What the case decided

Paschall v. Commissioner, T.C. Memo. 2026-46 (June 5, 2026), is the first U.S. Tax Court decision to reach the merits of proof-of-stake staking taxation. The court held that staking rewards are includible in gross income under IRC §61 in the year of receipt, applying the Commissioner v. Glenshaw Glass Co., 348 U.S. 426 (1955), accession-to-wealth standard: an undeniable accession to wealth, clearly realized, and over which the taxpayer has complete dominion.

The "newly created property" theory was rejected. The taxpayer argued that staking rewards represent newly created tokens — property the staker brought into existence through the staking process, analogous to a farmer's newly harvested crop — and therefore should not be taxable income until sale. The Tax Court rejected this theory: a staker does not create the tokens, the protocol does. The possibly-newly-created character of the tokens is immaterial to the §61 analysis.

The court did not need Rev. Rul. 2023-14. Neither the court's opinion nor the IRS's arguments rested on Rev. Rul. 2023-14. The court grounded its holding directly in §61 and Glenshaw Glass. This makes Paschall an independent corroboration of the ruling's result, not a case that depends on it.

Important scope limits

Paschall is a T.C. Memorandum decision — persuasive authority, not binding precedent. The case was litigated pro se (without an attorney) and the court flagged the absence of expert testimony on token mechanics.

Critically, the fact pattern was custodial exchange staking: the taxpayer staked Cardano through eToro, and rewards were credited to his eToro account on a monthly basis. The court held that eToro's trading restrictions on the staked position did not defeat the taxpayer's dominion and control over the credited rewards.

Because the rewards went directly to a custodial account — with no protocol withdrawal-queue gating — Paschall does not resolve the specific timing question relevant to solo ETH validators: whether a beacon-chain validator-balance credit, before withdrawal to the execution layer, is income at the moment of the credit or only at the moment of withdrawal. That question remains open; TrueStake implements both policies to let users compare outcomes.

Why it matters for TrueStake

Paschall provides judicial corroboration — independent of the IRS's administrative guidance — that the "staking rewards are not income until sale" position is legally incorrect under current law. This reinforces the soundness of TrueStake's architecture, which treats staking rewards as income events and never defers recognition to the point of ETH sale.

Not tax advice. Consult a qualified tax professional regarding your specific circumstances.