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A “hard fork” of a cryptocurrency owned by a taxpayer does not result in gross income for a taxpayer if the taxpayer receives no units of the new cryptocurrency, but taxpayers receiving an “airdrop” of units of a new cryptocurrency after a hard fork have ordinary gross income from the airdrop, the IRS ruled in Rev. Rul. 2019-24, issued Wednesday. The IRS also updated its Virtual Currency Transactions frequently asked questions on its website to reflect the ruling.

Rev. Rul. 2019-24 supplements basic guidance on the tax treatment of virtual currency that the Service issued in 2014 (Notice 2014-21).Taxpayers and practitioners, the latter including the AICPA, have been pressing for more guidance on the tax treatment of virtual currency and its many new and evolving types of transactions.

Cryptocurrency, the IRS explains, is a type of virtual currency that uses cryptography to secure transactions that are digitally recorded on a distributed ledger, such as a blockchain. A distributed ledger records, shares, and synchronizes transactions as data on digital systems without any centralized storage or administration. The new revenue ruling addresses a specific type of cryptocurrency transaction known as a hard fork that is often, but not always, followed by an airdrop.