A fork happens when a blockchain network undergoes an upgrade, creating a new blockchain that shares the same history as the original. Forks are important to maintain functionality and security. There are two types of forks, each with different outcomes:
- Soft fork: A soft fork involves updates to the protocol that remain compatible with older versions. It modifies the existing blockchain without creating a new one or invalidating the previous version.
- Hard fork: This happens when a blockchain’s code is changed, resulting in a new cryptocurrency while the original continues independently. This creates blockchain branches. For example, the split between Bitcoin and Bitcoin Cash is a hard fork.
Using the Fork category
You can change a Receive transaction category to Fork. Then, review your forked transactions by tax year from the Tax page, alongside the capital gains that are already tracked.
Tax treatment of Fork transactions
If you categorize a transaction as a Fork in CoinTracker, it will be treated as a taxable event.
Learn more about how the IRS treats forked crypto as income, with the fair market value at the time of receipt serving as the basis for the crypto until you dispose of it.
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