The Internal Revenue Services’ enforcement of taxation policies on digital assets, and cryptocurrency transactions resulted in a negative reaction from taxpayers.
A crypto investor and trader, Joshua Jarret has filed a lawsuit against the IRS under claims that taxing newly processed tokens as incomes is contradictory to over a century of U.S tax law.
According to Jarret, cryptocurrency tokens can be considered as income once they are received as payment or traded for compensation like any other property. Comparing crypto tokens to harvest crops, Jarret added that newly processed tokens are not be taxed until sold similarly to crops.
Jarret along with his attorneys argued that any new tokens freshly created, are not considered income until they are sold. Due to the tax enforcement, Jarret stated any investor who harvests tokens of any digital assets should move operations abroad with different tax regulations, if they don’t want their assets to be taxed in the U.S
Jarret partakes in Tezos, a blockchain system that gains digital rewards for people similar to mining Bitcoin. However, unlike Bitcoin, Tezos uses a different method of securing underlying blockchain while consuming less energy.
Phil Karter and Kevin Sweeney, shareholders of Chamberlain Hrdlicka, a Texas Law firm, say Jarret might have a case in point. In an email to Fortune, Karter and Sweeney stated it is fair to treat the staking of tokens as a property created by the taxpayer rather than treating it as a third party providing new tokens.
Former commissioner of IRS, and business consultant, Eric Hylton stated that cryptocurrency is considered as property, but due to the continuous innovation in the industry, the IRS needs to revisit the implications of such innovations.
The U.S intends to tax creative activities as income, the lawsuit alleges. Taxing newly created items is detrimental to taxpayers and the economy.
