Good day everyone,
I hope you are all having a good day, welcome to CryptoGod-1's blog on all things crypto. In this post I will be looking at the news of MicroStrategy potentially facing a massive tax bill on unrealised Bitcoin gains.
MicroStrategy Potential Tax on Unrealised Bitcoin Gains
The Wall Street Journal have reported that business intelligence firm MicroStrategy could be facing potential tax liabilities on their unrealised gains from Bitcoin, with their holdings currently valued at around $19 billion. They are notably the world’s largest corporate Bitcoin holder with more than 461,000 Bitcoin on their balance sheet.
Currently MicroStrategy’s total Bitcoin holdings are worth over $47 billion and of that $19 billion are unrealised gains. The United States company raised funds over the years for their Bitcoin purchases via stock and debt offerings. While MicroStrategy have not sold any Bitcoin to date they could still be forced to pay taxes on their holdings due to the Corporate Alternative Minimum Tax (CAMT) provision under the Inflation Reduction Act passed in 2022. Basically this means that CAMT will impose a 15% tax rate based on an adjusted version of a corporation’s earnings.
The Internal Revenue Service (IRS) has the ability to provide exemptions for unrealised gains from securities such as common stock. The IRS has yet to extend these exemptions into the digital assets space although there is belief that the IRS may draft rules which could be in favour of firms like MicroStrategy. Given Donald Trump’s pro-crypto stance this seems likely although not guaranteed. Tax analyst Robert Willens noted:
"If the Biden group was still in place, they probably wouldn’t get the exemption. It would be easy to slot crypto assets into the same exemption that stocks are going to enjoy, because there’s no real difference in the accounting."
If it ends up being a situation where MicroStrategy are required to pay taxes on their unrealised gains then the company may suddenly be forced to sell some of their Bitcoin holdings. This would likely see the crypto market become unsettled due to a flooding of the market with the asset. MicroStrategy’s substantial Bitcoin accumulation has been a prominent aspect of its business strategy and this would be a major issues to their ambitions.
Both MicroStrategy and Coinbase have petitioned the US Treasury and IRS to exclude unrealised crypto gains from the adjusted financial income calculation under the CAMT. As part of their petitions they have argued that such measures are necessary to “avoid serious unintended consequences for U.S. corporations holding substantial cryptocurrency.”
Firms such as Berkshire Hathaway have an exemption for their securities holdings and with tax season approaching it will be interesting to see how this develops with the IRS. Recently, the agency have brought in a new reporting system as they looking to ensure greater transparency with cryptocurrency transactions.
While MicroStrategy deals with potential tax liabilities it has not stopped them from adding to their Bitcoin portfolio. The company added another 11,000 Bitcoin to their holdings on the 21st of January 2025, which is the equivalent of $1.1 billion. MicroStrategy have an average cost per Bitcoin of $63,610.
Have a great day.
Peace. CryptoGod-1.
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