[nullc]

Sorry, You've misunderstood my comment.

Some people, like the person I was responding to, are looking at Situation 1 in the ruling as saying that when a fork happens and there are two cryptocurrencies and you didn't receive any additional "new" cryptocurrency (just two, now independently spendable, copies of cryptocurrency you already had) that taxes aren't owed.

They adopt this reading in part because the only other interpretation of Situation 1 is that it's talking about an irrelevant and uninteresting case.

They imagine that you only owe taxes if in addition to the coins copied by the fork you also receive additional "air drop" units, Situation 2's 'owned 50, airdropped 25' contributes to that interpretation.

They think in situation 1 you have 50 coins of M and 50 coins of N and owe no taxes, and in situation 2 you have 50 coins of R and 75 coins of S and owe taxes on 25 S.

I think this interpretation doesn't work well, both because it's totally silent on the cost basis of the copied coins and because of the text at the top of page 5.

As a separate problem with this ruling, if you do adopt the view that when a fork comes into existence you "received" coins, there is usually no fair market value at that time because the coins were not tradable in any way until later. In some cases seen so far one side of the fork or another doesn't become effectively tradable for months, we may eventually see examples where a market doesn't form for years.

[In a few cases there is potentially a FMV at fork time, e.g. when there were liquid futures markets ahead of the fork (has only happened even arguably once, AFAIK), or when many market participants decided to give the new asset the old asset's ticker.]

[gamblor956]

Your misreading the ruling. It considers the forked coins to be new coins. However they're not income until actually received in your exchange account.

The cost basis of the new coins is $0 because you paid nothing to acquire them. If they have value when received for some reason, they take on the value you claim as income in your tax return. This may be possible if for example other exchanges have already enabled transactions in that fork and established a value.

[nullc]

> However they're not income until actually received in your exchange account.

What exchange account? -- yes, many (IMO foolish) users keep coins in exchanges, many don't. :)

I'd love to read it the way you're reading it.

> The cost basis of the new coins is $0 because you paid nothing to acquire them.

The document states:

> When a taxpayer receives property that is not purchased, unless otherwise provided in the Code, the taxpayer’s basis in the property received is determined by reference to the amount included in gross income, which is the fair market value of the property when the property is received.

So I guess you'd take the position that if you got access to the coins at the instant of the fork, when there is no FMV yet, then you'd report $0 income and have a $0 cost basis. Otherwise, if your access was delayed and there was a FMV, you'd treat that as income and it would become your cost basis?

[gamblor956]

What exchange account? -- yes, many (IMO foolish) users keep coins in exchanges, many don't. :)

Doesn't matter, only that you use an exchange for the guidance to apply. If you receive the coins directly, this guidance isn't really relevant.

So I guess you'd take the position that if you got access to the coins at the instant of the fork, when there is no FMV yet, then you'd report $0 income and have a $0 cost basis. Otherwise, if your access was delayed and there was a FMV, you'd treat that as income and it would become your cost basis?

Yes, correct. If the forkcoin is worth $X at the time of receipt, you are taxed on $X income because your cost basis at the time is $0. But because you were taxed on $X, your cost basis is set to $X.