Tezos (XTZ) Founder and Wife Take IRS to Court Over Taxation of Staked Tokens
The founder of Tezos (XTZ), Josh Jarrett, and his wife, Jessica Jarrett, are once again challenging the IRS in court over the agency’s treatment of their staked XTZ tokens. In a recent complaint filed with a Tennessee Federal court, the Jarretts argue that newly minted tokens from staking should only be considered taxable income if they are sold.
According to the Jarretts, new property should not be taxed as income; instead, taxable income should only arise from the proceeds of selling that new property. They likened newly minted tokens to other forms of new property, such as a farmer’s crop, an author’s manuscript, or a manufacturer’s product, which are not taxed until they are sold. The Jarretts believe that the IRS’s current treatment of staked tokens as taxable income is unfair and unjust.
This is not the first time the Jarretts have taken legal action against the IRS on this issue. In 2021, they sued the agency seeking refunds for taxes paid on staked XTZ tokens. However, the case was dismissed after the Jarrets accepted a $4,000 settlement. Now, they are once again seeking refunds for staked tokens and are pushing for a permanent end to the IRS’s taxation of newly minted crypto property.
The lawsuit has garnered support from the prominent crypto advocacy group Coin Center, who believe that the outcome of this case could have significant implications for the future of cryptocurrency and decentralized technologies. Coin Center emphasized the importance of addressing the tax issue surrounding proof of stake, where tokens, not hash power, determine one’s ability to validate transactions and contribute to building the blockchain.
As the case unfolds, it will be interesting to see how the court rules on the taxation of staked tokens and whether the IRS’s treatment of newly minted crypto property as taxable income will be reconsidered. This legal battle highlights the complexities of taxation in the cryptocurrency space and the need for clear guidelines to ensure fairness and compliance for all parties involved. Stay tuned for updates on this case and its potential impact on the crypto community.