Tezos founder (XTZ) and his wife are taking the IRS to court once again over the agency’s treatment of their staked XTZ tokens.
The new complaint Josh Jarrett and Jessica Jarrett filed a lawsuit with the Tennessee Federal Court arguing that tokens newly produced from staking are only taxable when they’re sold.
“New property is not taxable income; instead, taxable income arises from the proceeds from the sale of that new property. In all other contexts, the IRS recognizes that new property is not taxable income. When a taxpayer creates new property—whether a farmer’s crop, an author’s manuscript, or a manufacturer’s product—he is not taxed until he sells it. Only upon sale of new property does income ‘come in.’ As the leading treatise explained in the year that the income tax was introduced, ‘the measure of taxable net income is not the amount or value of the products of the year’s operation, but the net proceeds of sales.'”
Jarretts sued IRS in 2021 for a similar reason, requesting refunds of taxes paid on XTZ tokens staked. Jarretts received a $4,000 offer to settle the case.
Jarretts now seek to get refunds of staked tokens as well as an end to the IRS treating newly-minted cryptoproperty like taxable income.
This lawsuit was filed by supported The prominent crypto advocacy group Coin Center.
Coin Center said in a press release.
“Josh’s case has important implications for the future of cryptocurrency and decentralized technologies. It is especially important for proof of stake, where tokens, not hash power, determine one’s ability to validate transactions and help build the blockchain. Since every token holder can stake, this means the tax issue affects everyone.”
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