US tax on airdrops and hard forks: Rev. Rul. 2019-24 and dominion and control
A hard fork alone is not income; new units you can actually move are. Here is how timing, value and basis work, and where the rules run out.
If your organisation receives new tokens from a chain split or an airdrop, the IRS view is that you have ordinary income when you can actually control them, measured at fair market value at that moment, and that value becomes your tax basis [1][2]. The hard part in practice is pinning down the moment of control and the price at that moment, and keeping evidence of both.
The core ruling
Revenue Ruling 2019-24 is the IRS's main published position [1]. It describes a hard fork as a protocol change that permanently splits a ledger away from the existing one, and an airdrop as a way of distributing units of a cryptocurrency to the ledger addresses of many holders [1]. It looks at two situations.
- A hard fork happens but the holder receives no units of the new asset. There is no gross income [1].
- A hard fork is followed by an airdrop of new units that the holder can immediately dispose of. The holder has ordinary income equal to the fair market value of the new units when they are recorded on the ledger, under section 61 [1].
The reasoning rests on the familiar idea of an accession to wealth, clearly realised, which the ruling draws from Glenshaw Glass [1]. Basis in the new units equals the amount included in income [1][2]. The IRS digital asset FAQs repeat these points in question-and-answer form, and also confirm that a soft fork, which does not create a new asset, produces no income [2].
Dominion and control decides the date
Income arises when you can transfer, sell, exchange or otherwise dispose of the new units, not simply when they appear somewhere on a ledger [1][2]. The ruling gives one concrete case: if the address receiving the airdrop sits in a wallet managed by an exchange, and the exchange does not support the new asset so it is not credited to your account, you do not yet have control. Receipt happens later, when you gain the ability to dispose of the units [1].
Chief Counsel Advice 202114020 applied this to the August 2017 Bitcoin Cash fork [3]. A holder with sole control of the private key could transact in Bitcoin Cash straight after the split. A customer of a hosted exchange wallet could not, and the memo notes that one large exchange only began supporting Bitcoin Cash in December 2017 [3]. Same fork, different income dates, and therefore different values. The memo says it may not be used or cited as precedent, but it shows how the IRS reasons through custody [3].
- Treasury holds 1,000 units of coin R in a self-custodied wallet.
- A hard fork creates coin S; 1,000 units of S land in the same address and can be moved at once.
- Fair market value of S at that time: 4.20 per unit.
- Ordinary income: 1,000 x 4.20 = 4,200.
- Tax basis in the 1,000 units of S: 4,200.
- If the same coins had been held at an exchange that credited S two months later at 2.90, income would be 2,900, recognised at the later date.
- Figures are illustrative.
Reporting
Receiving digital assets from an airdrop following a hard fork is one of the events that requires a Yes answer to the digital asset question on the individual return [4]. The IRS directs income from rewards and similar receipts to Schedule 1 for individuals, while business income goes on the business schedules [4]. Entities report the income on their own returns in the ordinary way; the ruling's principle is a section 61 principle, not one limited to individuals [1].
Later, when the airdropped units are sold or swapped, the gain or loss is measured against the basis you recorded at receipt, and the general disposal rules apply [2]. Since 1 January 2025 basis must also be tracked wallet by wallet or account by account, so the new units should be recorded in the wallet where they actually arrived [2].
Where the guidance runs out
The published guidance is narrower than the range of airdrops finance teams see. As of October 2026, the IRS FAQs and the return question frame airdrops in the context of a hard fork [2][4]. Several common situations are not directly addressed:
- Promotional or governance-token airdrops with no fork. Many advisers apply the same accession-to-wealth reasoning, but there is no ruling specific to them in the sources above.
- Airdrops that must be claimed through a transaction or are subject to vesting. When control begins (allocation, eligibility, claim, or unlock) is a judgement call.
- Tokens with no reliable market at receipt. The ruling assumes a known value; it does not say how to value a thinly traded or untraded token.
- Unsolicited spam tokens. Nothing in the ruling forces you to treat a worthless token as income at a manipulated price, but documenting why you assigned little or no value is your responsibility.
Where facts fall outside the ruling, write down the position you take, why, and what evidence supports the date and value. That record matters more than the specific answer if the position is ever examined.
What to do
- Keep a log of forks and airdrops affecting your wallets and exchange accounts, with the date each became transferable to you.
- For hosted accounts, keep the custodian's notice or account statement showing when the new asset was credited.
- Capture the price source and timestamp used for fair market value, and record basis per wallet.
- Write a short policy for claimable, vesting and no-market tokens, and agree it with your tax adviser before year end.
- Separate spam tokens from genuine receipts so they do not inflate income or basis.
This is general information, not tax advice; treatment depends on your facts.
Sources
- Internal Revenue Bulletin 2019-44 (Rev. Rul. 2019-24) (IRS)
- Frequently asked questions on digital asset transactions (IRS)
- Chief Counsel Advice 202114020: Bitcoin (BTC)/Bitcoin Cash (BCH) Hard Fork (IRS Office of Chief Counsel)
- Digital assets (IRS)
General information for finance teams, current as of publication. Not legal, tax or accounting advice.