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Bitcoin and Taxes in Canada 2018 Edition

CoinGuyCoinGuy Administrator
edited January 31 in General
We asked you for your questions and Daniel and the team at crowesoberman.com, has put together this handy guide!

If you need private assistance from Daniel and his company, you can contact them at crowesoberman.com or read more at https://crowesoberman.com/blog/guide-bitcoins-income-taxes/.

Please note that the information provided is for general information purposes only. Although every effort is made to ensure the correctness of information submitted for this AMA, there may be errors, omissions or typographical errors. The information is provided “as is” without any warranty of any kind. In no event will the author or Crowe Soberman LLP be liable for damages of any kind. Specific professional advice should be obtained prior to the implementation of any suggestion contained in this AMA.
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Comments

  • Thanks for making this happen, @CoinGuy .

    I came across a piece by WealthSimple on holding/selling BTC as a part of one's portfolio. In that piece, they cite another summary of the tax situation in Canada: http://www.mnp.ca/en/posts/the-future-today-taxing-virtual-currency

    And the bottom of that article has a list of references that, while not clickable, seem comprehensive (I just copy and pasted them into Google to find them).
  • Hi folks,

    After spending way too much time looking into this, I've discovered a few more resources that I've found to be particularly helpful with respect to the cryptocurrency taxation question in Canada.

    The key issue is that the CRA uses Adjusted Cost Base (ACB) for calculating gains. From what I understand, it's basically a running average of cost/gain per security you own. I'm sure that's not exactly right – I'm no accountant.

    While cointracking.info and cointracker.io (mentioned in previous threads) are pretty great tools, neither of them use ACB. However, there are a few resources out there that I found very useful, and you can use to either build your own sheet (Excel, Google), or just generally understand how you might approach the issue.

    www.adjustedcostbase.ca - website full of material on how to calculate it, including this post specific to cryptocurrencies: https://www.adjustedcostbase.ca/blog/capital-gains-when-trading-bitcoins-and-other-cryptocurrencies/, and

    • this article on ACB and gains/losses, in general: https://www.adjustedcostbase.ca/blog/how-to-calculate-adjusted-cost-base-acb-and-capital-gains/

    Google Sheets addon: Cryptofinance, by Julien Buty - basically an addon that can query many exchanges for price at a specific hour of a date, and many other functions. Super helpful if your gains depend on the quick swings of some volatile coins. Instructions for how to use it and how to install it are available in the Medium article (the link) by Julien Buty

    SimpleTax.ca - my vote for the best web app ever made, these guys also put out an amazing summary of the issues, including a helpful illustration on ways you can report Gains/Losses, and their take on what meets the requirements of Canadians' the duty to report (basically - that we try our best).

    So I hope some of you find some of this useful. Disclosure: I was so excited about that SimpleTax help article, I told them I'd share it here in this forum, but I am in no way affiliated with any of the businesses or resources mentioned here (apart from using SimpleTax, myself).

    Here's to hoping the CRA wakes up and realizes that they need to reconsider their opinion that cryptocurrencies are not currencies, and that this entire tax issue gets way more sane.




  • RayonRayon Member
    Hey @chrisyakimov, great work tracking down these resources! :) I've used the Adjusted Cost Base website before but I hadn't seen their bitcoin article you linked to. Also, the Google Sheets addon sounds like exactly what I need and I'll definitely check out the Simple Tax website.
  • No worries @Rayon - hope it all works for you (I'm still reeling from the experience) ;)
  • Who here is done with their tax filing? I bet it's a huge sigh of relief.
  • MichaelMichael Member
    I have provided my tax preparer with my Bitcoin information. Essentially I provided information on the date, amount of Bitcoin and CAD amount I spent over the past year, plus any CAD withdrawals. From that they can work out my adjusted cost base for the Bitcoin I bought and sold. I'll be interested to see the impact on my 2017 return.
  • Just be careful with Cointracker.io (which now provides ACB calculations... this functionality was just released a few days ago) - I've been working with it over the weekend and while I was initially impressed, I'm now rather disappointed. They initially calculated by capital gains to be at least 50% higher than they actually are. This is partly because their system had some transactions inexplicably showing up twice in their reporting, they failed to import all transactions (I used the API... it randomly missed transactions, thus causing me to have to manually enter the missing ones after comparing what cointracker.io listed to my actual transaction history from the exchange itself.

