[aazaa]

The "airdrop" terminology is interesting to say the least.

The closest thing I can see to a definition is in 26 CFR 1.61-1:

> An airdrop is a means of distributing units of a cryptocurrency to the distributed ledger addresses of multiple taxpayers. A hard fork followed by an airdrop results in the distribution of units of the new cryptocurrency to addresses containing the legacy cryptocurrency. However, a hard fork is not always followed by an airdrop.

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

Consider the Bitcoin/Bitcoin Cash hard fork of 2017. No "distributed ledger addresses" received an airdrop distribution.

What happened instead is that the tokens previously valid on a single network (Bitcoin) became valid on a new network (Bitcoin Cash). There was no "distribution" and as such there was no airdrop according to the IRS definition.

On the first block of the Bitcoin Cash split, there was no "recording" of cryptocurrency receipt on the "distributed ledger." There was just a block containing some unrelated (for most users) Bitcoin Cash transactions.

Either the IRS doesn't understand the basis of a hard fork, or it's specifically singling out hard forks coupled to "airdrops" as having received income.

Likewise Situation 1, from the same document:

> 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 Crypto N. Crypto N is not airdropped or otherwise transferred to an account owned or controlled by A.

> ...

> 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.

The use of the word "account" is also problematic, as it implies a custodial relationship with a financial institution, which has nothing to do with Bitcoin itself.

Filling in the blanks:

A holds 50 BTC. On Date 1, BTC experiences a hard fork, resulting in the creation of Bitcoin Cash. Bitcoin Cash is not airdropped or otherwise transferred to an account owned or controlled by A.

A did not receive units of the new cryptocurrency, Bitcoin Cash, 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.

Stay tuned because these rules are going to be refined - a lot.

[jrockway]

I think I got a Stellar "air drop" through Keybase. I don't even want their fake money, but now I have to do extra paperwork to deal with it.

I am surprised that McDonalds can offer you 50 cents off a burger without having to file a 1099.

[toast0]

> I am surprised that McDonalds can offer you 50 cents off a burger without having to file a 1099.

A discount is not income. If they gave you a $0.50 gift card though, that's taxable income, and they should collect a W-9, and file a 1099 if the total of annual amounts adds up to $600 or more; as a recipient, you're required to include it in your income regardless of if the originator filed a 1099 or not.

[traviscj]

This guy taxes.

In seriousness, though, how do you build up this level of comfort/familiarity with the tax code? Did you do it professionally?

[toast0]

No professional experience. I'm intrigued by systems of rules with exceptions, and I have pretty good recall for random, mostly useless data. (It's a useful collection in aggregate). Some amount of motive to minimize taxation; the tldr there is if you wanted a super awesome charitable trust, open it in the 80s; and maybe try to figure out how to get startup stock into a Roth account before it's worth much, but this requires prescience to know it's worth the effort. I think there are some brokerages that could offer enough flexibility to do it, but I only looked into it much too late.

I read bogleheads forums and tax questions are usually interesting to me. I don't like filing my tax returns without understanding why everything is where it is.

All that said, discounts aren't income comes up in the context of "why aren't cash back credit cards taxable, but account opening bonuses are" which also touches on 1099 rules because people complain about bank X issuing 1099s for all the bonuses, even when they aren't near the reporting limit. A quick search to verify that gift cards count as income (because they're considered cash equivalent) also reminded me of the name of the W-9 form.