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STRC tax treatment: return of capital, explained
Strategy expects its STRC payouts to be return of capital for US federal tax, not taxable dividends, because it estimates zero earnings and profits for 2026. Return of capital is not taxed when paid; it lowers your cost basis, and amounts above your basis are capital gain. The character can change if the estimate changes.
What the issuers and the IRS say
| Fact | What the official source says | Status | Primary source | Date checked |
|---|---|---|---|---|
| What Strategy reported for STRC | Form 8937: Strategy expects 100% of the Jan 28, 2026 STRC distribution ($0.91666667 per share, record date Jan 15, 2026) to be a non-taxable return of capital to the extent of each holder's tax basis, based on its estimate of zero current and accumulated earnings and profits (E&P) for 2026. | Verified | Strategy Form 8937 | 2026-10-26 |
| What happens to your basis | Your tax basis in STRC is reduced by the return-of-capital amount; any amount above your basis is treated as capital gain (IRC section 301(c)(2) and (3)). | Verified | Strategy Form 8937 irs.gov | 2026-10-26 |
| When basis reaches zero | IRS: once your basis is reduced to zero, further nondividend distributions are reported as capital gain. | Verified | irs.gov | 2026-10-26 |
| Can the character change? | Yes. The character depends on the company's E&P for the full tax year. Strategy says its estimates can change during the year, and it will file a corrected Form 8937 if they do. | Verified | Strategy Form 8937 | 2026-10-26 |
| How it is reported | On your 2026 Form 1099-DIV, per Strategy's Form 8937. | Verified | Strategy Form 8937 | 2026-10-26 |
| SATA and SATS (Strive) | Strive's guidance: distributions not paid out of E&P are generally a tax-deferred recovery of capital up to your basis; Strive says it has no accumulated E&P and does not expect current E&P this year or in the foreseeable future. | Verified | sec.gov | 2026-10-26 |
| Character of STRC payments after January 2026 | Not yet verified. We have not yet found Strategy's Form 8937 for later 2026 payments. | Not yet verified | — | 2026-10-26 |
| Strategy's characterization of 2025 STRC distributions | Not yet verified. Strategy's website blocked our checks on 2026-10-26. | Not yet verified | — | 2026-10-26 |
| State income tax treatment | Not yet verified. | Not yet verified | — | 2026-10-26 |
Deferral, not exemption
Return of capital postpones tax rather than removing it: a lower basis means a larger capital gain (or smaller loss) when you sell. This follows from the basis reduction described by Strategy and the IRS above.
We don't publish a “tax-equivalent yield”; it depends on your bracket, holding period and state.
General information only, not tax or legal advice. Tax treatment depends on your situation; ask a qualified tax adviser. Dividends are declared at the issuer's discretion, rates can change, and payments are not guaranteed.
Related: STRC dividend · SATA dividend · Non-US holders