Guidance Addresses BTC-to-BCH Hard Fork

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CCA 202114020 addresses the tax consequences of bitcoin’s 2017 “hard fork,” which created bitcoin cash. Under the CCA, taxpayers who received bitcoin cash as a result of the hard fork had gross income when they had “dominion and control” over the bitcoin cash.

The CCA clarifies Revenue Ruling 2019-24. Under that ruling, taxpayers had gross income as a result of a hypothetical hard fork followed by an “airdrop.” Some taxpayers wondered whether the ruling applied equally to non-airdrop events. In response, the CCA provides that “the specific means by which the new cryptocurrency is distributed or otherwise made available to a taxpayer following a hard fork does not affect the Revenue Ruling’s holding.”

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. Attorney Advertising.

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