New Developments in Preferred Dividend Tax Treatment
Strategy, a crypto-linked financial firm, recently announced that its 2025 preferred stock dividends will be treated as tax-free capital returns (ROC) under U.S. federal tax regulations, as disclosed in its Form 8937 filing.
This means investors won't pay taxes on these distributions immediately. Instead, the payments will reduce shareholders' tax basis in the preferred shares. Any amounts exceeding the original tax basis will be treated as capital gains.
- Raised approximately $5.5 billion through five perpetual preferred stock issuances in 2025
- Additional $1.9 billion raised through ATM equity financing
- Total capital raised reached about $7.4 billion
- Has paid approximately $413 million in dividends with a weighted average dividend yield of 9.6%
Outlook for Future Tax Treatment
The company indicated it currently holds no earnings and profits (E&P) under U.S. tax law definitions, suggesting ROC treatment could continue for more than a decade.
However, this tax treatment isn't set in stone and may change as the company's financial position evolves. Investors should consult their tax advisors as individual tax situations may vary.