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MicroStrategy Makes Headlines Ahead Of New Year’s Eve

MicroStrategy, the business intelligence firm, has made headlines ahead of New Year’s Eve as the sale of a portion of its Bitcoin holdings drew the attention of industry experts and critics.

It has been reported that a regulatory filing with the United States Securities and Exchange Commission (SEC) on December 28 detailed the first time the firm sold some of its BTC since its high-profile adoption of the preeminent cryptocurrency as its primary treasury asset.

However, MicroStrategy made waves in the industry in 2021 as it began amassing significant holdings of BTC, with founder Michael Saylor touting the asset as a superior store of value to fiat currency as a primary reason for the move. Given Saylor’s role as a staunch Bitcoin proponent over the past two years, MicroStrategy’s decision to sell some of its BTC drew attention across the industry.

The report said that the company’s SEC filing outlines clear intent to generate a tax benefit. MicroStrategy’s subsidiary MacroStrategy bought 2,395 BTC for approximately $42.8 million between November 1 and December 21 at an average price of $17,871 per BTC.

The announcement stated:

“MicroStrategy plans to carry back the capital losses resulting from this transaction against previous capital gains, to the extent such carrybacks are available under the federal income tax laws currently in effect, which may generate a tax benefit.”

Selva Ozelli, the International Tax Attorney and CPA, said:

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

She added:

“Furthermore, the wash sale rule, which prohibits selling securities at a loss and reacquiring them 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 BTC for approximately $13.6 million in cash just two days after realizing a loss on the sale of a portion of its holdings.

Ozelli highlighted the volatility of cryptocurrency market prices as an opportunity for retail and institutional investors to realize and harvest capital losses. The challenge lies in identifying assets that present the greatest opportunity for tax savings.

Thus, she concluded:

“The difficult part for investors is identifying which of the digital assets in their portfolio have the highest cost basis (original purchase price) when compared to the current market price.”

Source: Cointelegraph




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