On October 9, the IRS issued Revenue Ruling 2019-24, which addresses the tax treatment of cryptocurrency hard forks and airdrops. Very generally, a hard fork occurs when a cryptocurrency splits into two cryptocurrencies: the original pre-fork cryptocurrency and a new post-fork cryptocurrency. An airdrop occurs when a taxpayer receives cryptocurrency on a promotional basis.
Under the ruling, a taxpayer will not be taxed solely as a result of a hard fork, but will be taxed on the fair market value of any airdropped cryptocurrency when the taxpayer has dominion and control over the cryptocurrency.
For a discussion of other IRS actions relating to cryptocurrency transactions, please see our previous BrassTax articles here and here.
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