Before ETH Drops Further, Set Some Money Aside for Surprise Taxes
Ethereum merger resulted in proof of work airdrop. This means you could be on the hook for tokens you didn't even want.
Opinion
The Ethereum merger dominated the crypto world in September with promises of faster transaction times, improved security, and a 99% reduction in power consumption. However, will you also end up with a surprise tax bill? Let's examine.
During the merger event, the Ethereum mainnet – the then-current proof-of-work (PoW) blockchain – merged with the proof-of-stake (PoS) beacon chain, marking the end of PoW as a consensus mechanism for the Ethereum blockchain.
On the Beacon chain, Ethereum has joined the ranks of other major PoS blockchains such as BNB Chain, Cardano, and Solana. Ether (ETH) is the second-largest cryptocurrency by market capitalization after Bitcoin (BTC), and Ethereum is the chain that has driven decentralized finance (DeFi) and non-fungible token (NFT) activity. The merger promises many ramifications, but what about the potential tax implications for investors, traders and businesses? It's unlikely anyone will be too happy with a surprise tax bill, but that's potentially exactly what they'll get.
What are the possible tax consequences?If we take a brief trip down memory lane to the Bitcoin Civil War in 2017, it ultimately ended with a chain split into Bitcoin and Bitcoin Cash (BCH). This event was coined - no pun intended - as a hard fork.
In this case, new BCH coins were issued to BTC holders and therefore resulted in taxable income at fair market value upon receipt of the BCH for the recipients. Additionally, if BCH holders surrendered their coins, any accrued gains or losses were subject to capital gains tax.
Related: Post-merger ETH has become obsolete
Is a civil war brewing among the Ethereum community...
Ethereum merger resulted in proof of work airdrop. This means you could be on the hook for tokens you didn't even want.
Opinion
The Ethereum merger dominated the crypto world in September with promises of faster transaction times, improved security, and a 99% reduction in power consumption. However, will you also end up with a surprise tax bill? Let's examine.
During the merger event, the Ethereum mainnet – the then-current proof-of-work (PoW) blockchain – merged with the proof-of-stake (PoS) beacon chain, marking the end of PoW as a consensus mechanism for the Ethereum blockchain.
On the Beacon chain, Ethereum has joined the ranks of other major PoS blockchains such as BNB Chain, Cardano, and Solana. Ether (ETH) is the second-largest cryptocurrency by market capitalization after Bitcoin (BTC), and Ethereum is the chain that has driven decentralized finance (DeFi) and non-fungible token (NFT) activity. The merger promises many ramifications, but what about the potential tax implications for investors, traders and businesses? It's unlikely anyone will be too happy with a surprise tax bill, but that's potentially exactly what they'll get.
What are the possible tax consequences?If we take a brief trip down memory lane to the Bitcoin Civil War in 2017, it ultimately ended with a chain split into Bitcoin and Bitcoin Cash (BCH). This event was coined - no pun intended - as a hard fork.
In this case, new BCH coins were issued to BTC holders and therefore resulted in taxable income at fair market value upon receipt of the BCH for the recipients. Additionally, if BCH holders surrendered their coins, any accrued gains or losses were subject to capital gains tax.
Related: Post-merger ETH has become obsolete
Is a civil war brewing among the Ethereum community...
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