MicroStrategy Faces Potential Tax Burden on Bitcoin’s Unrealized Gains Amid New US Tax Laws

MicroStrategy, the largest corporate holder of Bitcoin, may face federal income taxes on its unrealized gains, despite never selling any of its BTC holdings.
The company, led by Michael Saylor, is on the radar due to the provisions in the Inflation Reduction Act of 2022, which introduced a “corporate alternative minimum tax” (CAMT). This tax could require MicroStrategy to pay 15% on its adjusted earnings, including the massive $19.3 billion in unrealized gains from its Bitcoin stash.
MicroStrategy, which now holds over 450,000 BTC, worth around $48 billion, has faced significant tax scrutiny. The company’s recent purchase of $243 million in Bitcoin on January 13 only adds to its substantial holdings. However, the potential tax burden could be offset if the U.S. government, under President Trump’s more crypto-friendly stance, offers an exemption for Bitcoin under current tax laws.
In a recent pushback, MicroStrategy and Coinbase have jointly called on the U.S. Treasury and the IRS to exclude unrealized crypto gains from the new tax framework, warning that this could result in unintended consequences for corporations with large crypto holdings. Their concerns are based on the combination of the CAMT and new accounting rules, which would force firms like MicroStrategy to pay tax on paper gains from their Bitcoin holdings.
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The IRS’ crypto tax regulations are gaining traction, particularly with the new rules set to take effect in 2025. These regulations require third-party reporting of digital asset transactions by centralized crypto exchanges, aiming to improve tax compliance. However, experts, including Anndy Lian, warn that this could push investors towards decentralized exchanges, where tracking transactions for tax purposes becomes more challenging.
In the face of these changes, the Blockchain Association has already taken legal action, challenging the IRS rules on constitutional grounds. The group argues that extending reporting obligations to decentralized exchanges, which the IRS considers “brokers,” infringes on privacy and could have far-reaching effects on the crypto industry.