The court dismissed the Jarretts’ case over the taxation of staking rewards after the IRS issued the refund the couple sought; not good enough, they said.
ConsenSys issued a statement Feb. 7 in support of the appeal of the of Jarrett v. United States case concerning the taxation of staking rewards. The case originated in a dispute over a refund of about $4,000 that Joshua and Jessica Jarrett claimed on XTZ tokens they validated in 2019.
The Jarretts claimed their staking rewards should be treated as property and taxable only on upon their sale. After the U.S. Internal Revenue Service (IRS) ignored their refund claim, the Jarretts filed suit.
They issued the refund in 2022, but the Jarretts refused it, preferring to pursue their legal case. “I need a better answer,” Joshua Jarrett said at the time.
Related: IRS reminds taxpayers of crypto income reporting ahead of 2022 filing
Their suit was subsequently dismissed, however, after a Tennessee district court ruled in October that the payment of the refund rendered the case moot. Now the Jarretts are appealing that decision.
ConsenSys senior counsel and director of global regulatory matters Bill Hughes said in a statement:
“We support Josh and Jessica Jarrett’s appeal because we believe that US taxpayers, who run many of the validators on Ethereum, deserve fair treatment under the tax code. […] We are glad that the Jarretts will not allow the IRS to dodge this issue by asking an appeals court to reinstate their case.”
The ConsenSys statement went on to note that the Ethereum Shanghai update scheduled for March will allow validators to withdraw 16 million staked Ether (ETH), aiming the tax treatment of staked crypto a timely issue. The private blockchain reiterated its position on taxation in the statement:
“Similar to a farmer who grows crops, staking rewards are created by the protocol to incentivize participating in providing security for the protocol. Created property is not taxed until sale.”
The Proof of Stake Alliance has also been a strong supporter of the Jarretts. That organization released a statement after the October court decision saying, “The IRS offered Josh a tax refund for 2019, and while this obviously suggests the IRS agrees with Josh, the IRS refused to confirm this or to assure Josh of the same tax treatment going forward.”
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