Quick answer
Free coins from a fork are taxable income — and you'll owe tax again as a capital gain when you sell them.
Income Tax
Australia
United Kingdom
United States
Fork Income
Cryptocurrency received as a result of a blockchain hard fork, typically treated as ordinary income at fair market value on receipt.
AustraliaUnited KingdomUnited StatesUnderstanding Fork Income on crypto
A hard fork occurs when a blockchain splits into two separate chains, often resulting in holders of the original coin receiving an equivalent amount of the new coin. Fork income refers to the new tokens received as a result of this split. The IRS (via Revenue Ruling 2019-24) takes the position that new tokens received from a hard fork are ordinary income at their fair market value on the date they are received (or when the taxpayer obtains dominion and control over them). Some practitioners argue that tokens with no established market at the time of receipt should be valued at zero, but the IRS position is clear for forks with a readily ascertainable market value.
A hard fork occurs when a blockchain splits into two separate chains, often resulting in holders of the original coin receiving an equivalent amount of the new coin. Fork income refers to the new tokens received as a result of this split. The IRS (via Revenue Ruling 2019-24) takes the position that new tokens received from a hard fork are ordinary income at their fair market value on the date they are received (or when the taxpayer obtains dominion and control over them). Some practitioners argue that tokens with no established market at the time of receipt should be valued at zero, but the IRS position is clear for forks with a readily ascertainable market value.
What this means for your crypto activity
FMV income on receipt
New tokens received from a hard fork are taxable income at FMV when you receive them.
Nil value if no market
If the forked token has no market value at the time of the fork, income may be nil — document this carefully.
Income sets cost basis
The income value at receipt becomes the cost basis for future capital gains on the forked tokens.
Selling forked tokens
Retaining the original coin and selling the forked token triggers a separate CGT event on the fork income cost basis.
Timing of control
Not all forks result in tradable tokens immediately — timing of 'dominion and control' may affect when income arises.
- New tokens received from a hard fork are taxable income at FMV when you receive them.
- If the forked token has no market value at the time of the fork, income may be nil — document this carefully.
- The income value at receipt becomes the cost basis for future capital gains on the forked tokens.
- Retaining the original coin and selling the forked token triggers a separate CGT event on the fork income cost basis.
- Not all forks result in tradable tokens immediately — timing of 'dominion and control' may affect when income arises.
Seeing it in action
Example scenario
In November 2017, BTC holders received an equal amount of BCH from the Bitcoin Cash fork. When BCH was first available to trade at $1,500, this was income. A taxpayer holding 1 BTC received 1 BCH worth $1,500 — taxable as ordinary income. Their cost basis in BCH is $1,500. When they sell BCH at $200 later, they have a $1,300 capital loss.
How this works across jurisdictions
- Australia
For personal investors, receiving a forked token is a non-income event upon receipt. The tokens are treated as a brand new asset that takes on an initial cost base of zero. When you later sell or dispose of the asset, you will pay CGT on the full value of the disposal.
- United Kingdom
HMRC does not treat a hard fork as immediate income. However, for future Capital Gains Tax calculations, the new tokens do not take a zero cost base. The historical purchase cost of your original tokens must be divided between the original and new tokens using a relative fair market value apportionment calculation.
- United States
Under IRS Revenue Ruling 2019-24, when a blockchain hard fork is accompanied by an airdrop of new tokens, the tokens are taxed as ordinary income under Section 61. This tax liability is triggered at fair market value the exact moment the taxpayer gains "dominion and control"—meaning the technical power to transfer, swap, or trade them.
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