The U.S. Internal Revenue Service (IRS) may consider bitcoin cash taxable this year, according to tax experts. Some bitcoin cash recipients could owe tax at rates as high as 39.6%.
Also read: Federal Judge Sides with Coinbase Customer Against IRS
Bitcoin Cash Could be Treated as Income
At the time of the Bitcoin network split on August 1, bitcoin holders received the same amount of bitcoin cash as the bitcoin they were holding at the time. While the IRS may consider the receipt of the new cryptocurrency taxable, “tax experts say there has been no guidance on how to treat the sudden receipt of bitcoin cash,” according to the Wall Street 
“While the IRS has issued guidance on cryptocurrency — labeling it an ‘intangible asset’ for investors subject to capital gains and loss treatment using the realization method — it has not issued guidance on cryptocurrency split or ‘fork’ transactions,” explained CPA Robert A. Green, founder and CEO of Green & Company Inc. He then noted that in the eyes of the IRS, the receipt of bitcoin cash is taxable income, adding that:
Bitcoin holders should report the receipt of bitcoin cash on their 2017 income tax returns.
Some bitcoin holders delay dealing with bitcoin cash or their exchanges do not support it, making it difficult to retrieve the cryptocurrency soon after it was created. However, the “IRS could apply the constructive receipt of income doctrine to argue the bitcoin holder had access to bitcoin cash but turned his or her back on receiving it,” he detailed.
A buy-side tax specialist at Deloitte, Jim Calvin, thinks that the receipt of bitcoin cash could be taxable this year for technical reasons, the Wall Street Journal conveyed his explanations:
Recipients would have ordinary income, although the amount isn’t clear. It could be based either on the value of bitcoin cash when issued or when investors could trade it…Bitcoin cash recipients could owe tax this year at rates as high as 39.6%. It’s unclear whether the 3.8% net investment income tax would also apply.
Bitcoin Cash Could Be Treated as ‘Property Division’
On the other hand, the IRS could consider the receipt of bitcoin cash a “property division,” the Wall Street Journal noted, adding that:
In this case, no tax would be due until the holder sells or transfers the bitcoin cash. But the cost basis of both bitcoin holdings would need to be adjusted to account for the split. (Cost basis is the starting point for measuring taxable gain after a holding is sold.)
According to the IRS, “stock splits don’t create a taxable event” although there is a requirement to report the new shares. “You merely receive more stock evidencing the same ownership interest in the corporation that issued the stock.” The agency does demand that the share’s cost basis is adjusted to include the new total quantity of the shares.
IRS Is Not Focusing on Bitcoin Cash
Currently, the IRS is preoccupied with cracking down on those who evade taxes using digital currency, rather than the taxation of bitcoin cash. Recently, news.Bitcoin.com reported on the agency purchasing Chainalysis’ bitcoin investigation software to detect money laundering as well as potential tax evaders.
The IRS is also in the process of seeking information on Coinbase customers. In July, it narrowed data requests to those with $20,000 in any one transaction type in any year during 2013 and 2015. A criminal tax attorney with Kostelanetz & Fink, Bryan Skarlatos, believes that “the IRS got the information it wanted on Americans hiding money in offshore accounts, and it will get the information it wants on Americans evading taxes through virtual currencies.”
How do you think the IRS will tax bitcoin cash? Let us know in the comments section below.
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The post IRS May Consider Bitcoin Cash Fork Taxable Income This Year appeared first on Bitcoin News.
via Kevin Helms
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