Strategy will avoid tax for unrealized bitcoins. Why is this important for investors?

Strategy, the largest corporate holder of bitcoin, said it is no longer subject to the alternative minimum corporate tax (CAMT) in the US after the Internal Revenue Service issued a clarification. This means the company will not have to pay tax on unrealized digital assets, founder Michael Saylor explained. Strategy had expected to be subject to a 15% CAMT starting in 2026. Strategy's shares rose 6% after the news was published.

Strategy said it no longer expects to be subject to the Corporate Alternative Minimum Tax (CAMT) after the US Treasury Department and the Internal Revenue Service (IRS) issued clarifications. The clarification states that companies may disregard unrealized gains and losses on digital assets when determining their Corporate Alternative Minimum Tax liability.

"Thanks to the temporary clarifications from the Treasury Department and IRS issued yesterday, Strategy does not expect to be subject to the alternative minimum corporate tax due to unrealized bitcoin gains," CEO Michael Saylor wrote on social media X.

Investors thought the tax exemption would boost the company's earnings: in trading on Wednesday, October 1, Strategy's shares rose 6.3% to $342.5.

Previously, Strategy expected to be subject to a CAMT of 15% on profits from 2026, amid rising bitcoin prices this year. This tax applies to companies whose profits exceed $1 billion in the three-year tax period preceding the first year of taxation, Bloomberg explains.

Strategy in January began recognizing the market value of bitcoins in its financial statements under the new accounting standards. As a result, as of June 30, Strategy had an unrealized gain on its bitcoin holdings of $8.1 billion. In total, the company has about $74.6 billion in bitcoin on its balance sheet.

Saylor's business model is to issue debt bonds and stocks, buy bitcoin with the proceeds, wait for the market to assign a premium for it, and repeat the cycle. Since 2020, when the company switched from issuing enterprise software to accumulating cryptocurrency, its stock is no longer valued on future earnings. Now, fair value is calculated by the mNAV (market-adjusted Net Asset Value) multiple, which shows at what ratio to the book value of Strategy's bitcoin reserve its shares are trading at. When bitcoin becomes cheaper, mNAV decreases.

At the current bitcoin value, Strategy's mNAV is 1.49, according to data published on the company's website. This means that Strategy's shares are trading about 49% above the fair value of the tokens the company owns.

This article was AI-translated and verified by a human editor