Tax Lawyer Breaks Down MicroStrategy Bitcoin Sale

[ad_1]

Economic intelligence firm MicroStrategy grabbed headlines ahead of New Year’s Eve as the sale of some of its Bitcoin (BTC) holdings caught the attention of industry pundits and critics.

A regulatory filing with the U.S. Securities and Exchange Commission (SEC) on Dec. 28 detailed the first time the company sold some of its BTC since its high-profile adoption of the preeminent cryptocurrency as its primary asset. Treasury.

MicroStrategy made waves in the industry in 2021 by starting to accumulate significant holdings of BTC, with founder Michael Saylor touting the asset as a store of value superior to fiat currency as the primary reason for the move.

Given Saylors’ role as a strong supporter of Bitcoin over the past two years, MicroStrategys’ decision to sell off some of his BTC has caught the industry’s attention. However, the company’s SEC filing clearly describes the intent to generate a tax benefit.

MacroStrategy, a subsidiary of MicroStrategys, purchased 2,395 BTC for approximately $42.8 million between November 1 and December 21 at an average price of $17,871 per BTC. He then sold 704 Bitcoins on December 22 at an average price of $16,776 per Bitcoin for $11.8 million, underscoring his intention to reduce his tax bill:

MicroStrategy expects to carry forward capital losses resulting from this transaction against prior capital gains, to the extent such carryovers are available under current federal income tax laws, which may result in a tax benefit. .

Cointelegraph reached out to international tax attorney and CPA Selva Ozelli to unpack the MicroStrategys Bitcoin sale and the reasoning behind it. As she explains, selling cryptocurrencies for profit in America would require the payment of capital gains tax:

Some investors choose to reduce their capital gains in a given tax year by selling some of their digital assets at a loss. This is called tax-loss harvesting.

Ozelli said the practice is common for individuals in the cryptocurrency space, since assets like BTC are treated as property by the Internal Revenue Service (IRS) and subject to rules on gains and losses. capital losses.

In addition, the wash sale rule, which prohibits selling securities at a loss and buying them back within 30 days, does not apply. Because crypto is not a security, there is no crypto-specific wash sale rule.

MicroStrategy made use of this exception, reacquiring 810 bitcoins for around $13.6 million in cash just two days after realizing a loss on the sale of part of its holdings.

Ozelli pointed to the price volatility of the cryptocurrency market as an opportunity for retail and institutional investors to realize and reap capital losses. The challenge is to identify the assets that present the greatest opportunity for tax savings:

The difficult part for investors is to identify the digital assets in their portfolio that have the highest cost basis (original purchase price) relative to the current market price.

Non-fungible tokens also present another opportunity to reduce tax liabilities. Famous DJ Steve Aoki has sold a variety of NFTs on OpenSea, with his activity publicly visible on his verified profile.

Reports speculate that Aoki may have been looking to achieve a tax-loss crop. Cointelegraph has contacted the DJ publicist to determine the reason behind the sale of hundreds of NFTs from its vast collection.

[ad_2]