December 2025- Q&A, Virtual Currency

Q&A with virtual currency

Q1. One of my cryptocurrencies went through a hard fork, but I did not receive any new cryptocurrency. Do I have income?
A1. A hard fork occurs when a cryptocurrency undergoes a protocol change resulting in a permanent diversion from the legacy distributed ledger. This may result in the creation of a new cryptocurrency on a new distributed ledger in addition to the legacy cryptocurrency on the legacy distributed ledger. If your cryptocurrency went through a hard fork, but you did not receive any new cryptocurrency, whether through an airdrop (a distribution of cryptocurrency to multiple taxpayers’ distributed ledger addresses) or some other kind of transfer, you don’t have taxable income.

Q2: One of my cryptocurrencies went through a hard fork followed by an airdrop, and I received new cryptocurrency. Do I have income?
A2. If a hard fork is followed by an airdrop and you receive new cryptocurrency, you will have taxable income in the taxable year you receive that cryptocurrency.

Q3: How do I calculate my income from cryptocurrency I received following a hard fork?
A3: When you receive cryptocurrency from an airdrop following a hard fork, you will have ordinary income equal to the fair market value of the new cryptocurrency when it is received, which is when the transaction is recorded on the distributed ledger, provided you have dominion and control over the cryptocurrency so that you can transfer, sell, exchange, or otherwise dispose of the cryptocurrency.