Trump's Cryptocurrency Holdings Revealed: The Simplest Tax Avoidance Strategy is "Hold for the Long Term".

Written by: Forbes

Translated by: AididiaoJP, Foresight News

The U.S. federal government recently released Trump's financial disclosure documents, which detail how one of America's top cryptocurrency holders manages to hold tens of millions of dollars in digital assets without having to pay massive taxes immediately. The core principle of this strategy applies to every cryptocurrency investor, regardless of the size of their holdings: unless sold, taxes generally do not need to be paid.

Holding Appreciating Assets Allows for Indefinite Deferral of Capital Gains Tax

The disclosure documents show that Trump holds a cold wallet Bitcoin position valued at over $50 million and has not reported any associated income. This substantial appreciation falls under the category of "unrealized gains" as defined by the IRS—meaning the paper value has increased but has not been sold in reality. According to current U.S. tax law, a taxable event only occurs when an asset is "disposed of" (such as selling, trading, or spending). Simply holding an asset, even if its value skyrockets by millions of dollars, does not create a tax obligation. This deferral can continue indefinitely until the asset is sold or otherwise disposed of.

Similarly, his Ethereum (ETH) holdings are valued between $5 million and $25 million, also stored in a cold wallet; additionally, he holds 15.75 billion WLFI governance tokens worth over $50 million. These positions have not been accompanied by income reports. The value of the assets appears on the balance sheet, but as long as they are not sold, there are no taxable events, and thus no tax bills.

Staking Rewards and Interest Income Must Be Reported and Taxed in the Year Earned

Not all holdings can enjoy deferral. Trump reported $510,808 in income from Coinbase validator rewards, received for verifying transactions on the Ethereum network through staking. The IRS views staking rewards as ordinary income and taxes them at fair market value when the tokens are received, regardless of whether the tokens are sold afterward.

Currently, there is some controversy among investors regarding the handling of staking rewards: an aggressive approach is to report income only when sold, instead of recognizing the full value upon receipt. The IRS has yet to issue clear guidance on all scenarios, but the 2023 revenue ruling (Revenue Ruling 2023-14) on proof-of-stake (PoS) mining rewards tends to favor recognition upon receipt. Most tax professionals adopt this conservative reporting approach. The disclosure documents do not specify which method was used here.

Additionally, the disclosure also shows that Trump holds USDC valued between $5 million and $25 million (a stablecoin pegged to the dollar) and earned $45,932 in interest. Stablecoin prices typically hover around $1 and rarely generate capital gains or losses, but interest income is classified as ordinary income, treated the same way as bank interest, and must be fully reported for tax in the year earned.

Royalties, Token Sales, and Licensing Fees Taxed as Ordinary Income

The disclosure documents also contain two records beyond passive holdings. CIC Digital LLC reported $635 million in royalties from "Celebration Coins" (Trump meme coins) and associated licensing fees related to NFTs. These incomes are classified as ordinary income under tax law and are taxed at the same rates as wages, rather than benefiting from the favorable long-term capital gains tax rate for holdings over a year. Income is taxed at the time of receipt.

The cryptocurrency project related to Trump, World Liberty Financial, reported $236.25 million in token sales revenue and $65.625 million in equity sales gains. Selling tokens constitutes a taxable event, similar to selling stocks. Gains or losses are calculated based on the difference between the sale price and the cost basis (initial purchase or investment amount). Depending on the holding time, either short-term or long-term capital gains tax rates may apply.

The Simplest Yet Often Overlooked Cryptocurrency Tax Optimization Strategy

This disclosure ultimately reveals not a complex offshore structure or aggressive tax avoidance plan, but rather the unique reason why the largest positions in the portfolio do not incur current tax liabilities: they have not been sold.

Every cryptocurrency investor can utilize this same deferral mechanism. Whether the assets are held in a wallet or on an exchange, as long as the value increases and they are not sold, taxable events will not occur.