Taxes and Cryptocurrencies
2023.01.03 08:53
Taxes and Cryptocurrencies
Budrigannews.com – The sale of a portion of the Bitcoin (BTC) holdings held by business intelligence firm MicroStrategy drew the attention of experts in the field as well as critics prior to New Year’s Eve. As a result, the company made headlines.
The first time the company sold some of its BTC since its well-publicized adoption of the leading cryptocurrency as its primary treasury asset was detailed in a regulatory filing made on December 28 with the Securities and Exchange Commission (SEC).
In 2021, MicroStrategy started amassing significant holdings of BTC. The company’s founder, Michael Saylor, cited the asset’s superior value to fiat currency as a primary motivation for the move.
MicroStrategy’s decision to sell some of its BTC caught the attention of the entire industry due to Saylor’s position as a steadfast supporter of Bitcoin over the past two years. However, the company’s SEC filing makes it abundantly clear that it intends to gain a tax advantage.
Between November 1 and December 21, MacroStrategy, a subsidiary of MicroStrategy, purchased 2,395 BTC at an average price of $17,871 per BTC for approximately $42.8 million. It then sold 704 Bitcoins on December 22 for $11.8 million, selling them at an average price of $16,776 per Bitcoin, highlighting its intention to lower its tax bill:
“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.”
Cointelegraph sought the explanation for MicroStrategy’s Bitcoin sale from CPA and international tax attorney Selva Ozelli. She explains that in the United States, selling cryptocurrencies for a profit would necessitate paying 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.”
MicroStrategy took advantage of this exception and repurchased 810 BTC for approximately $13.6 million in cash just two days after recognizing a loss on the sale of a portion of its holdings.
Ozelli emphasized that retail and institutional investors could profit from capital losses by taking advantage of the market price volatility of cryptocurrencies. The test lies in distinguishing resources that present the best an open door for charge reserve funds:
“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 took advantage of this exception and repurchased 810 BTC for approximately $13.6 million in cash just two days after recognizing a loss on the sale of a portion of its holdings.
Ozelli emphasized that retail and institutional investors could profit from capital losses by taking advantage of the market price volatility of cryptocurrencies. The test lies in distinguishing resources that present the best an open door for charge reserve funds:
“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.”
Additionally, nonfungible tokens (NFTs) provide a means to lessen tax obligations. On OpenSea, well-known DJ Steve Aoki has been selling a variety of NFTs, and his activity can be seen by anyone on his verified profile.
Reports guess that Aoki might have been hoping to complete duty misfortune reaping. Cointelegraph has contacted the DJ’s publicist to find out why hundreds of NFTs from his extensive collection were sold.
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