DeFi and GameFi Just Became Tax Free in the US?

If you're the type to light candles for your heroes, light one for Josh and Jessica Jarret.

This couple sued the IRS over their claim that staking rewards of Tezos coins are not income because they are newly created property.

I'll spare you the nuances of how this works tax-wise, but the important thing is that they won.

Edit: Reporting over this has been conflicting. Seems that they have not won yet.

Edit 2: It seems the source of the confusion is that the IRS offered the refund. That's essentially stipulating that the Jarret's claim is right. But the court case is still going on because the Jarrets want to establish firm precedent. At this point, it is being widely assumed that they will prevail in court since the IRS agreed to the dr

As of now, staking rewards where you stake assets in order to create new assets is not a taxable event. The analogy used in the case is a baker combining flour, eggs, sugar, and so on into a cake. The newly created cake is not income. When the baker sells the cake, that sale is the income.

More fundamentally, this court decision says that combining resources to create new crypto is not taxable.

That sounds an awful lot like any kind of reward token. Like you get from mining. Or from play2earn games like Splinterlands. Or from DeFi yield farming.

Obviously Splinterlands is a big deal for me and for a lot of you all reading, so let's tackle that specifically.

I buy card assets, then go through a process to create new DEC (and eventually new SPS). Is that a combination of resources to create a new product? Sounds like it to me. Earn DEC, only pay taxes when I sell DEC for something else. Check.

I buy SPS and stake it to generate new SPS and vouchers. Is that a combination of resources to create a new product? Sounds like it to me.

I buy cards, SPT, plot claims, liquidity pool tokens, skins, and packs to generate new SPS. Is that a combination of resources to create a new product? Sounds like it to me.

In general this decision suggests that any time you are minting a new coin, it's not taxable until it sells.

Similarly for the LEO, HIVE, HP, and HBD this post will earn (if any lol).

Putting up stake and compounding just became a lot more attractive.

Posted Using LeoFinance ^Beta