US IRS Insists to Tax Unrealized Profit from Crypto Staking

The US Internal Revenue Service (IRS) maintains that profits from crypto staking are taxable even before the participant cashes in on them. The governmental parastatal has reiterated that crypto staking does not constitute a new property. As a result, crypto enthusiasts staking their assets should account fully for them and pay taxes upon staking. A Bloomberg report on Tuesday stated the IRS’s stance in an ongoing legal proceeding between the agency and a US couple. For context, Joshua Jarret and his wife, Jessica Jarret, filed a lawsuit against the tax collectors in October, seeking to reform how the IRS views taxes on crypto staking. Background of the IRS Tax Case The years-long legal battle originated from an initial lawsuit against the IRS over a tax feud. The couple argued against the agency's stance on staking taxes and insisted that, like a farmer’s proceeds are only accounted for after harvest, rewards for staked cryptocurrencies should be taxable after the sales. Notably, the IRS repaid the couple’s overdraft tax of $4,000 for its 8,876 Tezos (XTZ) earnings in 2019. However, they pursue a greater course, seeking to establish a legal framework treating staked cryptocurrencies as new properties. Although the court closed the case on the premise that Joshua and Jessica had received a refund, the couple filed a fresh lawsuit on the case two months ago. They asked for a refund of the $12,179 paid in tax for its 13,000 XTZ earnings. Meanwhile, the IRS has maintained that crypto stakers should pay liability tax upon locking up their assets. The tax collectors cited the Revenue Ruling 202314 bill, which supports a tax imposition on staked assets as soon as their owners can sell, exchange, or dispose of them. Revolving View of Cryptocurrency Notably, views on cryptocurrency and its activities are evolving amidst a friendly global stance. In opposition to the IRS’s view that crypto is not property, legal entities in some other countries have started adopting digital assets as a prominent financial tool. For context, an English High Court recognized Tether as property. The presiding judge noted that the stablecoin has all the qualities of a property, including tangibility, traceability, and usage. Russia’s President, Vladimir Putin, recently signed a similar treaty on digital assets. He also approved a bill recognizing cryptocurrencies as property and exempting them from value-added tax. Meanwhile, cryptocurrencies continue to gain global traction. The sector’s firstborn, Bitcoin, has become the subject of a broader adoption among countries as a strategic reserve asset.