at the deceased’s death under the valuation method the deceased was required to use for those assets. 2. For crypto-assets acquired through a transfer under Article 40, paragraph 1, item 2, the sum of transfer consideration and the amount prescribed in that item.”

This is Income Tax Act Enforcement Order Article 119-6, paragraph 2. Inheritance-type acquisitions must be distinguished from ordinary lifetime gifts. The former carry over the value calculated at death; ordinary lifetime gifts use the assets’ fair value at the gift date.

The striking feature is how inheritance-type acquisition costs are determined. Covered cases are gifts effective on death to heirs, inheritance, universal bequests, and specific bequests to heirs. Rather than resetting to fair value at receipt, they carry over the value calculated at death under the deceased’s required valuation method.

The sentence contains two conditions. One concernswhen to measure:the deceased’s time of death. The other concernswhich valuation method to use:the method the deceased was required to use. Total-average and moving-average methods can produce different amounts. This article examines that second condition.

For acquisition costs generally, including purchases, self-issuance, and other acquisitions, see How is the acquisition price of crypto assets held by individuals determined? summarizing in

Overview

What Is Carried Over?

What paragraph 2, item 1 carries over isAmountthe amount, not the valuation method itself.

The deceased’s required method is a tool for calculating the amount. The resulting value becomes the recipient’s acquisition cost. This item says nothing about the recipient’s subsequent method.

Separate provisions determine the recipient’s method. Article 119-3, paragraph 2 requires a resident acquiring crypto-assets to notify the competent tax office in writing of the applicable method from those in the preceding article. Without notification, Article 119-5, paragraph 1 applies the total-average method.

Thus, a deceased person’s moving-average method does not automatically become the heir’s method. What carries over is the amount calculated at death.

What Changes Depending on Total-Average or Moving-Average Treatment?

Article 119-2, paragraph 1 defines the methods.

The total-average method divides the combined acquisition cost of same-type crypto-assets held on January 1 and acquired during the year by their total quantity to obtain unit acquisition cost. It averages the whole year together.

The moving average method is “a method under which the acquisition cost per unit is deemed revised in the same manner each time crypto assets of the same type are acquired, and the acquisition cost per unit deemed revised on the date closest to December 31 of that year is used as the acquisition cost per unit.” The unit cost is revised with each acquisition.

Even with identical purchases, these two methods do not produce the same per-unit amount. The amount carried over under Article 119-6(2)(i) also depends on which method the deceased used.

There is also a timing issue. The opening provision of Article 119-2(1) specifies the valuation date as “December 31 of that year (if the resident referred to in that paragraph dies or departs from Japan during the year, the time of that death or departure; the same applies in item (ii)).” Thus, if death occurs during the year, the reference point is the time of death, not December 31. The closing words “the same applies in item (ii)” can be understood as addressing the reference to “December 31 of that year” in the definition of the moving average method. Under that method, the relevant unit cost is the revised cost on the date closest to the time of death.

For the definitions of the total average and moving average methods and the notification procedure, see The average method and moving average method — how to evaluate individual crypto assets and how to report them in detail.

What If the Previous Owner Had Not Filed a Notification?

Article 48-2(1) of the Income Tax Act provides that the value of crypto assets held at year-end is “the amount valued using the valuation method selected by that person for crypto assets (if no valuation method was selected, or valuation was not performed using the selected method, the amount valued using the method prescribed by Cabinet Order).” The parenthetical provision addresses the case where no method was selected.

That “method prescribed by Cabinet Order” is set out in Article 119-5(1) of the Order for Enforcement of the Income Tax Act. It provides for “valuation at acquisition cost calculated using the total average method specified in Article 119-2(1)(i) (Methods of Valuation of Crypto Assets).”

The selection procedure is in Article 119-3 of the Order. Paragraph (1) requires that “a valuation method for crypto assets must be selected for each type,” and paragraph (2) requires written notification by the final income tax return deadline.

Taken together, these three provisions reveal the structure: use the notified method, or the total average method if no notification was filed. The “valuation method that was required to be used” in Article 119-6(2)(i) was also determined through this framework. Accordingly, if the deceased had filed no notification, the method they were required to use can be read as the total average method.

This is, however, an interpretation based on the structure of the provisions. What happened in an individual case cannot be established without checking actual notifications. Because Article 119-3(1) says “for each type,” the existence or content of a notification may have differed by crypto asset.

A valuation method can also be changed. Article 119-4(1) of the Order requires “approval from the district director of the tax office having jurisdiction over the place of tax payment” to change the selected method, including “the method under paragraph (1) of the following article required to be used by a person who did not notify a valuation method.” If a change was approved in the past, the subsequent method is the method that was required to be used. The relevant question is which method applied at the time of death.

What Does the Other Item Cover?

Paragraph (2) contains item (ii) as well as item (i). For “crypto assets acquired through a transfer specified in Article 40(1)(ii) of the Act,” it specifies “the total of the consideration for that transfer and the amount prescribed in that item.”

Item (i) also contains a parenthetical exclusion. Assets “acquired by a gift or bequest specified in Article 40(1)(i) of the Act (Inclusion in Gross Revenue in Cases of Gifts of Inventory Assets, etc.)” are excluded from item (i).

Both refer to Article 40(1) of the Income Tax Act. Item (i) requires the value at the time to be included in the donor's or other transferor's gross revenue for ordinary gifts and bequests other than universal bequests or specific bequests to heirs. Gifts effective upon death to heirs are excluded. Under paragraph (2) of the same article, the recipient's acquisition cost is also the value at the time of the gift or bequest. Article 87 of the Order includes crypto assets within these provisions.

