Tax Information for Savy Investors and Entreprenurs 

The Tax Consequences of Coinbase Users Getting Bitcoin Cash

After originally saying they wouldn't support Bitcoin cash, Coinbase changed their tune, saying they would support the new forked currency. 

As I wrote about a few days ago, the forking of two currencies creates a unique issue for the calculation of tax basis. 

Remember, basis is a fancy word for cost. You need to know your cost so that when you sell, you can calculate your gain, and in turn, your taxes. 

The IRS treats Bitcoin like a stock, and the fork is most analogous to a stock spinoff. Your basis becomes the relative value of the two assets after the spinoff. 

Now originally, Coinbase wasn't going to support Bitcoin Cash, so Coinbase users never had "constructive receipt" of the Bitcoin Cash. The meant that there would be no change in basis of the Bitcoin. 

Now that Coinbase is planning to support the Bitcoin Cash, the "constructive receipt" will occur on January 1st  2018. 

So the basis in Bitcoin remains the same till the Bitcoin Cash is posted on Coinbase, at which time, the basis splits between the relative value market value of Bitcoin and Bitcoin Cash on that day. 

Given the volatility of Bitcoin Cash, who knows what the relative split in basis will be. Four months in an eternity in the world of cryptocurrency.