MicroStrategy's Potential 2025 Bitcoin Tax Headache: FASB Fair-Value & CAMT Threaten Unrealized Gains
Rules put in place under Joe Biden may give $MSTR a tax headache in 2025 unless Trump and/or the new IRS commissioner intervene...
Recently there was a piece in the WSJ “MicroStrategy Suddenly Has a Tax Problem” and implied that they’ll likely need help from Trump’s IRS in 2025-2026 to avoid getting pounded with heavy taxes on unrealized gains for Bitcoin.
Many MSTR cultists (nothing wrong with being one of these) attacked the WSJ author for spreading “FUD” (fear-uncertainty-doubt) and claimed that the U.S. doesn’t have “unrealized capital gains” - implying the entire article was nothing more than a hit piece sponsored by a whale with a large MSTR short position.
The WSJ piece couldn’t have come at a worse time for Michael Saylor and MSTR given they just heavily diluted shares via ATM (at-the-market) offerings (increasing from 330M to 10.3B) - which put some sell/anti-buying pressure on MSTR shares (dropping in value despite Bitcoin going up in price).
Although I doubt the WSJ article was commissioned by a whale with a large MSTR short position, let’s hypothetically assume it was… this does not mean its contents are inaccurate.
In this case the “FUD” is deserved (even MSTR admits this in their January 2025 8-K SEC disclosure). Whether they’ll actually end up paying taxes on BTC holding gains remains unclear (Trump’s new IRS could tip the scales in their favor), but it’s a legitimate concern.
Note: MSTR is not necessarily the only company affected. If Coinbase and/or other companies hold significant amounts of BTC that have appreciated in value (over $1B) they will face the same reality as MSTR.
Where MicroStrategy Stands Today (Jan 2025)
Overwhelmingly Bitcoin-Focused
As of January 2025, MicroStrategy (“MSTR”) has 460,000+ BTC on its balance sheet, worth approximately $49 billion, dwarfing its traditional software revenues (under $500 million/year).
Over 98% of MSTR’s total enterprise value is from bitcoin. Its share price is essentially a leveraged bet on BTC’s price.
HODL Strategy and Financing
MSTR has repeatedly raised debt and equity capital to accumulate more BTC, led by Chairman Michael Saylor.
The company’s public stance: buy BTC, don’t sell (“never sell”), hold as primary treasury reserve asset. (They’re essentially a BTC treasury company).
Valuation Under Old GAAP Rules
Pre-2025, intangible crypto rules (“cost-less-impairment”) meant MSTR only recognized impairment when BTC dipped below cost.
Gains above purchase price were never recognized in GAAP net income until a sale occurred, leading to an artificially low carrying value for BTC in prior financials.
The New FASB Fair-Value Crypto Rule (ASU 2023–08)
LINK: Intangibles-Goodwill and Other-Crypto Assets (Subtopic 350-60)
You can click the link above and read through the Financial Accounting Standards Board amendment yourself.
A.) Effective January 1, 2025
ASU 2023–08 mandates that companies measure crypto at fair value each period.
Unrealized gains and losses flow directly into net income (instead of waiting until a sale).
B.) Huge Upside Gains in MSTR’s GAAP Earnings
If BTC remains above MSTR’s average purchase price (~$62k/BTC overall), MSTR’s GAAP net income could spike by billions—driven purely by revaluation.
Equally, volatility in BTC’s price means big swings each quarter.
C.) Impact on MSTR
On paper, MSTR’s book equity and net income might look dramatically higher—if BTC’s market price is significantly above cost.
However, that new mark-to-market approach also triggers a big tax complication: the corporate alternative minimum tax (CAMT).
The 15% Corporate Alternative Minimum Tax (CAMT)
On Aug. 16, 2022, President Joe Biden signed into law the Inflation Reduction Act, P.L. 117-169.
For applicable corporations that report over $1 billion in profits to shareholders, the act includes a 15% corporate alternative minimum tax based on book income.
A.) What Is CAMT?
Enacted via the Inflation Reduction Act of 2022, imposing 15% on a corporation’s “adjusted financial statement income” if its 3-year average is > $1 billion.
A large GAAP net income (including from unrealized gains) can push a firm above $1 billion average annual income, subjecting it to CAMT.
