The founder of Tezos (XTZ) and his wife are suing the IRS again over the agency’s treatment of their staked XTZ tokens.
In a new complaint filed in federal court in Tennessee, Josh and Jessica Jarrett argue that newly issued tokens from staking should only be treated as taxable if they are sold.
“New property does not constitute taxable income; instead, the taxable income comes from the proceeds of the sale of this new property. In all other contexts, the IRS recognizes that new property is not taxable income. When a taxpayer creates new property – whether it is a farmer’s crop, an author’s manuscript or a manufactured product – he is not taxed until he the sale. It is only when a new property is sold that the income “comes in”. As the landmark treatise explained in the year the income tax was introduced, “the measure of net taxable income is not the amount or value of the year’s income, but the net sales proceeds.
The Jarretts first sued the IRS on similar grounds in 2021, seeking a refund of taxes they paid on staked XTZ tokens. The case was dismissed after the Jarretts were offered a settlement of $4,000.
Now, the Jarretts are once again seeking a refund of the staked tokens and a permanent end to what they see as the IRS’s treatment of newly minted crypto assets as taxable income.
The lawsuit is supported by prominent cryptocurrency advocacy group Coin Center.
Coin Center said in a statement:
“Josh’s case has important implications for the future of cryptocurrencies and decentralized technologies. This is especially important for proof of stake, where tokens, not hashing power, determine a person’s ability to validate transactions and help build the blockchain. Since every token holder can stake, this means that the tax issue affects everyone.
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