MicroStrategy Faces Potential Tax Burden on Unrealized Bitcoin Gains: Report

MicroStrategy, a business intelligence firm helmed by prominent Bitcoin advocate Michael Saylor, faces potential federal tax liabilities on its extensive Bitcoin holdings, estimated at $47 billion, according to a Wall Street Journal report on Friday.

MicroStrategy suddenly has a tax problem and needs help from Trump’s IRS. New tax rules could soon tax unrealized gains on its bitcoin holdings. This would defeat the purpose of its bitcoin roll-up strategy. | My latest @wsj ⁦@WSJheard⁩ $MSTR https://t.co/QmPjW4Oq7r

— Jonathan Weil (@JonathanWeil) January 24, 2025

The company’s massive crypto portfolio, which includes $18 billion in unrealized gains, has drawn attention amid evolving U.S. tax regulations.

MicroStrategy Faces Possible Tax Bill from Bitcoin Holdings

The U.S. Corporate Alternative Minimum Tax (CAMT), introduced under the Inflation Reduction Act, imposes a 15% tax on adjusted GAAP earnings for corporations earning over $1 billion annually.

Notably, this framework includes unrealized gains on assets like Bitcoin, meaning profits from assets that have appreciated in value but remain unsold could still be taxed.

Should the tax be enforced, MicroStrategy may face billions of dollars in liabilities starting in 2026.

To address these potential liabilities, the firm is reportedly negotiating with the Internal Revenue Service (IRS) to seek exemptions.

However, the IRS has yet to indicate whether any relief will be granted under the current tax framework.

MicroStrategy’s substantial Bitcoin accumulation has been a prominent aspect of its business strategy.

The company raised capital through stock and debt offerings to acquire its holdings.

While this approach has drawn attention to Bitcoin, it now poses unique challenges amid increasing regulatory scrutiny.

The outcome of these tax issues may set a precedent for other corporations holding cryptocurrency assets.

MicroStrategy Expands Bitcoin Holdings with $1.1 Billion Purchase

As MicroStrategy deals with potential tax liabilities, the firm continues to expand its Bitcoin portfolio. On January 21, the company added 11,000 BTC to its holdings, equivalent to $1.1 billion.

According to a Tuesday X post from Saylor, this latest acquisition brings the company’s total Bitcoin holdings to 461,000 BTC, valued at approximately $29.3 billion.

The average cost per Bitcoin in its portfolio stands at $63,610.