Joshua and Jessica Jarret may set a precedent that benefits cryptocurrency owners.
Joshua and Jessica Jarret requested a refund of $3,293 in income tax paid in 2019 from the IRS in May 2021.
The couple filed a lawsuit in the United States District Court for the Middle District of Tennessee.
They stakingly obtained 8,876 Tezos tokens and claimed in court that any tokens obtained through proof-of-stake should be considered “new property” created by the taxpayer.
The Jarrets contended that the Tozen tokens obtained should not be taxed until they were sold or exchanged.
The IRS has offered to refund the couple’s taxes paid on Tezos rewards.
The precedent sets the stage for a discussion about defining and taxing cryptocurrency assets.
Form 1040, Internal Revenue Service
The IRS form 1040 asks taxpayers if they “received, sold, exchanged, or otherwise disposed of any financial interest in any virtual currency during the previous year.”
The IRS is attempting to transition to cryptocurrencies. Nonetheless, there is still some ambiguity about terms and how they can be taxed.
The IRS previously defined virtual currency transactions as the “receipt of new virtual currency as a result of mining and staking activities.”
The IRS definition contradicts a recent case in which they proposed a settlement.
Cryptocurrency owners are concerned about the new IRS policy and how it will affect their earnings.
It is unclear whether the IRS intends to update their official guidance on cryptocurrency. Nonetheless, cryptocurrency owners have the potential to kickstart a new positive trend.
According to Kamran Rosen, a crypto and blockchain journalist, “According to sources close to the case, the couple (Joshua and Jessica Jarret) intends to pursue the case further in court in order to obtain longer-term protection. This would undoubtedly set a national precedent for the burgeoning taking industry, which is currently valued at around $18 billion.”
“With half of all Bitcoin owners filing taxes on their cryptocurrency for the first time this year,” Rosen wrote, “the decision is likely to be one of the most closely watched of the 2021 tax filing season.”