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Michael Saylor Registered $1.3 Billion in Bitcoin Losses, You’ll See Why It’s a Brilliant Move

He’s no stranger to controversy.

In 1999 the SEC brought accounting charges to Saylor’s company MicroStrategy, which had to pay $350,00 in penalties.

As a result of republishing the correct financial figures, the company’s stock plummeted in value, and Saylor’s net worth fell by $6 billion.

In 2022 things got worse.

The Attorney General for the District of Columbia is suing Saylor for alleged tax fraud. They’re accusing him of illegally avoiding $25 million in taxes by pretending he lived in another state.

The volatility of Bitcoin and the recent correction present tax loopholes for everyday people, but the billionaires whose companies are cleverly still buying more Bitcoin are taking advantage of the loophole the most.

Let’s not single out wealthy people. Cryptocurrency wash selling, tax harvesting or whatever the heck you want to call it is an entirely legitimate practice in the United States for anyone to do.

Saylor is a Bitcoin maximalist who believes no other cryptocurrency or digital asset besides Bitcoin has any meaningful value.

He has yet to stop buying Bitcoin and owns about 132,500 purchased for $3.98 billion, averaging $30,639 per coin.

But he’s also secretly selling his Bitcoin, and despite media headlines around the sale of his Bitcoin, you’ll see why it’s a brilliant move.

Tax Loss Harvesting.

It sounds dirty, but Tax Loss Harvesting is a legitimate practice in the U.S. If you live in other parts of the world, it may be different. So you should check with a tax professional.

None of this is financial advice.

Tax-loss harvesting generally works by selling an underperforming investment which is losing money. Then, you use that loss to reduce your taxable capital gains.

According to an SEC filing, Michael Saylor’s MicroStrategy bought 2,395 Bitcoin for $42.8 million in cash between November 1 and December 21, 2022.

Then the day after, on December 22nd, they sold 704 Bitcoin at a loss to offset previous capital gains.

A few days later, on December 24th, Microstrategy bought 810 Bitcoin.

It’s the first time Saylor’s company has sold Bitcoin since it began adding it to its treasury in 2020.

Saylor was transparent that the purchases and sales of Bitcoin were to generate a net tax benefit, and losses involved were to offset previous capital gains, per the filing.

“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.”

Michael Saylor bought back more Bitcoin than he sold at the higher price of $16,845 per coin on the 810 Bitcoin, costing him $69 extra per coin because the sale of the 704 Bitcoin averaged $16,776

MicroStrategy bought 2,395 Bitcoin between November 1 and December 21, 2022, before venturing into the tax-loss harvesting strategy.

The purchase cost about $42.8 million, resulting in an average price of $17,871 per bitcoin, including fees.

Michael Saylor now holds 132,500 BTC, acquired for about $4.03 billion at an average price of $30,397 per Bitcoin and faces an unrealised loss of over $1.3 billion.

MicroStrategy’s SEC filing is transparent and states the sole purpose of the sale is that they intended to generate a tax benefit.

Michael Saylor, in a recent interview, doubled down on the fact that he believes in the virtues of Bitcoin more than any other asset, and even though the losses to the market may seem a surprise to everyone, it’s tied to digital asset impairment losses and the way Bitcoin is accounted for because it is unregulated.

He responded when questioned on whether this was a sign he was changing his strategy to Bitcoin.

Interviewer — “You did report a loss that surprised everyone, but it’s tied to impairment losses, connected to how Bitcoin losses are accounted for. Please walk me through your paper losses of 1.3 billion dollars. Does this change your strategy around Bitcoin and future BTC acquisition?”

Michael Salor — Source

“No, it doesn’t change our strategy, the losses are a function of the indefinite intangible accounting treatment, and of course, an encouraging development in the industry is that companies are going to move to fair value accounting, so eventually, we’ll be able to mark our Bitcoin assets to market, so we’re enthusiastic about that.

Micro strategy is a way to invest in the digital transformation of money.

We’re a gateway to the macro and crypto economy, allowing investors to go short or long. Or trade the volatility.

So our strategy is to buy and hold Bitcoin, and the key for us to be consistent, transparent and responsible in pursuing that strategy, and we’re unique in that regard.”

The interviewer then asked Saylor if he planned on selling Bitcoin in the future because there were sales for tax loss harvesting in December 2022.

Michael Saylor — Source

“We’re always considering ways we can take advantage of this multi-billion dollar asset, and as you know, there is volatility and some unique tax treatment.

In that case, we were able to generate a 34 million dollar tax loss, and we were able to carry it back against taxable gains.

We look forward and may see opportunities from time to time, but we’re fairly prudent, responsible and considerate in covering those things.”

Unlike stocks or bonds, cryptocurrencies escape one rule that applies solely to financial securities — the “wash sale” rule.

Suppose you want to sell a stock at a loss and buy the same or substantially identical stock or security within 30 calendar days before or after the sale. You won’t be able to take a loss on your current-year tax return like Saylor did with his Bitcoin.

Since cryptocurrency is largely unregulated, it isn’t a security, so the 30 days wash sale rule does not apply.

Final Thoughts.

If you’re an investor in MicroStrategy, you’d be happy with how Michael Saylor has managed the Billion Dollar asset you’ve invested in, provided you’re satisfied with him buying Bitcoin until the cows come home.

Michael Saylor is an unusual off-centre character who idolises Bitcoin and shares his views of the Digital currency religiously on the internet.

Most of the time, he divides opinions.

Although well within the current law, there is a moral aspect to him booking in losses and buying back those assets the next day to avoid paying tax.

The moral aspect is for you to decide.

I get a lot of stick when I say this, but Michael Saylor is a genius to me. He’s the named inventor on more than 40 patents and has navigated his technology company through multiple recessions and setbacks over the last 30 years.

You don’t get there by accident, which shows how he manages his investor’s Bitcoin holdings.

Brilliantly.

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