IANAA but I imagine it is like a stock split.
Bitcoin Cash is not something that existed inside Bitcoin and was then spun out. It's more like a new company was formed and it's cap table was initialized as a copy of another pre-existing company.
I think there just isn't any precedent for the concept of "forking" and how the internal revenue code applies to it.
The cap table is interesting though. One could say it starts off at $0 but that isn't really true as there is a 'good will' value due to the public knowledge of the fork and that the coin will be worth something.
It would be income tax then, right?
If the coin crashes to 0 a week later, then you'd still pay it too, in theory.
The following are my observations from discussions with my accountant and reading some of the IRS tax codes and "guidance". Do NOT take this as tax advice
In general (within the US) the tax code is treating crypto both as property AND as income.
1) Someone pays you in crypto - income
2) If you mine crypto it is treated as income.
3) If you purchase crypto it is treated as property.
4) If you HOLD crypto it is treated as property.
To break down how this works in regards to taxes. If it is "income crypto" then you are liable for taxes on the value of the crypto at the "moment" you receive it.
1) For example, you received 1 token that is valued at $100 and your tax rate is 22% then you now owe $22 in income tax. If you hold that crypto and it goes to $0; you still owe $22 in income tax.
To further complicate this though, the loss from the $100 to $0 IS a capital loss. So what this means it you made an extra $100 in income, but then you lost $100 in capital losses which you write down against your income so now you are back to owe-ing $0 in income tax on that $100.
Now that may seem like a complicated way of saying you don't owe anything, but the catch is you can only write down $3000 a year of capital losses against your income. You can carry those losses over each year until it is wholly accounted for, but in the meantime, you could end up holding the bag and oweing a lot of money to the IRS.
2) If instead, you purchase 1 token that is valued at $100 and you hold it and it goes to $200 and then sell; you now owe capital gains taxes. If you held for less than 1 year then the $100 gain is classified as capital gains, but taxed like income. If you hold it for more than 1 year it is taxed at the capital gains rates.
BCH received in the split would be treated as free money received (because Bitcoins are currency, not equity interest), so as cash income, and thus would be taxed like cash income.
The only problem is that there is no entity that can issue a notice on how to assign the basis, which is how things are usually handled in equities. The price of BCH was all over the place immediately after the fork, though for a while the price of BTC+BCH was closer to the old price of BTC than BTC alone was, which is what you’d expect.
See this post for an example of a duplicated cap table in an equity market.
https://money.stackexchange.com/questions/23176/in-the-event...