B.) Consequence for MSTR
Starting in 2025, MSTR’s GAAP net income may skyrocket if BTC remains well above MSTR’s cost basis.
If that unrealized gain is included in the CAMT base, MSTR might owe billions in actual tax—despite not having sold a single coin.
MSTR disclosed this risk in its January 2025 8-K SEC filings, suggesting it could face a massive wealth-tax-like liability unless the IRS/Treasury grants relief.
The Coinbase-MicroStrategy Joint Comment Letter to the IRS
LINK: CAMT Comment Letter from Coinbase & MicroStrategy (1-2-2025)
You can sift through the comment letter submitted jointly by Coinbase and MicroStrategy to the IRS (received Jan 2, 2025).
A.) Context: Proposed CAMT Regulations
In September 2024, the IRS/Treasury released proposed CAMT rules (REG-112129-23). The rules included carve-outs/exceptions for some “unrealized gains” in stocks, insurance assets, etc.—but not for crypto.
On January 2, 2025, Coinbase and MSTR co-filed a comment letter urging the IRS to exclude unrealized crypto gains from CAMT.
B.) Key Points from the Letter
New FASB Standard + CAMT = Unintended Consequence
“Neither Congress nor FASB planned this outcome—it is the unintended result of basing tax liability on decisions by a private organization that is focused on financial statement accounting standards, not principles of taxation.”
Scope for IRS to Adjust
They cite sections 56A(c)(15) and (e) giving Treasury broad power to “provide for such adjustments” to AFSI to avoid anomalies.
The letter states: “Treasury should exercise its authority to remove unrealized gains and losses on crypto assets from CAMT.”
Fairness + IFRS Disparity
IFRS (used by many foreign filers) typically counts crypto’s upward revaluation as “other comprehensive income” (OCI), which is outside net income (and thus outside the CAMT base).
U.S.-GAAP filers are thus penalized. The letter warns that such a disparity might drive U.S. companies to relocate or restructure to avoid punitive CAMT on unsold BTC gains.
Constitutional Issues
They argue that taxing unsold intangible gains could violate the realization principle under the Sixteenth Amendment, referencing the recent Moore v. United States debate.
Also references the “private non-delegation” doctrine, since FASB is a private body effectively setting part of the tax base. This raises separation-of-powers concerns.
Proposed Solutions
Exclude any intangible or investment assets that are fair-valued for GAAP but not for tax.
Or specifically say: “We disregard FASB changes enacted after CAMT’s passage” unless Treasury explicitly adopts them for the CAMT.
Or at the very least, “exclude unrealized gains or losses under ASU 2023–08 from AFSI.”
C.) Urgency
The letter urges interim guidance or a quick fix, noting companies might adopt the fair-value rule in early 2025.
Without quick relief, MSTR might face forced BTC sales or large dilutive financings.
Trump 2.0: Pro-Crypto & Billy Long as New IRS Commissioner (?)
Potential Repeal or Overhaul of CAMT
Trump hints at rolling back various IRA provisions. If the administration decides the CAMT is harming U.S. competitiveness—particularly with a pro-crypto stance—they might push for legislative or regulatory fixes.
Billy Long as IRS Commissioner
Billy Long, a former congressman with business-friendly leanings, was nominated (pending Senate confirmation) to lead the IRS.
If confirmed, he could champion a carve-out for unrealized BTC gains in final CAMT rules or sign sub-regulatory guidance excluding them from AFSI.
The political climate is uncertain: final changes might require buy-in from Treasury leadership or new legislation.
Odds of Relief
If the Trump administration is actively pro-crypto and sees MSTR’s predicament as a chilling effect on U.S. digital asset investment, there is a reasonable chance of relief. Possibly 50-65% that some measure—like a narrower carve-out or transitional relief—gets enacted administratively.
If legislative action is required to fully repeal the CAMT, that might face more political headwinds—30-40% chance if Republicans control both chambers, but less if Congress is divided.
Scenario Analysis: MSTR’s Likely Outcomes
Below are various scenarios that I think could happen with my estimated odds. You may feel differently and that’s completely fine - you can create your own odds… just don’t be dishonest with yourself.
Scenario A: No Exemption, CAMT Applies in Full
MSTR’s GAAP net income surpasses the $1 billion threshold in 2025–2027 from BTC revaluations.
