Why A New Rule Helped Tesla Get $600M in Bitcoin Gains But May Cost MicroStrategy Billions
A recent change to accounting rules may have helped deliver a $600 million profit on bitcoin (BTCUSD) holdings for Tesla (TSLA), but the same rule could potentially leave MicroStrategy (MSTR) with a multi-billion dollar tax bill.
Roughly 26% of Tesla's net income for the fourth quarter of 2024 came from its bitcoin holdings.The company was able to book these bitcoin-derived profits due to a change in Financial Accounting Standards Board (FASB) guidelines for crypto assets.
The new rules or ASU 2023-08 allow companies with bitcoin holdings to account for its value on a mark-to-market basis or depending on where it's trading at in the markets.
«The primary advantage of the FASB’s new rules concerning the new mark-to-market rule for corporate digital asset holdings are that it will allow companies to provide the value of their digital assets in real time,» Miller & Company LLP Managing Partner & CPA Paul Miller toldInvestopedia.
Under previous FASB guidelines, bitcoin was treated as an “indefinite-lived intangible asset,” forcing companies to write down its value when prices dropped but preventing them from recording gains unless the asset was sold.
The old system frustrated MicroStrategy’s founder, Michael Saylor, who argued it got in the way of adoption of bitcoin as a corporate treasury asset.
Bitcoin's been on a tear last year and remains strong well into this year. Based on the new rules, MicroStrategy's bitcoin buying spree has left it with roughly $18 billion in unrealized bitcoin gains, The Wall Street Journal reported recently.That could create a tax bill worth billions for MicroStrategy.
This reclassification of crypto assets on its books has made MicroStrategy potentially vulnerable to a 15% tax on
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