[floatingatoll]

If you hold pre-fork currency, and there is a hard fork: IF you gain any of the new currency THEN it's income ELSE it's not.

To quote the final paragraph, emphasis mine:

https://www.irs.gov/pub/irs-drop/rr-19-24.pdf

HOLDINGS

(1) A taxpayer does not have gross income under § 61 as a result of a hard fork of a cryptocurrency the taxpayer owns if the taxpayer does not receive units of a new cryptocurrency.

(2) A taxpayer has gross income, ordinary in character, under § 61 as a result of an airdrop of a new cryptocurrency following a hard fork if the taxpayer receives units of new cryptocurrency.

[norswap]

Don't you automatically "receive/gain" the new currency upon a hard fork? Or am I misunderstanding these words?

[nullc]

Depends on how you define "receive". Also "new".

If currency X is hardforks and there now exist X and X' then in all ordinary cases you have access to both X and X'. But did you receive? Your access is because X' copies/extended X's state when it came into existence. There wasn't any new transfer to you.

One part of the text sounds like it's possible to not "receive": "Situation 1: A holds 50 units of Crypto M, a cryptocurrency. On Date 1, the distributed ledger for Crypto M experiences a hard fork, resulting in the creation of CryptoN. Crypto N is not airdropped or otherwise transferred to an account owned or controlled by A."

Another part of the text describing the same facts, instead makes it sound like reception is determined by resulting control: "Situation 1: A did not receive units of the new cryptocurrency, Crypto N, from the hard fork; therefore, A does not have an accession to wealth and does not have gross income under § 61 as a result of the hard fork."

So, taking both these parts together, it sounds like situation 1 is describing an irrelevant and obvious case. It's technically possible for N to be created and copy currency M but leave out A's coins. Obviously A wouldn't owe any taxes as a result. Duh. This wasn't a case anyone was concerned with.

So what if you instead say okay, the coins you got access to via state copying were "received"-- well okay, but now in that case the many times ethereum or bcash were hardforked and the original systems were largely, but not completely, abandoned you'd then owe income tax on essentially the entirety of your holdings. 0_o

[undefined3840]

No. It completely depends on how you hold your crypto. If you are storing it on an exchange it’s completely up to the exchange to credit your wallet, which they don’t necessarily have an obligation to do.

[zucker42]

I would think so too. It makes me question if the IRS understands how decentralized cryptocurrencies work.

[ThrustVectoring]

No. You have one asset that is sellable in part in two different manners. It's exactly as if you bought a two-piece action figure as one lot and then sold the pieces separately.

[panarky]

Why is cryptocurrency treated differently from stocks?

I bought 100 shares of GOOG worth $1000 each, or $100,000 total.

The next day, the stock split and now I own 100 shares of GOOG worth $501 each and 100 shares of GOOGL worth $499 each, or $100,000 total.

Under the stock scenario I don't owe any tax on the new GOOGL shares, but if it was cryptocurrency then suddenly I have to come up with a pile of cash for taxes?

[abduhl]

You have described a spin off or a change in asset of some kind, not a stock split.

A stock split is when the same underlying asset is revalued due to issuance of new shares. It has the same ticker generally.

For a stock split you would owe no additional taxes due to the split itself.

For a spin off, my understanding is that you owe additional taxes on the extra value obtained from the split. Take the pre spin off market value as the combined asset value then compare it to the added value of the two assets after the spin off. If the post spin off value is more then you are taxed on the realized gain.

Switching assets is taxed normally by sale price and new purchase price.

[panarky]

It was a 2-for-1 stock split in 2014 that created a new class of stock.

No taxes were payable on the split, because no new value was created.

The existing value was literally split between the new shares and the existing shares.

https://www.marketwatch.com/story/google-investors-are-about...

[ThrustVectoring]

This should result in differences in tax treatment between exchange-held and wallet-held balances.

If you hold it in a wallet, you have one asset that is dividable into two parts, each transactable on different blockchains. If you hold it on an exchange, you have the right to receive an asset on one blockchain, and after the fork the exchange credits you the right to receive an asset on another blockchain.

These are different events. Arguably, all exchange balances in new blockchains are basically "airdrops" of new economic rights. It's not directly held assets, but rather an abstraction over it, and this abstraction is different. If the exchange wants to, it can refuse to give you airdropped or hardforked assets on "your" crypto.