Mined digital currencies shouldn’t be taxed by the IRS because it’s property creation, according to representations made in a federal court.
The court heard arguments from a Tennessee couple who were taxed on the creation of 8,876 units of a digital currency called Tezos.
The transaction was reported to the IRS as “other income,” resulting in a tax charge of $ 9,407. However, the couple later requested a refund, suggesting that creating a digital currency is not taxable income, but rather a creative activity – much like a baker making a cake.
In their complaint, the Jarretts said the IRS was attempting an unprecedented measure to impose taxes on asset creation rather than income.
“The United States here is trying to use federal income tax law to do something unprecedented, which is to tax creative activities rather than income. Taxing newly created cakes, books, or tokens as income would have far-reaching and adverse effects on taxpayers and the US economy and is not supported by the Internal Revenue Code, regulation, jurisdiction, or the constitution. “
In their argument, the couple cited Eisner v Macomber from the Supreme Court in 1920, which stated that income must include “income” and not creation.
Similarly, they argued for the precedent set by the Supreme Court in Commissioner v. Glenshaw Glass, describing income as “examples of undeniable asset appreciation that have been clearly realized and over which taxpayers have complete control”. In their case, however, there was not yet a “realization” that could be classified as taxable.
The Jarretts are asking the court to order a refund of $ 3,293 in taxes paid and a $ 500 increase in tax credits, which the IRS has not yet responded to.
See also: CoinGeek Live Panel on Regulation of Digital Assets & Digital Asset Businesses
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