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Comment by pjc50 | Hacker News Reader

Isn't it treated as an unrealised capital gain?

New tax bill specifies that currency-to-currency transfers are now taxable events, I assume this falls in line. It's not only about turning things into fiat.

Really the law's going to have to adapt here if people are ever going to use crypto as an actual currency. Owing capital gains every time you order a latte is nuts.

There is no sale from a new coin being created. There is a sale if you trade coin X for coin Y.

PS: Trading cars with someone counts as 2 sales, assuming the titles change hands.

exactly

This seems more like a stock split than a transfer.

The site I linked argues not because unrealized gains occur when something you own goes up in value. But during a fork you are given (access to) something new.

And if you realize it I imagine your strike price was $0, so its full profit. IANAL tho.

(This thought experiment may be completely wrong, I'm unfamiliar with US tax law)

If people were attempting to propose improvements via forking and this were true, would that not create rather dire tax liabilities?

Say you bought into bitcoin 'original', and then it forks into bitcoin 'improved' as well. Loads of people agree that the improved version is much better and switch to it, leaving the original near worthless.

But then if this interpretation of tax rules were true you'd be left paying cap gains on the full value of the improved version, rather than the difference between original and improved at sale time. Ouch.

I think there's an implication in your thought process that the 'bitcoin original' value, which you bought into, goes to $0. This would constitute a capital loss, and you would have gains up from $0 on the secondary blockchain ('bitcoin improved'). This would seem reasonable to me, as it's essentially a wash. The only thing that would muddy the whole thing up is the holding period for short term and long term capital gains.

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