    Also, for QuadrigaCX, they ignore what you actually paid for a coin and instead use a price based on an aggregate of the price on multiple exchanges/sources... this won't fly with CRA since the exact value in CAD is readily available for all transactions we make on QuadrigaCX.

    I think Cointracker.io will be amazing once they get the bugs worked out, but at the present time, it's not a viable option.
  • Thank you @CoinGuy for the file... its far from complete, but its at least something to start with! :)

    Also thank you @chrisyakimov for sharing your findings with us.

    Do you guys have any thoughts on how should cloud mining earnings be reported/taxed?

    Obviously I don't pay for electricity and have not paid for ASICs/GPUs

    I purchased a "Cloud" mining contract in 2017... Then received earnings monthly.

    I did not sell the bitcoins I received ... however, I have not covered the initial cost of the contract
    (comparing fiat I paid to equivalent fiat I received).

    So lets say I signed up for $1,000 ...
    All the periodic BTC payments received, did not yet cover the initial $ fee I paid.

    I kept track of how much I received (in bitcoin), and what was the dollar value of that payment on that date/day (in CAD).

    Would really appreciate if someone can send me his/her opinion on this?

    Thanks all :)
  • Hey @Crypto_Tim - glad my previous stuff was helpful. Unfortunately, I know absolutely nothing about how mining is treated - whether directly or through a cloud arrangement.

    My understanding, generally speaking, is:

    1. You have to determine whether you are engaged in activity that the CRA would flag as "business-like" - if so, you are going to be declaring any income as business-based income (and so taxed at that rate). If not, it would be gains. Mining, I think, might be straight up business income (but check into that).

    2. If you get money from your activities, it's taxable. Any time you exchange one coin for another, it's also a taxable event (and it's a pain to do the accounting). So if you received payments from your arrangements, that's income (it doesn't matter to the CRA what your bottom line is). With that said, if what you're doing is business-like, you might be able to declare costs, too, and so your total might actually reduce your tax (?) - you'd have to figure that part out.

    3. CRA uses "Adjusted Cost Base" accounting methods for doing anything that would be taxed like a gain (holding a security and selling it). So whatever your BTCs are worth in CAD the moment you get them gets factored into what your current ACB is. Whenever you decide to sell a coin, the fair market value of that transaction in CAD is what is used to determine whether you realized a gain or loss against your current ACB, as well as what your new ACB is for any subsequent transactions.

    Okay - that's all I got. Not a lawyer. Not an accountant. It's also likely that I'm not entirely sane when it comes to all this.

    Best of luck!
    C
  • NewbiemenNewbiemen Member

    Hey @Crypto_Tim - glad my previous stuff was helpful. Unfortunately, I know absolutely nothing about how mining is treated - whether directly or through a cloud arrangement.

    My understanding, generally speaking, is:

    1. You have to determine whether you are engaged in activity that the CRA would flag as "business-like" - if so, you are going to be declaring any income as business-based income (and so taxed at that rate). If not, it would be gains. Mining, I think, might be straight up business income (but check into that).

    2. If you get money from your activities, it's taxable. Any time you exchange one coin for another, it's also a taxable event (and it's a pain to do the accounting). So if you received payments from your arrangements, that's income (it doesn't matter to the CRA what your bottom line is). With that said, if what you're doing is business-like, you might be able to declare costs, too, and so your total might actually reduce your tax (?) - you'd have to figure that part out.

    3. CRA uses "Adjusted Cost Base" accounting methods for doing anything that would be taxed like a gain (holding a security and selling it). So whatever your BTCs are worth in CAD the moment you get them gets factored into what your current ACB is. Whenever you decide to sell a coin, the fair market value of that transaction in CAD is what is used to determine whether you realized a gain or loss against your current ACB, as well as what your new ACB is for any subsequent transactions.

    Okay - that's all I got. Not a lawyer. Not an accountant. It's also likely that I'm not entirely sane when it comes to all this.

    Best of luck!
    C

    Thanks, it's helpful
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