How Cryptocurrency “Hard Forks” and “Airdrops” Are Taxed
By Anthony Diosdi In 2019, the IRS issued Revenue Ruling 2019-24. This Revenue Ruling provided guidance on the taxation of “hard forks” and “air drops.” Revenue Ruling 2019-24 supplements the basic guidance regarding the tax treatment of virtual currency provided by the Internal Revenue Service (“IRS”) in Notice 2014-21. According to the IRS, cryptocurrency is a type of virtual currency that uses cryptography to secure transactions that are digitally recorded on a distributed ledger, such as blockchain. A distributed ledger records, shares, and synchronizes transactions as data on digital systems without any centralized storage or administration. Revenue Ruling 2019-24 discusses the taxation of a specific type of virtual currency transaction known as a “hard fork” which may be followed by a so-called “airdrop.”As a general rule, a hard fork acts…