Tax experts reportedly warned ETH tokens might become a taxable commodity if a hard fork occurs after the Ethereum Merge. They hinted that ETH holders might be exposed to a hefty tax bill if a hard fork emerges.
Tax Experts Say Hard Fork Would Cause Hefty Tax On Holders
The entire crypto space seems to be looking forward to the upcoming ETH 2.0 with improved and more economic and eco-friendly features. However, so much depends on what happens after the successful launching of the new version.
There is a high probability that Ethereum might experience another hard fork that will split the community again, like in 2016 when the Ethereum Classic hard fork happened. If this occurs, Ethereum will issue new tokens, and ETH holders will receive airdrops of the new tokens.
Commenting on the possibilities of a hard fork occurring, Fuller explained that there might be tax consequences on the outcome. Miles Fuller is a top executive at TaxBit, a Tax compliance firm.
Fuller said everything would go on its normal course if the PoW to PoS transition occurred without a fork. However, he added that if there is a fork, PoW ETH holders will pay taxes depending on their wallet’s type
He continued that non-custodial wallet users would pay taxes on their PoW ETH holdings based on IRS directives regarding it as income. However, the fate of PoW ETH holdings on exchanges depends on whether the exchange supports the forked token or not.
Many Miners And Exchanges Wants Network-Slipping Hard Fork To Occur
Miles Brooks, a top executive at CoinLedger, tweeted that the possibility of the tax also depends on the performance of the PoW forked token in the market. He said if the token’s value declined after the merge, users might have insufficient assets to pay the tax levied on them.
Hence, he advised holders to sell out some tokens as they receive to secure tax bills first. Furthermore, the Ethereum community has been bustling with activities lately as many exchanges and miners want PoW hard fork to happen.
They claimed they would lose a lot as their mining rigs would become useless and have to migrate to another PoW crypto if the fork did not happen. Meanwhile, Vitalik Buterin suggested that the miners can easily move to Ethereum Classic to continue their mining activities.
In addition, the latest reports showed that Ethereum would not be named ETH2.0 after the Merge. Rather it would be called ETHS/ ETH. Also, if a hard fork happens, the resulting new token would be called ETHW, as reported.