> I hadn't considered the situation where the forked coin is the one that retains most of the value. I think in that situation I would be comfortable arguing to the IRS that the old currency is actually the fork, e.g. ETC vs ETH. The technical and legal definitions of "fork" don't necessarily have to match.

Agreed, but that appears to contradict the plain text of the ruling.

It's also not guaranteed to be unambiguous. Even with ETH/ETC and BTC vs BCH/BSV there are people that argue the forks are the real thing, though I agree that they're crazy. But it isn't hard to imagine a situation where the split were closer to 50/50 (and maybe both sides got different tickers).

It's also possible for it to look like one won but have the situation reverse... E.g. it's not completely implausible that ETH might have won originally, but then a week in the political winds changed, all the hash power moved to ETC leaving ETH useless and then had the ethereum foundation people say the fork was a mistake, and then everyone followed along with giving the old chain back the ticker.

When BSV split off, there were two chains each incompatible with each other and the original rules didn't continue (in that case). Many exchanges listed two assets, transferring any bcash holdings into each equally, "Bitcoin ABC" and "Bitcoin SV". Other exchanges gave ABC the BCH ticket. I think at least one gave BSV the BCH ticker. Over time the ABC side got the BCH ticker everywhere. I imagine if BSV had succeeded in their effort to get more hash power the situation would still be highly inconsistent.

In some cases cryptocurrencies have made additional consensus rule changes to make sure hardforks couldn't be undone, in some cases they haven't. Their understanding of hardforks seems to assume that all hardforks are bilateral, but in many cases they're actually one sided and could be undone.

I agree that your interpretation should be the one adopted when it is unambiguous.

> I would also be comfortable using the first trading day's close as the market value

I would agree if we were talking about orderly or regulated markets. For example, in many bitcoin forks the fork was not meaningfully tradable for a week or more-- and when it became tradable it was only tradable on obscure foreign exchanges whos terms and conditions forbid US residents from using the service. In these illiquid markets the prices have been rather distorted.

FWIW, the interpretation I adopted was that I've just sold fork quickly as soon as I could reasonably move them to a place to sell them, then reconized as income the value I actually received in selling them. ... at least the forks I knew about, but there have likely been other forks that I've never heard of.

There are also likely coins that I could be argued to technically control but which I don't currently know about-- stuff like coins mined in 2012 which are currently lost in corrupted wallet files (or perhaps with forgotten passwords that I'll eventually crack) on old system images that I'll probably find some day, but which I don't know about right now, even after doing a bit of looking.

Consider: for people actually using Bitcoin rather than speculating in an exchange account-- their bitcoin holdings can look a lot more like USD laying around your house than like your S&P 500 ETF in your brokerage account.

Because of these lost cases I think it would be much more reasonable to state that ordinary income is only realized when you demonstrate actual control over the coins, e.g. by moving them. This would have the effect of allowing people to delay the income tax, but they'd do so only with serious risk of value loss and at the cost of delaying the starting date for a capital gains calculation (so it would fail an equivalents test). This would nicely eliminate a lot of the absurd corner cases, including stuff like the winner flip/flop.