District Court Dismisses Cryptocurrency Taxation Suit; Finds the Issue Moot
The District Court for the Middle District of Tennessee granted a motion to dismiss a tax refund suit relating to cryptocurrency staking rewards on mootness grounds after the IRS issued the refund.
The taxpayers paid ordinary income rates on block rewards they earned from consensus-layer staking on the Tezos blockchain, then sued for a refund on the theory that block rewards from consensus-layer staking should not be taxed on receipt, but on a subsequent disposition. After issuing the refund, the government petitioned to dismiss the case. The taxpayers rejected the refund and challenged the motion to dismiss on the basis that they would be harmed without a judicial determination on the merits of their claim.
In a memorandum, the court determined that a live case or controversy no longer remains because a refund had been issued and "any subsequent controversy would necessarily involve a different tax year."