It depends on your circumstances.
Hard Fork, Airdrop and Revenue Ruling 2019-24
Revenue Ruling 2019-24 addresses whether a taxpayer has gross income under Section 61 of the Internal Revenue Code of 1986 (the Code)2 as a result of two types of transactions: the occurrence of a hard fork (i.e., when a cryptocurrency undergoes a change that may result in the creation of a new cryptocurrency in addition to the legacy cryptocurrency) and an airdrop (i.e., when a taxpayer receives new units of cryptocurrency following a hard fork).
The Revenue Ruling addresses only transactions involving a cryptocurrency, a type of virtual currency that uses cryptography to secure transactions that are digitally recorded on a distributed ledger.
The IRS ruled on two separate fact patterns and both conclusions hinged on whether the taxpayer in the particular case “received” the newly created cryptocurrency for U.S. federal income tax purposes. The IRS explained that although the receipt of cryptocurrency from an airdrop generally occurs when it is recorded on the new distributed ledger, “receipt” for U.S. federal income tax purposes does not occur unless the taxpayer is able to exercise complete dominion and control over the new cryptocurrency.
For example, the IRS stated that a taxpayer does not have dominion and control if the address to which the new cryptocurrency is airdropped is in a wallet managed through a cryptocurrency exchange that does not support the newly created cryptocurrency. In that example, the IRS stated that the taxpayer is treated as receiving the new cryptocurrency for U.S. federal income tax purposes only when the taxpayer acquires the ability to transfer, sell, exchange or otherwise dispose of the new cryptocurrency.
In the first fact pattern, a taxpayer owned a cryptocurrency that experienced a hard fork, resulting in the creation of a new cryptocurrency that was not airdropped or otherwise transferred to the taxpayer’s account. In this case, the IRS ruled that because the taxpayer did not receive the new cryptocurrency and did not have accession to wealth, the taxpayer did not have gross income as a result of the hard fork.
