4 ms·

They still haven't issued guidance on how to treat forks like BTC/BCH, have they?

kentm 9y ago
It’s still ambiguous but the most straightforward way is to treat it as miscellaneous income, which is how I reported it.
- ryanmarsh 9y ago
  If Apple's stock were to split and then "moon" would you claim the difference in portfolio value as misc income? That sounds nonsensical to me. The IRS guidance states it can be treated as a capital asset. You're still HODLing right? Right?
  - kentm 9y ago
    I did the research a few months ago and don’t remember the details, so sorry if this is vague. There are certain criteria that are required for something to be treated as a split and IIRC coin forks were really iffy in this case. The usual case in a stock split is that you get either more of the same security or something of similar likeness (a non voting class of shares in the case of the google split), which is arguable in the case of crypto. You could argue it’s a split to save money and if you had a huge amount in BTC at the time of the split it’d be worthwhile. My tax savings were going to end up being trivial so I went with what was “safe”. Edit: noticed your comment about Apple stock “moon”-big. If we’re reporting the fork as income then it’d be income at the value at the time of the fork. So if you had one BTC then the BCH income would be $277 or so and that would become the cost basis going forward. I didn’t have a lot of BTC so the actual tax cost was very low. If you’re holding thousands of BTC at the time then the story would be different and you’d be incentivized to argue a different tax treatment. Apologies for the wordiness here!!
- kemonocode 9y ago
  Do you owe taxes on unclaimed coin forks? I'd wager no but considering how complex taxation in general has turned out to be with cryptocurrencies...
rblatz 9y ago
I would assume it would be treated like a company spin-off. https://www.investopedia.com/ask/answers/052115/why-are-some-spinoffs-taxable-and-some-are-taxfree.asp https://www.investopedia.com/ask/answers/052115/why-are-some...
- modeless 9y ago
  That assumption is reasonable but unfortunately wrong. The laws around spinoffs are specifically written to apply only to securities (stock in a company) and cryptocurrencies are not securities.
  - gwillen 9y ago
    I don't know who's downvoting this, but this is exactly what my high-paid CPAs told me. I'm hoping the IRS gives guidance, and I'm extra-hoping that they give sane guidance, but the law simply doesn't appear to allow for treating coin splits like stock splits.
kinghajj 9y ago
I consider them the same coins, simply sold twice, to two communities that disagree on where the coins have been sent. Since my cost basis is $0 (mined pre-2013 as a student living with my parents, and didn't bother to report the pittance of an income that would have been), I don't think the IRS will mind.
- ThrustVectoring 9y ago
  Reporting a cost basis of $0 has you paying the maximum amount of taxes. As a general rule, the IRS doesn't care if you decide to say that you owe the maximum possible amount of taxes - it generally focuses on possible underpayment, not overpayment.
swyx 9y ago
this is the frustrating thing to me. IRS shouldnt be allowed to stay ambiguous on basic accounting issues (listen to https://letstalkbitcoin.com/blog/post/the-bitcoin-game-53-advanced-crypto-taxes-with-zac-mcclure https://letstalkbitcoin.com/blog/post/the-bitcoin-game-53-ad...) if they also want to tax it. particularly if the tax year has already passed, how does it make sense for the IRS to retroactively define tax guidance. if you dont bother to define the rules of the game then you're just pretty much barefacedly just abusing your legal power to tax whatever you want to tax for the sake of taxing.
- loeg 9y ago
  There's nothing retroactive about this. Just a gentle reminder of the rules that already exist.

It’s still ambiguous but the most straightforward way is to treat it as miscellaneous income, which is how I reported it.

ryanmarsh 9y ago
If Apple's stock were to split and then "moon" would you claim the difference in portfolio value as misc income? That sounds nonsensical to me. The IRS guidance states it can be treated as a capital asset. You're still HODLing right? Right?
- kentm 9y ago
  I did the research a few months ago and don’t remember the details, so sorry if this is vague. There are certain criteria that are required for something to be treated as a split and IIRC coin forks were really iffy in this case. The usual case in a stock split is that you get either more of the same security or something of similar likeness (a non voting class of shares in the case of the google split), which is arguable in the case of crypto. You could argue it’s a split to save money and if you had a huge amount in BTC at the time of the split it’d be worthwhile. My tax savings were going to end up being trivial so I went with what was “safe”. Edit: noticed your comment about Apple stock “moon”-big. If we’re reporting the fork as income then it’d be income at the value at the time of the fork. So if you had one BTC then the BCH income would be $277 or so and that would become the cost basis going forward. I didn’t have a lot of BTC so the actual tax cost was very low. If you’re holding thousands of BTC at the time then the story would be different and you’d be incentivized to argue a different tax treatment. Apologies for the wordiness here!!
kemonocode 9y ago
Do you owe taxes on unclaimed coin forks? I'd wager no but considering how complex taxation in general has turned out to be with cryptocurrencies...

rblatz 9y ago

I would assume it would be treated like a company spin-off. https://www.investopedia.com/ask/answers/052115/why-are-some-spinoffs-taxable-and-some-are-taxfree.asp https://www.investopedia.com/ask/answers/052115/why-are-some...

modeless 9y ago
That assumption is reasonable but unfortunately wrong. The laws around spinoffs are specifically written to apply only to securities (stock in a company) and cryptocurrencies are not securities.
- gwillen 9y ago
  I don't know who's downvoting this, but this is exactly what my high-paid CPAs told me. I'm hoping the IRS gives guidance, and I'm extra-hoping that they give sane guidance, but the law simply doesn't appear to allow for treating coin splits like stock splits.

kinghajj 9y ago

I consider them the same coins, simply sold twice, to two communities that disagree on where the coins have been sent. Since my cost basis is $0 (mined pre-2013 as a student living with my parents, and didn't bother to report the pittance of an income that would have been), I don't think the IRS will mind.

ThrustVectoring 9y ago
Reporting a cost basis of $0 has you paying the maximum amount of taxes. As a general rule, the IRS doesn't care if you decide to say that you owe the maximum possible amount of taxes - it generally focuses on possible underpayment, not overpayment.

swyx 9y ago

this is the frustrating thing to me. IRS shouldnt be allowed to stay ambiguous on basic accounting issues (listen to https://letstalkbitcoin.com/blog/post/the-bitcoin-game-53-advanced-crypto-taxes-with-zac-mcclure https://letstalkbitcoin.com/blog/post/the-bitcoin-game-53-ad...) if they also want to tax it. particularly if the tax year has already passed, how does it make sense for the IRS to retroactively define tax guidance. if you dont bother to define the rules of the game then you're just pretty much barefacedly just abusing your legal power to tax whatever you want to tax for the sake of taxing.

loeg 9y ago
There's nothing retroactive about this. Just a gentle reminder of the rules that already exist.