By 2026 or 2027, MSTR faces a 15% tax on multi-billions of paper BTC gains.
Would They Sell BTC? Possibly. Selling even 5-10% of holdings could net billions in liquidity, but severely undermines the “never sell” brand.
My guess is that MSTR would probably raise large amounts of equity or convertible debt - diluting shareholders or leveraging further.
Stock Reaction: Negative, as forced liquidation or dilution is viewed unfavorably.
Odds: This scenario’s probability is perhaps 25-35% if no political/regulatory fix is found.
Scenario B: IRS/Treasury Carve-Out or Deferral
The final regs or guidance specifically exclude or defer unrealized crypto gains from the CAMT.
MSTR can keep holding BTC, unaffected by the new fair-value GAAP rule from a tax perspective.
Odds: Probability might be 40-50%, considering the strong legal/policy arguments and the administration’s potential pro-crypto stance. The joint letter is quite persuasive.
Scenario C: Partial / Temporary Relief
The IRS might provide transitional relief: for example, ignoring new FASB rules for some period or capping the effect of unrealized crypto gains.
This buys MSTR time. They might still owe some minimal CAMT if BTC surges, but not a full 15% on everything.
Odds: Probability roughly 15-25%—a middle ground the IRS could adopt while evaluating the final approach.
Scenario D: Legislative Repeal or Major Overhaul
Congress, under Trump’s leadership, might repeal or substantially amend the CAMT.
Odds: ~10-20%. It’s not the top priority for all Republicans, but possible in an overall “pro-business, roll-back IRA” package. Could happen within 2025 or 2026 if the political climate is favorable.
Implications for MicroStrategy (2025-2026)
Near-Term Volatility: MSTR’s stock might remain volatile as investors weigh the risk of big tax obligations vs. potential relief. Some funds might short MSTR if they believe no exemption is forthcoming.
Capital Strategy: If relief is uncertain, MSTR might quietly prep a contingency plan (new convertible notes or at-the-market equity issuance) to ensure tax liquidity. That could hamper the share price, as dilution concerns weigh on the market.
Legal Challenge: Failing a carve-out, MSTR (or others similarly situated) might litigate. They’d argue the CAMT is effectively a direct tax on intangible property. Constitutional challenges are uncertain, but potentially serious. Litigation outcomes could freeze or overturn parts of CAMT, but that’s a long road.
Future Bitcoin Accumulation: Ironically, if the CAMT is not fixed, MSTR might slow or stop buying new BTC, because each additional unrealized gain amplifies the potential tax. This undercuts MSTR’s entire branding as a major Bitcoin proxy.
RELATED: Short MicroStrategy, Long Bitcoin Arb Strategy
Overall: Legitimate “FUD” & Risk, but Probable Workarounds
Yes, this is real: MSTR’s prospective tax liability on unsold BTC gains under the CAMT is not “false FUD.”
The CAMT + FASB’s new crypto rule indeed creates a scenario in which MSTR could owe billions in taxes purely on paper gains.
However, it’s not guaranteed to happen. The Coinbase-MSTR comment letter shows that top industry players are lobbying hard for an exemption.
Odds of some kind of solution (regulatory carve-out, transitional relief, or a legislative fix) may be moderate to high—perhaps 50-65% that MicroStrategy sees at least partial relief—due to:
Solid policy arguments,
Constitutional concerns,
Broad reluctance to hamper U.S. digital asset competitiveness,
Trump administration’s possible willingness to gut or amend the CAMT.
Should none of that materialize, MSTR faces the unpalatable choice of significant share dilution or selling a chunk of its BTC—both damaging to its thesis.
Investors should treat this as a legitimate risk with real consequences but also a high likelihood that in the next 6-18 months, developments (political or regulatory) could alleviate it.
Final Take:
Legitimate Risk: MSTR itself has publicly flagged it.
Potential ‘Escape Routes’: IRS carve-out, legislative fix, or transitional relief.
Most Probable Path: ~40-50% chance of a direct crypto exemption in final regs; ~25-35% chance of no fix; remainder in partial or legislative solutions.
Investors should watch for the final CAMT regulations, watch Billy Long’s confirmation, and follow ongoing legislative signals. The stakes for MSTR’s HODL strategy—and thus for MSTR’s stock—are reasonably high.