Hypothetical Situation & Question… because it’s close to my reality.
Bob buys 5000 tokens of X Crypto (V1) valued at $5000.
X Crypto chooses to halt trading and migrate to a new smart contract, hereafter known as X Crypto (V2).
X Crypto airdrops 5000 X Crypto (V2) tokens to Bob’s wallet valued at $5000.
X Crypto (V1) tokens are untradable and delisted.
What are the tax implications for Bob?
X Crypto V1 & V2 are identical in all regards from purpose and use case, to value and company. The only difference is that they have a new smart contract address which was created because of a security breach on a centralized exchange.
Will I… I mean Bob… be stuck with a $5000 Ordinary Income tax liability? Does Bob need to declare a complete loss of funds on X Crypto (V1) as it is no longer tradable? Is it possible to declare the airdrop of X Crypto (V2) as a migration to a new contract?
Thanks for your help… This is a big oof.