On July 31, 2023, the IRS issued Revenue Ruling 2023-14, which
sets forth the IRS's position as to when certain staking
"rewards" are taxable income.
The Ruling analyzes a fact pattern where a cash method taxpayer
"stakes 200 units of [token] M and validates
a new block of transactions on the M blockchain,
receiving 2 units of M as validation
rewards." The Ruling concludes that the taxpayer must include
the "fair market value of the validation rewards
received" in gross income during "the taxable year in
which the taxpayer gains dominion and control over the validation
rewards."
However, what the Ruling does not say is far more significant
than what the Ruling does say.
First, the facts that the IRS rules on do not state that the
tokens are newly created property with respect to which the
taxpayer is the first owner. Not all staking arrangements involve
newly created property; there are many situations where a person
engaged in staking receives tokens from
