Hard fork- The blockchain is fundamentally changed, thus resulting in the emergence of a new coin. Bitcoin Cash emerged from the Bitcoin hard fork. The newly created tokens in the blockchain may be transferred to the holders of the original cryptocurrency.
The taxation of a hard fork is thus determined by whether and when the recipient acquired possession of the new tokens. Hardfork-created new tokens are generally considered taxable income to tax authorities. The taxable event occurs when such new tokens are available for use, that is when the recipient has control over them. The amount taxable will be based on the fair market value of the newly created tokens at the time received, in the same way as with an airdrop.
For instance, if a Bitcoin owner, after a hard fork, begins to have Bitcoins Cash and at that time, the value of these tokens is $1,000, then this becomes taxable income. In that respect, the recipient would be expected to report income in the tax year in which the fork occurred and the tokens were received.
At times, the newly issued tokens will not be immediately useable due to connectivity problems in the network or lack of exchange support. In this connection, the tax events may only arise once the new tokens become usable.