Airdrops and tokens received from a hard fork are ordinary income when you gain dominion and control over them. Under Revenue Ruling 2019-24, you have taxable income equal to the fair market value of the new tokens at the moment you can transfer, sell, or otherwise dispose of them. That same value becomes your cost basis, so a later sale is a separate capital gain or loss measured from there.
Part of our guide: Crypto Taxes.
The short version
- New tokens from an airdrop or hard fork are ordinary income at their fair market value when you gain dominion and control (Rev. Rul. 2019-24).
- “Dominion and control” generally means you can transfer, sell, or dispose of the tokens, not merely that they exist on-chain.
- The income amount becomes your cost basis in the new tokens.
- Selling those tokens later is a separate, second event: a capital gain or loss measured from that basis.
- If a fork gives you nothing you can control, there may be no income until control arrives. Timing follows access.
What ‘dominion and control’ means
The trigger for income is not the blockchain event; it is your ability to use the asset. Revenue Ruling 2019-24 ties the income to the moment you have dominion and control, which generally means the tokens are recorded to an address you can act on and you are able to transfer or sell them. If tokens land in a wallet you control, that is usually the moment. If they sit on a platform that has not yet credited or enabled them, control may come later, and the income date moves with it.
How airdrops are taxed
An airdrop distributes tokens to addresses, sometimes as a promotion and sometimes following a protocol event. When you gain control of airdropped tokens, you recognize ordinary income equal to their fair market value at that time. This holds even though you did nothing to earn them in the ordinary sense and even though you may not have asked for them. The value at the moment of control is both your income and your basis going forward.
How hard forks are taxed
A hard fork splits a blockchain and can create a new coin held by existing holders. The ruling’s logic is the same: if the fork results in new tokens you can control, you have ordinary income at fair market value when that control exists. If the fork produces nothing you receive or can act on, there is no income from the fork itself. The distinction that matters is not that a fork happened, but whether it delivered something you can actually use.
A taxpayer who receives new cryptocurrency has ordinary income when the taxpayer has dominion and control over it, measured by its fair market value at that time.
Summary of IRS Revenue Ruling 2019-24
The second tax event: selling later
People often stop at the income event and forget the sale that follows. Because your basis in the new tokens equals the income you already recognized, selling later produces a capital gain or loss from that basis, with the holding period starting when you gained control. If the token rose after you received it, the sale adds capital gain on top of the ordinary income already reported. If it fell, you may have a capital loss even though you paid ordinary income tax at receipt, which is an uncomfortable but real outcome for volatile tokens.
What I actually see
The most common problem is valuing at the wrong moment. People use the date a token launched, or the date they noticed it, rather than the date they actually gained control. For a volatile token those dates carry very different values, and only one is correct.
The second is the forgotten second event. A holder reports the airdrop as income, sells months later, and does not account for the capital gain or loss from basis. The income and the sale are two separate calculations, and skipping one misstates the year.
The third is unwanted tokens treated as free. Dust and spam airdrops still carry the framework, and while their value may be trivial, tokens that later have real value create real income that nobody recorded at the time of control.
Where this goes wrong
The income event is reconstructed at tax time from memory. The holder cannot say when control began, so the fair market value is a guess, the basis that flows from it is a guess, and the later sale inherits both guesses. A single missing timestamp corrupts every number downstream of it. The fix is contemporaneous: record the date, the value, and the price source when control arrives, not the following March.
The decision rule
- Pin the moment of dominion and control for each airdrop or fork, and record its date and time.
- Value the tokens at that moment with a named price source, and log that figure as both income and basis.
- Report the ordinary income in the year control began.
- Track the basis forward so the eventual sale is a clean capital gain or loss.
- Do not assume forks always create income; income depends on receiving something you can control.
If you cannot name the date you gained control and the value on that date, the airdrop is not yet properly reported, whatever its size.
Where this sits
Airdrops and forks are close cousins of staking. Staking tax reporting uses the same dominion-and-control timing. Reconstructing cost basis is the repair job when receipts were not logged. A records checklist keeps the income and the later sale straight. It reports through Crypto Taxes.
Sources
- IRS, Revenue Ruling 2019-24, airdrops and hard forks
- IRS, Notice 2014-21, virtual currency is property
- IRS, Frequently Asked Questions on Virtual Currency Transactions
- IRS, Digital assets
- IRS, About Form 8949
Related
- Crypto staking tax reporting
- How to reconstruct crypto cost basis
- Crypto tax records checklist
- What is specific identification for crypto?
- Common crypto tax record mistakes
Last updated: 5 August 2026.
This article is general education, not legal, tax, or investment advice. Tax outcomes depend on your facts, your records, and current law, which is still developing for digital assets. Talk to a qualified CPA about your own situation.
