Company: TOXR
Filing Date: 2025-11-07
Form Type: S-1/A
Source: 0001213900-25-107665
Chunk: 233

Company: 21Shares XRP ETF
Filing Date: 2025-11-07
Form: S-1/A
Chunk 233
---
 new units of digital assets is a taxable event giving rise to ordinary income equal to the value of the new digital assets. The Trust Agreement will require that, if such a transaction occurs, the Trust will as soon as possible direct an XRP Custodian to distribute the new forked asset in-kind to the Sponsor, as agent for the Shareholders, and the Sponsor will arrange to sell the new forked asset and for the proceeds to be distributed to the Shareholders. Such a sale will give rise to gain or loss, for U.S. federal income tax purposes, if the amount realized on the sale differs from the value of the new forked asset at the time it was received by the Trust. A hard fork may therefore give rise to additional tax liabilities for Shareholders.

While the IRS has not addressed
all situations in which airdrops occur, it is clear from the reasoning of current IRS guidance that it generally would treat an airdrop
as a taxable event giving rise to ordinary income. If the Trust were to receive the economic benefit of an airdrop, therefore, it would
have similar tax consequences to those described above for a hard fork. The Trust intends to disclaim any digital assets received in
an airdrop offered to holders of XRP. Therefore, if an airdrop results in holders of XRP receiving a new digital asset of value, the
Trust and the Shareholders will not participate in that value. If the Trust were to claim or receive the economic benefit of an airdrop,
it may give rise to additional tax liabilities for Shareholders.

3.8% Medicare Tax on Net Investment Income

Certain U.S. Shareholders
who are individuals are required to pay a 3.8% Medicare tax on the lesser of the excess of their modified adjusted gross income over
a threshold amount ($250,000 for married persons filing jointly and $200,000 for single taxpayers) or their “net investment income,”
which generally includes capital gains from the disposition of property. This tax is in addition to any capital gains taxes due on such
investment income. A similar tax applies to estates and trusts. U.S. Shareholders should consult their own tax advisers regarding
the effect, if any, this tax may have on their investment in the Shares.

Brokerage Fees and Trust Expenses

Any brokerage or other transaction
fee incurred by a Shareholder in purchasing Shares will be treated as part of the Shareholder’s tax basis in the underlying assets
of the Trust. Similarly, any brokerage