By contrast, Article 40(1)(ii) of the Income Tax Act concerns transfers at a significantly low price where part of the difference is recognized as effectively a gift. Article 119-6(2)(ii) of the Order specifies the acquisition cost in such a transfer as the sum of the actual consideration and the effective gift amount. Acquisition cost for inheritance, ordinary gifts, and transfers at a low price is therefore determined differently.

Is This the Same as Calculating Inheritance Tax?

No. These are different matters.

This article concerns what Article 119-6(2) of the Order for Enforcement of the Income Tax Act specifies asAcquisition price. This amount forms the basis for valuation under Article 119-2(1) of the Order and feeds into the calculation of income when the received crypto assets are later sold or used.

Taxation of the inheritance or gift itself is governed by a different law. We have not examined the relevant calculation provisions in this article and do not address them here.

The key point is that the same crypto asset may have different amounts for different purposes. It is necessary to distinguish which calculation is involved rather than importing an amount from one into the other.

Points that require care in practice

• Whether the recipient can establish if the deceased had notified a valuation method. The amount carried over changes depending on whether a notification was filed.
• If several crypto assets were held, notification details may have differed by asset. Article 119-3(1) of the Order requires selection “for each type.”
• For an ordinary lifetime gift, acquisition cost is the market value at the time of the gift. When a resident gives crypto assets, the donor generally includes their value at the time in gross revenue and deducts the transfer cost as a necessary expense, so income may arise even without receiving cash.
• Which valuation method the recipient will use. Without notification under Article 119-3(2) of the Order for Enforcement of the Income Tax Act, the total average method applies under Article 119-5(1).
• Confirm the form of gift or bequest and whether the recipient is an heir. Acquisition cost is determined differently for gifts effective upon death or specific bequests to heirs, compared with other gifts or specific bequests.
• The FY2026 tax reform indicates changes to taxation of individuals’ crypto-assets. Treatment of acquisition-cost rules must be confirmed in the statutory text. The Outline is discussed in Key points of the FY2026 tax system revision outline summarizing in

Legal basis

• Order for Enforcement of the Income Tax Act, Article 119-6(2) (Acquisition Cost of Crypto Assets) / Quoted wording: “The acquisition cost under the preceding paragraph for the crypto assets listed in the following items shall be the amount specified in each item: (i) Crypto assets acquired by gift, inheritance, or bequest (excluding those acquired by a gift or bequest specified in Article 40(1)(i) of the Act (Inclusion in Gross Revenue in Cases of Gifts of Inventory Assets, etc.)): the amount valued at the time of the deceased's death using the valuation method the deceased was required to use for those crypto assets. (ii) Crypto assets acquired through a transfer specified in Article 40(1)(ii) of the Act: the total of the consideration for that transfer and the amount prescribed in that item.”
• Order for Enforcement of the Income Tax Act, Article 119-2(1) (Methods of Valuation of Crypto Assets) / Quoted wording: “December 31 of that year (if the resident referred to in that paragraph dies or departs from Japan during the year, the time of that death or departure; the same applies in item (ii))”; “a method using as acquisition cost per unit the total acquisition cost of crypto assets of the same type held on January 1 of that year plus the total acquisition cost of those acquired during the year, divided by their total quantity”; “a method under which, when crypto assets of the same type are acquired again, the original acquisition cost per unit is deemed revised to the average unit cost calculated using the quantities and acquisition costs of the assets held at that time and the assets newly acquired; thereafter the unit cost is deemed revised in the same manner on each acquisition of the same type, and the unit cost deemed revised on the date closest to December 31 of that year is used as the acquisition cost per unit.”
• Order for Enforcement of the Income Tax Act, Article 119-3(1) (Selection of a Crypto Asset Valuation Method) / Quoted wording: “A valuation method for crypto assets must be selected for each type.”
• Order for Enforcement of the Income Tax Act, Article 119-3(2) (Selection of a Crypto Asset Valuation Method) / Quoted wording: “By the final income tax return deadline for the year in which that date falls, written notification must be made to the district director of the tax office having jurisdiction over the place of tax payment of the method to be used, from among those specified in paragraph (1) of the preceding article, for crypto assets of the same type.”
• Order for Enforcement of the Income Tax Act, Article 119-4(1) (Procedure for Changing a Crypto Asset Valuation Method) / Quoted wording: “including the valuation method specified in paragraph (1) of the following article that a person who has not notified a valuation method is required to use”; “must obtain approval from the district director of the tax office having jurisdiction over the place of tax payment.”
• Order for Enforcement of the Income Tax Act, Article 119-5(1) (Statutory Crypto Asset Valuation Method) / Quoted wording: “The method shall be valuation at acquisition cost calculated using the total average method specified in Article 119-2(1)(i) (Methods of Valuation of Crypto Assets).”
• Income Tax Act, Article 48-2(1) (Calculation of Crypto Asset Transfer Costs and Methods of Valuation) / Quoted wording: “The amount shall be the amount valued using the valuation method selected by that person for crypto assets (if no valuation method was selected, or valuation was not performed using the selected method, the amount valued using the method prescribed by Cabinet Order).”

Additional Authorities and Sources

• National Tax Agency: Tax Treatment of Crypto-Assets, etc. (FAQ), December 26, 2025
• Income Tax Act (e-Gov)
• Order for Enforcement of the Income Tax Act (e-Gov)

Sources checked September 7, 2026.