[nullc]

How do you square your interpretation with the text at the top of page 5?

It appears to be saying in situation 1 you have no N-coins at all. By exclusion, situation 2 would apply if you have the new coins and it clearly states taxes are owned on the market value in that case.

[gamblor956]

Not sure I understand your confusion. If you don't receive the forked coins (situation 1) you don't have income. It doesn't matter why you didn't get any of the forked coins.

[nullc]

I was reading the top of page 5 as "the user doesn't have any crypto N after the hardfork". I understand your reading now.