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>Many believe that you owe taxes as soon as the funds for a bitcon fork are available to you. I think that belief is mistaken. (1) Suppose Bitcoin has a conte

by nokcha 9y ago

>Many believe that you owe taxes as soon as the funds for a bitcon fork are available to you. I think that belief is mistaken. (1) Suppose Bitcoin has a contentious fork into two chains, say BitcoinA and BitcoinB. The supporters of each chain claim that their chain is the "true" Bitcoin. Before the split, you had 1 btc worth $10k, and after the fork, you have 1 btcA worth $5k and 1 btcB worth $5k. Which of the two chains do you owe taxes on? (2) Even if a hard-forked chain is treated as a new asset instead of a split of an old asset, it shouldn't be taxed until the user actually exercises control over it. In order to control funds on a new hard fork, generally the user must take the risky action of installing new (potentially malicious) software and importing their private keys --- this would seem to be a "substantial limitation or restriction" under 26 CFR 1.451-2(a).

dmm 9y ago
That's an interesting position. This is definitely an area that needs more clarification. I do think that treating forks like income is the most conservative interpretation and the one least likely to result in trouble from the IRS.
- raybayfay 9y ago
  Really? So you're going to declare income on the 20 hard forks in 2017 (many were scams / questionable value... if any, also not listed on US exchanges), and on the 50 hard forks this year? Don't you think this is a bit insane??
  - jebeng 9y ago
    There should be some sort of value threshold or something similar. If your holdings of the hard fork's resulting coin is worth less than some trivial amount, then it shouldn't be necessary. But if for some crazy reason the market decides that another joke like Bitcoin Cash is actually worth some significant amount, then it seems hard to argue that this should somehow be immune to tax.
    - raybayfay 9y ago
      Sure I agree that there be a way to differentiate, but the only reasonable approach is that the new fork coins should be unrealized gains until when (or if) you use them (aka trade/sell). It has a 0 cost basis until proven otherwise. Seems simple; meets the requirements; stops bad actors. Only negative is IRS may only get long-term cap gains if someone holds it for a long-time.

by nokcha 9y ago

dmm 9y ago

That's an interesting position. This is definitely an area that needs more clarification. I do think that treating forks like income is the most conservative interpretation and the one least likely to result in trouble from the IRS.

raybayfay 9y ago
Really? So you're going to declare income on the 20 hard forks in 2017 (many were scams / questionable value... if any, also not listed on US exchanges), and on the 50 hard forks this year? Don't you think this is a bit insane??
- jebeng 9y ago
  There should be some sort of value threshold or something similar. If your holdings of the hard fork's resulting coin is worth less than some trivial amount, then it shouldn't be necessary. But if for some crazy reason the market decides that another joke like Bitcoin Cash is actually worth some significant amount, then it seems hard to argue that this should somehow be immune to tax.
  - raybayfay 9y ago
    Sure I agree that there be a way to differentiate, but the only reasonable approach is that the new fork coins should be unrealized gains until when (or if) you use them (aka trade/sell). It has a 0 cost basis until proven otherwise. Seems simple; meets the requirements; stops bad actors. Only negative is IRS may only get long-term cap gains if someone holds it for a long-time.