In May 2021, Joshua and Jessica Jarret asked the IRS for a refund of $3,293 in income tax paid in 2019.
The couple filed a complaint with the United States District Court for the Intermediate District of Tennessee.
They obtained 8,876 Tezos tokens by staking, and they claimed in court that all tokens earned through proof of stake should be counted “new property” created by the taxpayer.
The Shanks claimed the Tozen Tokens obtained should not be taxed until sold or traded.
IRS offered to refund the taxes paid by the couple on the rewards obtained by trading Tezos.
The precedent opens the debate on the definition and taxation of cryptocurrency assets.
IRS Form 1040
the IRS Form 1040 verifies whether taxpayers “have received, sold, traded, or otherwise disposed of any financial interest in a virtual currency within the last year.”
the IRS try to switch to cryptocurrencies. Nevertheless, there is still confusion about the terms and how they can tax them.
Previously the IRS Defined Virtual Currency Transactions such as one that included the “receipt of new virtual currency as a result of mining and staking activities.”
The IRS definition goes against the recent case in which they proposed a settlement.
Cryptocurrency holders have a lot of doubts about the new IRS policy and how it would affect their income.
It is not clear if the IRS plans to update their official cryptocurrency guidelines. Nevertheless, crypto owners could start a new positive movement.
According to Crypto & Blockchain Journalist Kamran Rosen, “Sources familiar with the matter say the couple (Joshua and Jessica Jarret) plan to take the case to court get longer term protection. This would undoubtedly set a national precedent for the growing catching industry, currently estimated at around $18 billion.”
“With half of all bitcoin owners file taxes on their crypto for the first time this year, the decision is likely to be one of the most watched of the 2021 tax filing season,” Rosen posted.