MicroStrategy may pay taxes on $19B Bitcoin unrealized gains

MicroStrategy, the top corporate holder of the world’s first cryptocurrency Bitcoin (BTC), may have to pay taxes on its holdings despite never selling any.

A recent Wall Street Journal report claims that in accordance with the Inflation Reduction Act of 2022, MicroStrategy qualifies for a 15% tax rate based on the adjusted version of the company’s earnings.

Still, the United States Internal Revenue Service (IRS) may decide to create an exemption specifically for Bitcoin holdings under Trump’s administration. MicroStrategy has already asked the regulator to implement such a measure in a recent letter submitted jointly with publicly traded U.S. crypto exchange Coinbase.

“Coinbase and MicroStrategy respectfully request that the U.S. Department of the Treasury and the Internal Revenue Service […] avoid serious unintended consequences to U.S. corporations holding substantial cryptocurrency” the letter reads. The document then goes on to explain the extent of the request:

“[Unintended consequences can be avoided by adjusting] the final rule to exclude from ‘adjusted financial statement income’ […] unrealized gains and losses on investments of an applicable corporation that for book purposes are measured at fair value with changes reflected in net income. We also respectfully request that interim guidance be issued to the same effect, to assure prompt relief.”

MicroStrategy is a publicly traded business intelligence company founded in 1989 that pivoted to acquire as much Bitcoin as possible in 2020. The company now holds well over 1% of all Bitcoin that will ever exist and is now well underway to get its hands on 2%.

At the time of writing, MSTR Tracker data shows that MicroStrategy currently holds about 461,000 BTC worth nearly $48.85 billion. The current unrealized profit of 66.57% on those holdings is equivalent to $19.52 billion.

The report comes under a year after MicroStrategy paid $40 million to settle a tax fraud lawsuit accusing it and its founder Michael Saylor of tax evasion. According to the New York Times report, local officials assessed the agreement as the “biggest-ever income tax fraud recovery” in the district.

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