The topic of Bitcoin taxation has always been a topic of substantial debate. After all, many people feel they don’t owe the IRS any taxes as far as cryptocurrency is concerned. Although the opinions may differ in this regard, the government agency isn’t backing down. In fact, tax experts claim the institution may make Bitcoin Cash taxable as well in the future. The tax rates have yet to be determined, but can be as high as nearly 40%. That would set a very dangerous and annoying precedent, to say the least.
With the Bitcoin “fork” taking place a while ago, most BTC holders received free Bitcoin Cash tokens. Considering how these BCH tokens now have a value, they can be labeled as income. More specifically, it is an income stemming forth from cryptocurrency and is thus a capital gain. Right now, capital gains are taxable under IRS guidelines, even for currencies such as Bitcoin. This creates a very uneasy situation, to say the least. Unfortunately, there is no such thing as getting “free money” in the United States and not paying any taxes on it whatsoever. So far, there is no official regulation regarding Bitcoin Cash, but that situation may change soon.
The IRS is Aware of the Bitcoin Cash Airdrop
More specifically, the Wall Street Journal claims big changes are coming. The IRS may effectively make BCH income taxable. Additionally, all US-based Bitcoin holders should effectively report the receipt of BCH on their 2017 income tax returns. It would make a lot of sense for the institution to make this income taxable outright, though. Albeit this is a one-off “freebie”, it effectively gives all Bitcoin owners more value out of thin air. In a way, making this income subject to taxation would somewhat legalize Bitcoin Cash in the US as well. It is doubtful many people will see it that way, though.
The bigger question is how users would have to pay to the IRS. Right now, there are no guidelines or calculation one can take into account. Deloitte’s Jim Calvin thinks the outcome wouldn’t be all that fun by any means. Some recipients may pay a tax rate of 39.6% on their free coins, which can add up to substantial amounts. Especially larger BCH holders won’t be too pleased with that outcome, assuming things will get that far. There’s also the net investment income tax to keep in mind. Bitcoin Cash certainly keeps stirring the pot, although not necessarily for the right reasons.
It is important to keep in mind the IRS has no official BCH plans right now. However, the government agency is well aware of what is going on in the Bitcoin world. Any “airdrop” of currencies given to Bitcoin holders will be on their radar. This may also affect income tax for Stellar Lumens or Byteball, by the look of things. Neither of these currencies is on the agency’s radar right now, though. The coming months will get pretty interesting for US-based Bitcoin Cash holders. An official taxation guideline would certainly shake things up quite a bit.
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