Spotting a lucrative tax loophole, Bitcoin’s biggest evangelist sells BTC for the first time

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MicroStrategy Inc., the enterprise software company best known in recent years as the biggest buyer of Bitcoin, announced a series of transactions, including its first-ever sale of the token. The company remains a net buyer.

In a filing on Wednesday, MicroStrategy said it acquired around 2,395 bitcoins between early November and December 21 through its subsidiary MacroStrategy, paying around $42.8 million in cash. He then sold 704 of the tokens on Dec. 22 for a total of around $11.8 million, for tax purposes, before buying another 810 two days later.

MicroStrategy expects to carry forward capital losses resulting from this transaction against prior capital gains, the company said in explanation of the Dec. 22 sale. This may generate a tax benefit, MicroStrategy said in its filing.

Because cryptocurrencies are largely not considered securities, there are no crypto-specific washout rules that would apply to the market, says Sean Farrell, head of digital asset strategy at Fundstrat, which does not work directly on tax implications but closely follows the space.

So were operating in this world where for lack of a better word it’s a loophole where if you’re sitting in a position below cost you are able to sell that position and immediately buy back those assets at the same price spot, Farrell said in an interview. This is basically what MicroStrategy is trying to do to maximize its holdings and help secure tax breaks.

In total, MicroStrategy held approximately 132,500 bitcoins worth over $4 billion as of December 27. The company paid an average purchase price of $30,397 per bitcoin. Bitcoin was trading at around $16,650 on Wednesday, after losing more than 60% for the year, a drop that puts it on pace for one of its worst annual periods on record.

There is no change to our Bitcoin strategy, which is to acquire and hold Bitcoin for the long term, said Shirish Jajodia, head of investor relations and treasury at MicroStrategy.

MicroStrategy had become well known over the pandemic years for its Bitcoin acquisitions, led in large part by its charismatic CEO Michael Saylor. Saylor earlier this year stepped down from that role and is now the company’s executive chairman and still leads its Bitcoin strategy.

Shares of the company fell 6.5% on Wednesday to around $138, the lowest level since August 2020. They are down around 75% year-to-date.

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