Two Tezos (XTZ) investors, Josh and Jessica Jarrett, have once again taken the IRS to court over the agency’s treatment of their staked XTZ tokens. The Jarretts argue that newly minted tokens from staking should only be considered taxable if they are actually sold.
In their complaint filed with a Tennessee Federal court, the Jarretts assert that new property, such as tokens generated through staking, should not be classified as taxable income until they are sold. They draw parallels to other forms of new property, like a farmer’s crop or an author’s manuscript, which are not taxed until they are sold.
This is not the first time the Jarretts have challenged the IRS on this issue. In 2021, they filed a similar lawsuit seeking refunds for taxes paid on staked XTZ tokens. Although the case was dismissed after they were offered a $4,000 settlement, the Jarretts are once again seeking refunds for staked tokens and aiming to put an end to what they see as the IRS’s unfair treatment of newly minted crypto property as taxable income.
Supporting the Jarretts in their legal battle is the crypto advocacy group Coin Center, which believes that this case has significant implications for the future of cryptocurrency and decentralized technologies. Coin Center highlights the importance of proof of stake mechanisms, where tokens play a crucial role in validating transactions and building the blockchain. They stress that the tax issue at hand affects all token holders who participate in staking.
As the lawsuit progresses, the crypto community eagerly awaits the outcome, as it could potentially set a precedent for how the IRS treats staked tokens and other forms of newly minted crypto property. Stay tuned for updates on this case that could shape the future of cryptocurrency taxation.
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