The United States Internal Revenue Service (IRS) has reaffirmed its position that rewards generated from staking activities are not new property.
The court reportedly rejected claims in a second lawsuit filed by Jeff Bezos and his wife, Jessica Jarrett, over staking rewards.
According to Bloomberg, the IRS has maintained its previous position that rewards generated from staking activities are not new property and are not taxable until the rewards are sold or redeemed.
The company said it was opposing a legal challenge to the company's decision to defer the payment, arguing that the compensation was taxable income when it was received.
The National Tax Agency issued the "2023-14 Revenue Ruling
2023-14) provides that if a taxpayer receives staking rewards, they may sell them.
"The FSA requires that when an investment is sold, exchanged, or otherwise disposed of, it must be reported as income at its fair market value."
Staking is the process of locking cryptocurrencies into smart contracts to operate the blockchain and verify transactions, thus securing the network.
This allows them to receive compensation, usually in the form of additional cryptocurrency, and earn passive income through digital assets. According to the National Tax Agency’s 2023 guidelines, block rewards, like staking, are:
The tokens are considered income from the time of their creation and are taxed according to the market value of the tokens at that time. The Jarretts' tax dispute dates back to 2021, when they were involved in a staking reward transaction in 2019.
The couple filed their first lawsuit in connection with 8,876 Tezos tokens they received in return for a sale. The couple argued that these tokens should be considered property, similar to a farmer's crops or a writer's manuscripts, and that they could not be sold.
They argued that they should only be taxed at the time of purchase. In response, the IRS offered them a $4,000 tax refund, but the Jarretts rejected it and decided to withdraw all of their Proof of Stake transactions.
The lawsuit continued in an attempt to set a legal precedent for the work, but the court found the case moot due to the refund and dismissed the case.
The legal dispute, which began when the Zarets filed a second lawsuit in October, has now been resolved with the U.S.
This could set a precedent for how digital asset staking should be taxed in the country.
2024/12/24 14:28 KST
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