The Nashville couple’s lawsuit over taxes they paid on unclaimed and unsold Tezos staking rewards comes to an end when the Internal Revenue Service (IRS) has agreed to issue them a refund.
This decision could set a precedent for future guidance on how cryptocurrency rewards earned through wagering are taxed. Currently, Proof-of-Stake staking rewards are classified as income and tax is paid as they are received. The new development suggests that they should only be taxed when they are sold for US dollars.
In May 2021, the Jarretts filed a complaint against the US government stating that the 8,876 Tezos (XTZ) tokens they created in 2019 were not income and should not be taxed as such. The complaint also alleged that the government was trying to do something “unprecedented, which is to tax creative activity rather than income.”
“Taxing newly created cakes, books, or tokens as income would have far-reaching and detrimental effects on U.S. taxpayers and the economy and is not supported by the Internal Revenue Code, regulations, case law, or the Constitution.”
According to court documents expected to be released Thursday, the IRS said it would honor the Jarretts’ request for a refund, with “statutory interest, as provided by law” of the $3,793 the Jarretts paid for unclaimed fees last year.
There is currently no guidance on how to tax unclaimed staking rewards. The IRS asks taxpayers “whether they received, sold, traded, or otherwise disposed of any financial interest in any virtual currency,” but none of those descriptors appear to be directly related to the Jarretts’ unsold and unclaimed bounties.
Related: CoinTracker Crypto Tax Calculator Valued at $1.3B After $100M Raise
Forbes reported that sources close to the matter say the couple plans to continue the case in court to gain long-term protection and set a national precedent. American taxpayers are probably praying that no legislative response to this court outcome will resemble the UK regulator’s new guidance on cryptocurrency staking. There, the placement of cryptocurrencies will often be treated as a sale of tokens and will be subject to capital gains tax.
The Nashville couple’s lawsuit over taxes they paid on unclaimed and unsold Tezos staking rewards comes to an end when the Internal Revenue Service (IRS) has agreed to issue them a refund.
This decision could set a precedent for future guidance on how cryptocurrency rewards earned through wagering are taxed. Currently, Proof-of-Stake staking rewards are classified as income and tax is paid as they are received. The new development suggests that they should only be taxed when they are sold for US dollars.
In May 2021, the Jarretts filed a complaint against the US government stating that the 8,876 Tezos (XTZ) tokens they created in 2019 were not income and should not be taxed as such. The complaint also alleged that the government was trying to do something “unprecedented, which is to tax creative activity rather than income.”
“Taxing newly created cakes, books, or tokens as income would have far-reaching and detrimental effects on U.S. taxpayers and the economy and is not supported by the Internal Revenue Code, regulations, case law, or the Constitution.”
According to court documents expected to be released Thursday, the IRS said it would honor the Jarretts’ request for a refund, with “statutory interest, as provided by law” of the $3,793 the Jarretts paid for unclaimed fees last year.
There is currently no guidance on how to tax unclaimed staking rewards. The IRS asks taxpayers “whether they received, sold, traded, or otherwise disposed of any financial interest in any virtual currency,” but none of those descriptors appear to be directly related to the Jarretts’ unsold and unclaimed bounties.
Related: CoinTracker Crypto Tax Calculator Valued at $1.3B After $100M Raise
Forbes reported that sources close to the matter say the couple plans to continue the case in court to gain long-term protection and set a national precedent. American taxpayers are probably praying that no legislative response to this court outcome will resemble the UK regulator’s new guidance on cryptocurrency staking. There, the placement of cryptocurrencies will often be treated as a sale of tokens and will be subject to capital gains tax.
