A U.S. Tax Court dispute involving bitcoin holder Benjamin Rogovy is testing whether self-custody alone can trigger income tax on unsolicited assets created by blockchain forks. The Internal Revenue Service argues that because Rogovy controlled the private keys to his bitcoin, he effectively received forked coins when those networks were created, even if he never claimed or used them.

The case centers on several 2017-era Bitcoin forks, including Bitcoin Cash, Bitcoin Gold and other offshoots that copied Bitcoin’s transaction history. Rogovy says that, apart from a small portion of Bitcoin Cash, he did not take steps to access those assets, considered some of them unsafe or scam-like, and in some instances did not know they existed before an IRS audit.

How the fork dispute arose

The dispute grows out of the period when competing groups split from Bitcoin after failing to win consensus for proposed changes to the network. Those new chains preserved Bitcoin’s earlier transaction history, which meant a person holding bitcoin in self-custody could potentially use the same private keys to authorize transactions on the forked chains as well.

That technical overlap did not automatically make the new assets usable in practice. Accessing them required compatible wallet software for the new chain and, for any sale, a buyer or exchange willing to support the token. Rogovy’s position is that he largely chose not to pursue that process and therefore did not accept or receive most of the forked coins the IRS later identified.

IRS theory and the Bitcoin Gold problem

The IRS contends that possession of the private keys was enough to establish actual receipt of the forked assets at the time they were created. It then uses exchange prices to assign taxable income to coins that Rogovy says he never accessed.

Bitcoin Gold highlights a central tension in that argument. According to the case description, the IRS acknowledges that software needed to transact on that chain was not publicly available immediately after the fork, while still maintaining that key possession alone established receipt. That raises the question now before the court: can a taxpayer be treated as having received an asset before the practical means of using it are available?

What Rogovy is arguing

Rogovy’s lawyers argue that copying a blockchain does not by itself create taxable receipt, and that accepting unsolicited assets should require some affirmative conduct. They also say substantial technical and security barriers stood in the way of complete dominion and control over the unclaimed coins, including the risk that interacting with unfamiliar fork software could expose existing private keys.

Their challenge goes beyond access alone. They argue that the tokens on a new chain were not received from another person, but instead reflected a continuation of the existing Bitcoin interest, meaning there was no realization event. They also dispute whether exchange prices observed after the fork can establish fair market value at the moment the IRS says the income arose.

Why the case matters beyond one taxpayer

The legal issue overlaps with IRS guidance that has left open questions for crypto users. In Revenue Ruling 2019-24, the agency said a hard fork does not create income unless the taxpayer receives new cryptocurrency, and that receipt can occur once the taxpayer has the ability to transfer or sell the asset even if they do not actually do so.

But that guidance did not clearly answer what happens when someone takes no action to access or accept unsolicited fork coins. A 2021 IRS memorandum treated a Bitcoin Cash holder’s private-key control and immediate ability to transact as enough for income at the fork. The Rogovy case now brings that unresolved disagreement into court.

What comes next

The Tax Court’s ruling could clarify whether self-custody, by itself, is enough to create taxable income when third parties launch new chains that happen to recognize existing Bitcoin keys. The answer could affect how unsolicited fork assets are treated when they are unknown, unclaimed, or difficult to access.

For now, the confirmed next step is the court’s consideration of the dispute between Rogovy and the IRS. The outcome may determine how far general tax concepts such as receipt, realization, and control extend in cases where blockchain technology creates assets without any action by the holder.

Source: www.coincenter.org