In court documents expected to be made public Thursday, the IRS stated that it would refund $3,293 in income taxes (plus statutory interest) to a Nashville couple who had paid the amount of 8,876 Tezos tokens they had obtained through the stake. According to a May 2021 civil lawsuit filed by the couple, Joshua and Jessica Jarrett, any tokens obtained through proof-of-stake should be considered "new property" created by the taxpayer, and therefore not income that "comes in." to the taxpayer. . To be taxed, tokens earned through staking (or any other newly created property) must first be converted into a "readily accessible form of wealth."
Thus, the lawsuit alleges that, until the tokens are sold, no taxable event has occurred. The decision sets a great precedent amid a broader political debate on how to define and tax crypto assets. The 2021 version of IRS Form 1040 prominently features a line asking if taxpayers at any time during the year "received, sold, exchanged, or disposed of any financial interest in any virtual currency," indicating to many that the IRS has the intention to do crypto. a center point of focus moving forward. Confusion remains, however, as IRS instructions issued recently on December 21 defined a "transaction involving virtual currency" as one that included "the receipt of new virtual currency as a result of mining and staking activities." ", which goes directly against the decision in question. With the tax filing season for 2021 opening last week, the news has already created huge waves in the crypto community. While it's unclear at this time if the IRS plans to update its official guidance for last year, sources close to the matter say the couple plan to pursue the court case for longer-term protection. This would undoubtedly set a national precedent for the growing extraction industry, currently estimated at around $18 billion.
One thing is for sure: with half of all Bitcoin owners filing taxes on their crypto for the first time this year, the decision is likely to be one of the most closely watched of the 2021 tax filing season.