MicroStrategy Inc. MSTR reportedly may be liable for taxes on its unrealized Bitcoin BTC/USD gains, despite having made no sales.
What Happened: The Inflation Reduction Act of 2022, which introduced a “corporate alternative minimum tax,” could result in the so-called Bitcoin holdings company being subject to a 15% tax rate on its unrealized gains, reported The Wall Street Journal on Friday.
MicroStrategy, along with Coinbase COIN, another leading publicly listed cryptocurrency-linked firm, have pushed back against the regulation. In a joint letter from earlier this month, both companies appealed to the U.S. Treasury and the Internal Revenue Service to amend the rule to exclude unrealized cryptocurrency gains from the adjusted financial statement income, or the AFSI.
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Interestingly, the report kicked up a storm on social media platform X, with several users placing a community note that stated, “The claim that MicroStrategy may have to pay federal income taxes on its unrealized Bitcoin gains of $18 billion is false. The U.S. tax system does not tax unrealized capital gains” that has not yet been sold or converted into cash.
Benzinga has reached out to MicroStrategy to understand their position on the issue and whether they have contacted the new Donald Trump-led administration to address it. The story will be updated when they respond.
Why It Matters: The question of taxing unrealized cryptocurrency gains comes after the Financial Accounting Standards Board’s new accounting rules for cryptocurrencies, which went into effect in December. Under the new rules, companies will be required to report the fair market value of their positions, capturing both unrealized gains and losses on a quarterly basis.
MicroStrategy has led corporate Bitcoin adoption, with its stockpile increasing to 461,000 BTC, valued at $45.74 billion, according to BitcoinTresuries.net. The firm was sitting on unrealized Bitcoin gains of 56% as of this writing.
The firm’s co-founder and executive chairman, Michael Saylor, has been known for his proximity with the Trump administration, having met with the entire cabinet just ahead of last week’s presidential inauguration.
Price Action: At the time of writing, Bitcoin was exchanging hands at $99,182.10, down 5.53% in the last 24 hours, according to data from Benzinga Pro.
Shares of MicroStrategy closed 5.21% lower at $353.67 during Friday’s regular trading session.
According to 12 analyst ratings, the stock’s consensus price target is $449.5, while Bernstein, TD Cowen, and Barclays have average price targets of $546.67.
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