Amanda Parsons (Colorado; Google Scholar), May I Pay More? Lessons From Jarrett for Blockchain Tax Policy, 176 Tax Notes Fed. 2063 (Sept. 26, 2022):

In this article, Parsons examines Jarrett, a pending refund suit in which the taxpayers argue that blockchain reward tokens should be included in income only upon sale or exchange (a position that would raise their tax bills), and she explores why they sought this treatment and what implications it holds for policymakers trying to develop a tax regime for blockchain activities.

Lessons From Jarrett
The tax treatment requested in Jarrett is puzzling and should not be accepted at face value. Analyzing the possible motivations for this desired treatment can provide important insights for policymakers and regulators as they grapple with creating a regime to regulate and tax this emerging space.

First, they should recognize that as cryptocurrency and blockchain have become more mainstream, corporate players have joined the game. When crafting a taxing regime for blockchain activities, policymakers must consider the appropriate and desired tax treatment of corporations.

Second, preventing blockchain tax evasion should remain a top concern for the IRS. The increase in IRS enforcement funding in the Inflation Reduction Act (P.L. 117-169), including the specific directive for increased digital asset monitoring and compliance activities, is an important first step.

And, finally, Jarrett is yet another reminder of how the realization requirement allows people to escape taxation on appreciated assets. What is on the surface bad tax planning (forgoing a favorable long-term capital gains rate) becomes top-notch tax planning when you consider the potential to permanently escape tax by leveraging the realization requirement.