The founder of Tezos (XTZ) and his wife have once again taken the IRS to court over its handling of staked XTZ tokens.
In a new complaint filed in federal court in Tennessee, Josh and Jessica Jarrett argue that newly minted tokens through staking should only be treated as taxable if they are sold.
“New properties are not taxable income. Instead, taxable income arises from the proceeds from the sale of the new property. In all other situations, the IRS recognizes that new property is not taxable income. If a taxpayer creates new property, such as a crop, a writer’s manuscript, or a manufacturer’s product, no tax is due until it is sold. Income ‘comes in’ only when you sell new properties. As explained in a seminal paper in the year the income tax was introduced, ‘the measure of taxable net income is the net proceeds from sales, not the amount or value of the production of operations for the year.’”
The Jarretts first sued the IRS on similar grounds in 2021, seeking a refund for taxes paid on staked XTZ tokens. The case was dismissed after the Jarrets were offered a $4,000 settlement.
Now the Jarretts are again seeking a refund for the staked tokens and permanently stopping the IRS from treating newly minted cryptocurrency assets as taxable income.
The lawsuit is backed by Coin Center, a prominent cryptocurrency advocacy group.
Coin Center said in a statement:
“Josh’s story has important implications for the future of cryptocurrency and decentralized technologies. This is especially important for proof-of-stake, where it’s not the hash power that determines the token’s ability to verify transactions and help build the blockchain. Since any token holder can stake, this means tax issues affect everyone.”
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