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***** Scenario 5: Cryptocurrency Airdrops and Forks Taxpayer received...

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Accounting

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Scenario 5: Cryptocurrency Airdrops and Forks
Taxpayer received an airdrop of a new cryptocurrency valued at $5,000 at the time of receipt.
Later, owned cryptocurrency undergoes a hard fork, resulting in an equal amount of a new coin.
No sale of any cryptocurrency during the year.
Wages: $85,000
Interest Income: $800
Itemized Deductions: $18,000
Allowable deduction for self-employment tax: None
Questions:
Discuss the potential tax implications at the time of the airdrop and the hard fork.
Are there realized gains to report? How do you establish a cost basis?
This is an evolving area - explore current IRS guidance on this topic.

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