Internal Revenue Services (IRS) has finally revealed the IRS cryptocurrency Tax guidelines in the wake of cryptocurrency hard forks.
A recent issue by the United States Internal Revenue Service aimed to initialize new ruling- “Revenue Ruling”.
Applicable for the years 2019-2024, it primarily addresses two questions, followed by a six-page evaluation answering those questions. The issue was published to address the taxes levied owed to a cryptocurrency diversion of network protocol- in technical terms, a “hard-fork”.
IRS cryptocurrency Tax guidelines for a hard fork
The questions asked were as follows:
1) In case a taxpayer does not receive units of a new cryptocurrency, does the taxpayer have a total income below §61 (sixty-one) of the Internal Revenue code owed to a hard fork?
2) In case a taxpayer does receive units of a new cryptocurrency, as a result of the distribution of new cryptocurrency tokens, does the taxpayer have an income below §61 (sixty-one)?
As previously stated, the questions were followed by an answer to the two addresses. The answer to the first was a “no”, explaining that the taxpayer had not been conferred with cryptocurrency. Thereby, he neither has credited gross income, nor an “accession to wealth”.
The answer to the second was a “yes”, by signifying that in this case, the taxpayer had received the cryptocurrency. However, the guidance itself drew up considerable doubt when addressing what exactly “receiving” cryptocurrency meant. Alongside this, the risk of “phantom income” via tax liability is greatly increased. This could be due to easily liquidated assets or income that is in fact, never received.