Could IRS Change Rules On Taxing Staking After Losing Court Battle?
The United States Internal Revenue Service (IRS) lost a legal battle on taxing digital assets obtained through staking.
According to a Forbes report, the IRS will refund the $3,293 in income tax and statutory interest a Nashville based couple paid on their staked 8,876 Tezos (XTZ) tokens.
May last year, Joshua and Jessica Jarrett, filed a civil lawsuit with the U.S. District Court for the Middle District of Tennessee, demainding a refund of the $3,293 income tax they paid in 2019 on 8,876 XTZ tokens acquired from staking.
The couple also asked for compensation for lost income by a $500 increase in tax credits.
In the court filing, the Jaretts said that tokens received through proof-of-stake protocols should be considered “new property” created by the taxpayer, not as income. Hence, the new property should not be taxed until it is sold or exchanged for a “readily accessible form of wealth.”
The couple won the case against the tax authority, and was ordered a refund of their 2019 tax on staked tokens. However, it remains unclear at the moment if the IRS has any plans to update its official guidance on crypto taxes.
After the lawsuit had started the IRS had offered a refund for the plaintiffs Joshua and Jessica Jarrett for ending the lawsuit. However, they declined the offer and wanted a ruling to ensure the same thing doesn’t happen to them or others in the future.
But I refused the offer, because I know that until my case receives an official ruling, I have no certainty they won’t try to tax me again. pic.twitter.com/qrHU9iR3pf
The move by the Jarretts could be significant as it sets a precedent for anyone who wishes to profit from the rapidly growing cryptocurrency staking industry, which is currently estimated to be worth over $18 billion.
