That must be how Alvie N. Paschall and Patricia C. Paschall, T. C. Memo. 2026-46, filed 6/4/26, must feel after Judge Cary Douglas (“C-Doug”) Pugh sustains IRS’ $33K underreporting hit due to the bonus cryptocurrency Alvie got when he let his crypto be used in proof-of-stake transaction during year at issue. 

As near as i can tell, a proof-of-stake means the staker puts up his own crypto to to validate other punters’ crypto transactions. If he gets it right, he gets more crypto; gets it wrong and he loses. But see T. C. Memo. 2026-46 at p. 3, as Judge C-Doug Pugh battles through without expert testimony, which she laments, at pp. 2 and 8.

I lament even more, for I understand almost none of this. 

Howbeit, crypto is property, can be sold for cash, hence is Section 61 money’s worth. No constraints on Alvie selling in year at issue. That he never got the misaddressed Form 1099-MISC for the bonus is nothing to the point. The bonus is not like a stock dividend, because no proof that the bonus was distributed across the board in proportion to the punters’ holdings, whether or not they put up their crypto to validate others. 

Neither was it created by Alvie’s labor.

“Stakers do not create anything by themselves. Instead, the staked tokens validate transactions on the blockchain. In exchange for validation, the cryptocurrency’s protocol grants stakers additional tokens. The fact that these tokens may be newly created is immaterial because the stakers are not the ones who created them. Further, petitioners were not owners or operators of a staking pool; unlike the baker or writer, they lacked the power to decide whether (and when) the property was created.” T. C. Memo. 2026-46, at p. 10.

And IRS didn’t rely on Rev Rul. 2023-14, nor does C-Doug Pugh, so no need to get Loper Bright involved.

Taishoff says both this blogpost and Judge C-Doug Pugh’s opinion really needs expert input. Perhaps my ultrasophisticated readers would care to weigh in after reading both.