Strategy: The 2025 preferred stock dividend distribution will be treated as a tax-exempt capital return.

 Bitcoin treasury company Strategy announced that, according to the relevant scale of the U.S. federal income tax, all dividend distributions of its preferred stock in 2025 will be regarded as tax-free return of capital (ROC) within the shareholders' corresponding tax basis. The relevant information has been disclosed through Form 8937. The distributions will be treated as a return of capital and will accordingly reduce the shareholders' tax basis in the relevant preferred stock instruments. If the distribution amount exceeds the tax basis, it will be treated as capital gains. Strategy added that in 2025, it has raised approximately $5.5 billion through five perpetual preferred stock offerings, followed by an additional $1.9 billion raised through an ATM program, with a total fundraising scale of about $7.4 billion. To date, the company has cumulatively paid approximately $413 million in dividend distributions, corresponding to a weighted annualized dividend rate of about 9.6%.

Strategy expects that there is currently no accumulated earnings and profits (E&P) in the sense of U.S. tax law, so it expects that preferred stock distributions may continue to be treated as ROC for a relatively long period (possibly more than 10 years) in the future. However, the final tax outcome may still be adjusted according to changes in the company’s financial condition, and it also reminds that different investors may have differentiated tax situations.