Inherited a Polymarket Wallet or Kalshi Account? How It's Taxed

When someone dies holding Polymarket shares or Kalshi positions, their results up to the date of death go on a final tax return. Property that passes to heirs generally takes a new basis equal to its fair market value at death, so paper gains before death usually escape income tax. A position that had already resolved may not get that treatment, because it may be a right to income. There's no guidance specific to prediction markets, so expect some open questions.

OddsFile is software, not tax advice. The IRS has not issued guidance on how prediction-market contracts are taxed. This article explains the options and the sources behind them; a tax professional can tell you which position fits your situation.

First: access and security

Before tax comes access. A self-custody wallet has no customer support. Without the seed phrase or keys, assets may be unreachable, and the wallet's value may still count in the estate. Don't share a seed phrase with anyone offering to help, and be careful with anyone offering recovery services.

Kalshi and Robinhood are regulated venues, so their support teams are the route. Contact them with the death certificate and estate documents. We haven't found a published procedure for either, so ask.

The final return

The IRS says to prepare the final return the same way you would if the person were alive, including all income through the date of death, on Form 1040 or 1040-SR. Publication 559 is the guide for survivors and executors.

Past omissions are worth a look. If the person traded for years and never reported, the executor inherits that issue. See how to fix unreported income.

New basis at death

Section 1014(a) says the basis of property acquired from a decedent is generally its fair market value at the date of death. This works in both directions.

Paper losses vanish at death. That's useful to know if someone seriously ill is holding big losers: a sale in their lifetime lets the loss count, subject to their treatment. That's a planning question to take to a preparer, not something to rush.

Inherited property generally counts as held long term, even if sold soon after. This might matter under capital treatment.

Worked example

Using the first row: the market resolves YES after death, and the heir redeems for $1,000.

Without the step-up, the gain would have been $700. Value at death is what matters, so save the market price from the date of death, with evidence.

The exception: income in respect of a decedent

Section 1014(c) says the basis reset doesn't apply to a right to receive income in respect of a decedent. Think of income the person had earned but not yet received.

Accrued Kalshi interest not yet paid is a clear example. A resolved winner that hadn't been redeemed is the hard case:

No authority says how this works for outcome tokens. If a winner resolved before death, the conservative view is to include its gain on the final return, or treat it as income in respect of a decedent, not to claim a reset. Discuss it with the estate's preparer.

Gambling treatment

If the person reported as a gambler, an open wager isn't obviously "property" with a basis reset, and the 1014 analysis is less clear. There's no guidance here either. The estate might want a consistent position.

Estate tax and Form 1041

Most estates aren't large enough for federal estate tax, but the value of positions counts. The estate's income goes on Form 1041, which also has a digital asset question. Income the estate earns after death, such as rewards, interest or gains, is reported there. Check with a preparer on the current filing threshold, and on state estate or inheritance taxes.

Moving assets to an heir

A transfer from a deceased person's wallet to a beneficiary isn't a sale, and it isn't income to the beneficiary as such. Still, document it: date of death, wallet, position values and the path of each transfer.

If no one moves anything, rewards may keep arriving, and markets will keep resolving. Watch the calendar.

What an executor should do

1. Find wallets, accounts and addresses, starting with email and tax files.
2. Secure access before anything else.
3. Save a snapshot of every position and its price at the date of death.
4. Separate pre-death results for the final return.
5. Identify resolved positions that weren't redeemed.
6. Keep every record for the estate's file. See how long to keep records.

Run the free OddsFile check: paste a Polymarket or Hyperliquid address and see your 2025 or 2026 P&L, no signup. It's a public-address tool, so you can use it to see the history without needing the wallet keys.

FAQ

Is an inherited Polymarket balance taxable income?

Inheriting property generally isn't income. Gains after death are.

Does a stablecoin balance get stepped up?

It's property with a value near $1, so a reset has little effect.

What if nobody has the seed phrase?

The assets may be lost for practical purposes. Ask a preparer how to document that for the estate.

Do heirs need the decedent's original cost?

Mostly they need value at death, but the original cost remains relevant for the final return and any disposal before death.