MicroStrategy has a tax problem? New tax rules could impose on unrealized BTC gains – Cryptomode
MicroStrategy, the largest holder of Bitcoin (BTC), has over $47 billion in stock, including an $18 billion gain, after years of accumulating money through debt and equity issues to buy BTC.
But the New Wall Street Journal (WSJ) a report He says it might be microstrategy required To pay federal income taxes on these paper gains.
Investment gains are often not subject to taxes until assets Sold. However, Congress recently created “Alternative minimum tax for corporationsThrough the Inflation Reduction Act of 2022. This means that microstrategy can pay taxes on unrealized gains from its BTC holdings, and based on MicroStrategy’s financial statements, the tax rate will be 15%.
microStrategy can be exempt from paying taxes
Meanwhile, certification could exonerate the Internal Revenue Service (IRS) from new regulations microstrategy Who pays these taxes? Companies like Berkshire Hathaway are free from paying taxes on unrealized gains on assets like common stock because the IRS has already included exemptions written into the currently proposed rules.
However, the IRS has not yet granted any exemptions for corporate unrealized gains on cryptocurrency assets like Bitcoin. Given to Trump administrationDemonstrating interest in cryptocurrency, a corporate BTC holder could be the first to receive such an exemption.
The IRS is still developing rules for the new corporate alternative tax. Longtime tax analyst Robert Wellens said in a WSJ report that the IRS would likely rule in favor of MicroStrategy, which has not been the case under the Biden administration.
The company is currently operating in a pinch and could sell some BTCs to raise funds if necessary to pay the tax on unrealized Bitcoin gains.
US corporation alternatives minimum tax
The United States implemented the US alternative minimum tax to limit companies reporting income for Generally Accepted Accounting Principles (GAAP) purposes while showing little or no tax revenue on IRS filings.
For example, Enron was famous in the 1990s for reporting inflated GAAP earnings while avoiding federal income taxes. In MicroStrategy’s example, the company may pay taxes on paper profits, which could be a loss if the value of Bitcoin drops significantly.
Before this year, companies holding crypto assets in their GAAP financial reports did not include fair market valuations. Instead, cryptocurrencies are classified by accounting rules as intangible assets whose value can be written down but not written down.
Therefore, MicroStrategy’s GAAP results did not contain Unrealized gains of Bitcoin holdings. This year, the Financial Accounting Standards Board created new regulations that consolidated the previous rule.
The business intelligence company will begin displaying the actual value of its Bitcoin on its financial records this year, and earnings will reflect value changes. In a filing on January 6, the company revealed numbers for the first time measuring the effects of accounting and tax changes.
