Some individuals, trusts and even corporations own Virtual currencies. Whether it be Bitcoin, Litecoin, Etherum or some other one,
how do we handle these transactions when it comes to our taxes? The IRS is doubling down on their enforcement efforts when it comes to the reporting of virtual currency and recently announced some new guidance under section 61 dealing with airdrops of new cryptocurrency following a hard fork, where a taxpayer receives units. WOW, say what...a hard fork??? Airdrop....I thought that was Apple's thing.
All of this seems confusing, but the Rev. Rule 2019-24 does explain this fairly well, and for those of you who are hard core Cryptocurrency traders, you know these terms well. From our interpretation, if you do receive new currency as a result of a hard fork, and those currencies are airdropped into your ledger, you have ordinary income to report for the value received. If you've not received the currencies in your distributed ledger, even after a hard fork, then no accession to wealth occurred and you have no income.
We know cryptocurrency can be a lot to try and deal with for taxes, so please reach out to us and let us know your story. We're happy to help and sorry if this blog post is a little geeky, but we're a little geeky too!