Indeed, as you would incurring a capital loss in any other asset class.
As such, you should recognize that loss in the same tax year as the fork occurred, which is why I believe the selling pressure would be towards the tail end of the tax year whether the price goes up (to cover taxes on the distribution) or down (to recognize and true up losses). If you did that in the same tax year as the fork, you'd never have to carry forward the losses. Both the gain and the loss occur in the same year and cancel out (i.e. you'd never lose more than you gained from the fork).
All well and good for you to say that now. But we also can't rewind, there's no safe harbor, and the IRS doesn't appear to be collecting my marginal rate of income tax in the denominated coin. So if I've got a bag of BTG and BSV that's not been sold, I owe a lot for a scam that I didn't unload.
I couldn't disagree with you more about this being fair. it creates a market hazard (dumping), and it fails to recognize the conjoined-value at time of fork. Were the futures value treated as the cost-basis of the new coin, that would be fair.
Moreover, this is a clever way for the IRS to learn your complete BTC holdings AND to seek stricter legal precedents against you.
You can still suffer if the fork forces you to realize a gain as short term capital gain (higher tax rate than long term capital gain).
I expect this ruling to be challenged and ultimately settled in Tax Court. (I have zero investments in crypto, so no dog in the fight, but this seems patently unjust to me.)
