Tezos validator Josh Jarrett and his wife Jessica from Tennessee have filed a new lawsuit against the IRS concerning the taxation of tokens created through staking.
In their complaint, the couple argues that such assets should be considered newly created property, with tax liabilities arising only upon sale.
They compared tokens received from staking to “a farmer’s crop, an author’s manuscript, or a manufacturer’s product,” which are not taxed until sold.
The Jarretts seek a change in the IRS rule that includes rewards for locked coins in the fiscal base immediately upon their creation at the presumed market price.
The plaintiffs also demand a refund of $12,179 in taxes paid for 13,000 Tezos (XTZ) tokens received in 2020. The couple has neither sold nor exchanged the assets, which are currently valued at ~$8580.
The Jarretts’ legal battle with the IRS began in 2021 when they sued over 8876 XTZ earned from staking in 2019, as noted by Cointelegraph. The couple paid an estimated tax bill of $9407 but subsequently filed for a refund.
In 2022, the tax authority attempted to close the case by offering a $4000 refund. The Jarretts declined, aiming to establish a legal precedent for all PoS networks.
The IRS stated that it had paid the proposed compensation and acknowledged that the couple had no tax obligations for staking rewards received in 2019. Experts believe this rendered the case “moot.” In September 2024, a Tennessee court dismissed the lawsuit.
In May, a bill regulating the taxation of staking income was introduced in the US Congress. The document proposes changes to IRS rules sought by the Jarretts.