The highly anticipated Spark token snapshot takes place on December 12, at 0:00 GMT. Ripple XRP holders eagerly await this date, but Head of Tax Strategy at CoinTracker, Shehan Chandrasekera, warns that airdrops are a taxable event.
As such, individuals who register for and receive Spark tokens must include this as ordinary income when filing U.S. taxes.
Taxpayers should consult a qualified professional if they need help.
Ripple XRP Holders Lumped With Tax Liability
Although there have been numerous airdrops in the past, specific tax guidance on airdrops did not exist at the time.
However, as cryptocurrencies have grown in market cap and become increasingly recognized within the finance world, the IRS has clarified rules regarding the tax treatment of airdropped tokens.
IRS Rev. Rul. 2019-24 classifies cryptocurrency as a virtual currency, which is subject to taxation as ordinary income.
The rules mention airdrops specifically by defining what an airdrop is, even acknowledging that they can exist without a hard fork, as is the case with the Spark airdrop.
What’s more, IRS Rev. Rul. 2019-24 breaks down cut off points based on differences between when the airdrop is recorded, and when the taxpayer has control over the tokens.
This is particularly relevant as the Spark airdrop will come in batches over (up to) a 34 month period.
“At network launch, each account that has claimed Spark will receive 15% of the total Spark for which they are eligible. This is 15% of the Spark claimable term in the equation above. The remaining Spark claimable will be distributed over a minimum of 25 months and a maximum of 34…
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IRS Clamps Down on Airdrops Starting With Ripple’s Spark Token Airdrop
