Quick answer
A hard fork can put new tokens in your wallet — and a tax bill alongside them.
DeFi & Web3
Australia
United Kingdom
United States
Hard Fork
A permanent blockchain split; new coins received post-fork are typically treated as taxable income at fair market value.
AustraliaUnited KingdomUnited StatesUnderstanding Hard Fork on crypto
A hard fork is a permanent divergence in a blockchain's protocol that creates two separate chains. Holders of the original cryptocurrency typically receive an equivalent amount of the new chain's token. The most famous example is the Bitcoin Cash fork from Bitcoin in 2017. The IRS clarified in Revenue Ruling 2019-24 that tokens received from a hard fork are taxable as ordinary income at fair market value at the time they are received (when the taxpayer has dominion and control). This triggered significant retroactive tax liability for BTC holders who received BCH and sold it much later.
A hard fork is a permanent divergence in a blockchain's protocol that creates two separate chains. Holders of the original cryptocurrency typically receive an equivalent amount of the new chain's token. The most famous example is the Bitcoin Cash fork from Bitcoin in 2017. The IRS clarified in Revenue Ruling 2019-24 that tokens received from a hard fork are taxable as ordinary income at fair market value at the time they are received (when the taxpayer has dominion and control). This triggered significant retroactive tax liability for BTC holders who received BCH and sold it much later.
What this means for your crypto activity
Income at FMV on receipt
New tokens received from a hard fork are income at FMV when you receive or can control them.
Inaccessible tokens
If you don't want or can't access the forked tokens, there may be an argument for zero or minimal income.
Income sets cost basis
The income value at receipt becomes the cost basis for future CGT when forked tokens are sold.
Exchange distribution timing
Exchanges may not distribute forked tokens immediately — the income event occurs when you gain control.
No market at receipt
If the forked token has no market at time of receipt, income may be argued as nil.
- New tokens received from a hard fork are income at FMV when you receive or can control them.
- If you don't want or can't access the forked tokens, there may be an argument for zero or minimal income.
- The income value at receipt becomes the cost basis for future CGT when forked tokens are sold.
- Exchanges may not distribute forked tokens immediately — the income event occurs when you gain control.
- If the forked token has no market at time of receipt, income may be argued as nil.
Seeing it in action
Example scenario
In August 2017, Alice holds 2 BTC when the Bitcoin Cash hard fork occurs. She receives 2 BCH. When BCH first becomes tradeable at $1,200, this is her 'dominion and control' moment. She has $2,400 in ordinary income. Her cost basis in 2 BCH is $2,400. When she sells both BCH at $300 each ($600 total), she has a $1,800 capital loss.
How this works across jurisdictions
- Australia
ATO treats fork income as ordinary income at FMV on receipt; CGT applies on subsequent disposal.
- United Kingdom
HMRC treats forked tokens as a new acquisition; if unsolicited and no market value at receipt, income may be nil (zero cost base).
- United States
IRS Revenue Ruling 2019-24 explicitly treats hard fork tokens as ordinary income at FMV when received; cost basis is the income value.
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