Safe Harbor for Taxpayers with Forked Assets Act of 2021

To provide for the tax treatment of forked convertible virtual currency. 1. Short title This Act may be cited as the Safe Harbor for Taxpayers with Forked Assets Act of 2021 2. Tax treatment of forked convertible virtual currency (a) Exclusion from gross income Part III of subchapter B of chapter 1 139I. Exclusion of convertible virtual currency received in a hard fork (a) In general No amount shall be included in gross income by reason of the receipt of any forked convertible virtual currency. (b) Forked convertible virtual currency For purposes of this section— (1) Forked convertible virtual currency The term forked convertible virtual currency (2) Convertible virtual currency The term convertible virtual currency (A) functions as a medium of exchange, a unit of account, or a store of value; (B) does not have legal tender status; and (C) has an ascertainable equivalent value in legal tender or is used as a substitute for legal tender. (3) Hard fork The term hard fork (4) Constructive receipt Receiving forked virtual currency shall include any right to receive (or other constructive of) such virtual currency. . (b) Safe harbor period for penalties relating to tax treatment of hard-Forked virtual currency (1) In general In the case of a taxpayer who during the applicable period receives forked convertible virtual currency— (A) no penalties or additions to tax under part II of subchapter A of chapter 68 (B) no penalties or additions to tax under sections 6651, 6654, 6655, 6656, 6698, and 6699 shall apply for any failure during the applicable period to file a return or report or make a payment of tax to the extent such failure is attributable to filing or payment requirements relating to the receipt of such virtual currency (or any disposition of such currency during such period). (2) Definitions and special rules For purposes of this subsection— (A) Applicable period The term applicable period (i) Rules for calculating and allocating the basis of forked convertible virtual currency. (ii) Rules for calculating the fair market value of forked convertible virtual currency at any given time. (iii) Rules for determining the holding period of forked convertible virtual currency. (B) Other terms Terms used in this subsection which are also used in section 139I (c) Clerical amendment The table of sections for part III of subchapter B of chapter 1 of such Code is amended by inserting after the item relating to section 139H the following new item: Sec. 139I. Exclusion of convertible virtual currency received in a hard fork. . (d) Effective date The amendments made by this section shall apply to forked convertible virtual currency (as defined in section 139I

Summary: Safe Harbor for Taxpayers with Forked Assets Act of 2021 This bill excludes from gross income, for income tax purposes, any amount received as forked convertible virtual currency. It also establishes a safe harbor period during which certain penalties and additional taxes applicable to a taxpayer who receives a forked convertible virtual currency are suspended until the Internal Revenue Service issues regulations or guidance, or legislation is enacted, that addresses specified issues related to the tax treatment of such currency.