On Oct. 9, the Internal Revenue Service (IRS) issued additional
guidance regarding the taxation of cryptocurrency. The guidance
comes more than five years after the IRS issued Notice 2014-21, the
first and, until now, only official guidance regarding
cryptocurrency.
Revenue Ruling 2019-24 (the Revenue Ruling)
reaffirms that virtual currency is treated as property and does not
constitute currency. The Revenue Ruling distinguishes virtual
currencies from foreign currencies. According to the Revenue
Ruling, foreign currency, unlike virtual currency, is "legal
tender, circulates, and is customarily used and accepted as a
medium of exchange."
The Revenue Ruling goes on to analyze two hypothetical
situations, one involving a "hard fork" and the other
involving an "airdrop." The Revenue Ruling defines a hard
fork as occurring "when a cryptocurrency on a distributed
ledger undergoes a protocol change resulting in a permanent
diversion from the legacy or existing
