Taxation of Digital Assets: Taxation of Staking and Mining Policy – Treatment and Discussion

Tax attorney Megan Jones chaired a Practicing Law Institute (PLI) program about U.S. federal income tax treatment of cryptocurrency block rewards created or received from "staking" or "mining" activities of taxpayers that validate transactions on a blockchain. The IRS requires taxpayers to report any transaction involving the "sale or exchange" of cryptocurrency, but agency guidance also stipulates that staking and mining rewards are taxable "upon acquisition," before they are sold or exchanged. This program, geared toward attorneys who deal with digital assets, provided an overview of how cryptocurrency exchanges work and how crypto assets are validated on distributed ledgers. Speakers then dove into the tax treatment of crypto and virtual assets, including Notice 2014-21, Revenue Ruling 2023-14 and other IRS guidance on the subject. They also covered sourcing, unrelated business taxable income (UBTI), effectively connected income (ECI) and related issues, plus taxpayer challenges to the IRS' position on crypto, such as the Jarrett case.