IRS just published tax guidance on Cryptocurrency forks

Chris Burns - Oct 9, 2019, 2:02pm CDT
IRS just published tax guidance on Cryptocurrency forks

In May of this year, IRS Commissioner Charles Rettig made a comment about releasing future guidance on the taxation of cryptocurrency in the USA. Today that guidance was revealed. This is the first guidance released by the IRS on this subject since their relatively thin set of comments on the matter all the way back in the year 2014. A lot has changed in cryptocurrency since the year 2014, including the two most major rises and falls of Bitcoin since the dawn of the blockchain.

Two new questions were sort-of answered by the IRS today in documentation. One regarded gross income for the Internal Revenue Code as a result of a hard fork of cryptocurrency. The other question was the same, but regarding “an airdrop of a new cryptocurrency following a hard fork.”

In both situations, it would appear official now that a taxpayer does not have gross income under rule section 61 of the Internal Revenue Code (Code) as result of a hard fork of cryptocurrency the taxpayer owns if the taxpayer does not receive units of a new cryptocurrency. The opposite is true, too – if that taxpayer receives units of a new cryptocurrency, via airdrop following a hard fork, that taxpayer has gross income under section 61.

That’s not necessarily perfectly clear for all cryptocurrency users, of course, as it’s not always really easy to discern whether “units” of a cryptocurrency have actually been “received” since there are so many different factors that can come into play.

Regardless of the less-than-perfectly-precise nature of the documentation provided, it is always nice to have a little bit more clarity. The IRS is also publicly suggesting that they are “soliciting public input on additional guidance in this area.”

You can read the full guidance today at the official IRS release website. These comments were released on October 9, 2019 with code IR-2019-167 and a link to the full commentary on the new rule “Revenue Ruling 2019-24: for 26 CFR 1.61-1: Gross income. This has specifically to do with hard forks of cryptocurrency.

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