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Bitcoin and Taxes in Canada 2018 Edition



  • Thanks again @chrisyakimov :)

    I appreciate your thoughts, although you're not a lawyer/accountant...
    I hope others would benefit from your replies as well.

    2 more quick questions if you don't mind...
    (anyone else, please feel free to chime in)...

    1- I found this very useful article about cryptocurrency taxes for Canadians... and wanted to share with all of you :)

    One thing that I need your thoughts about, is regarding this part:

    "Please note how the ACB of each asset class changes whenever Scooter acquires new assets, but the ACB do not change when scooter disposes of assets."

    If I understood this correctly... the tax specialist is saying that ACB changes when you BUY?
    but doesn't change when you SELL?

    or did I misunderstood something? :o

    Because in the article that you shared ... it clearly says:
    "The taxable events are the two dispositions of XC and the one disposition of YC."
    These are all "SELL" transactions.

    2- How do you think the taxable event(s) would be treated,
    If I purchase a bitcoin (for USD), then spend the BTC immediately or within a day or so?

    eg. using the btc to purchase a product online, or sending btc to someone (as a payment for his service)...etc

    How would the average price be applied in that case?

    Again.. just need your opinion(s), I understand that no one here is a lawyer/accountant (as much as I know)..
    Thanks to all :smile:

  • Hey @Crypto_Tim - I'm glad this was all useful. That's another great article you found - thanks for sharing.

    1. So - from the way I understand it: ACB PER UNIT does not change when you sell. But ACB figures are often aggregate (total value). So if you Buy 2 BTC at $10K CAD, you have an ACB of $20K and an ACB per unit of $10K ($20,000 / 2 BTC = $10,000 per BTC). If you sell .5 BTC, you have a remaining total ACB of $15,000, but your ACB per unit is still $10K.

    Make sense? If that sale got you proceeds of $7,000, you'd realize a capital gain of $2,000. But if you sold it for $4,000 in proceeds, you'd have realized a capital loss of $1,000.

    Now if you sold that .5 BTC for 5 ETH, the way I understand it is you have to calculate the fair market value ($CAD) of that 5 ETH. If ETH was worth $800, then you've realized proceeds of $4,000 with respect to the sale of your .5 bitcoin, and you have just realized a capital loss of $1,000 with respect to your BTC.

    And you have ALSO just "bought" $4,000 in Ethereum, meaning you now have an ACB of $15,000 for BTC, and $4,000 for ETH.

    This now answers your second question, I think:

    2. Each time you exchange one crypto for another, to treat them like commodities, what you theoretically pretend to do is sell the coin you're getting rid of for fiat CAD, then immediately use that fiat CAD to buy the coin you got in exchange (even though no fiat was ever involved). That's two transactions that have to be accounted for in ACB - a SELL of the first coin (realizing a loss or gain and not affecting ACB/coin) and a BUY of the second (changing the gross ACB of coin 2, as well as its ACB/coin).

    Technically speaking then, if you buy 2 BTC for $20,000K and then spend .01BTC that same day, if we assume the price has stayed the same, you've done the following.

    BUY BTC for 20K
    SELL .01 BTC for $100 / Buy whatever you bought for $100 (pair of jeans, maybe).

    Your ACB is now $19,900. Your ACB per BTC is still $10,000. And because the price of BTC never moved, your proceeds (the worth of what you bought) is exactly equal to the value of the BTC you "sold" in that exchange which is exactly equal to the value of that same amount of BTC when you originally bought it, and so your net gain/loss is exactly zero.

    But if BTC appreciated in price by 10%. Now your $100 jeans would require .00909BTC, and so now you would have the following:

    BUY BTC for 20K
    Sell .00909 BTC (Fair market value of $100) / Buy your jeans for $100.

    Your ACB is now $19,909.10 because you just let go of .00909BTC at what was a $10,000 per BTC cost to you, originally . Your ACB per unit is still $10,000, but you have 1.99091 BTC left instead of 1.99000. So the original cost of the .00909 BTC you just spent on $100 jeans was $90.90. Which means, believe it or not, you've just realized a capital gain by using your BTC to buy something. The gain is the "proceeds" of $100 minus the outlay of $90.90 = $9.10.

    Technically (shoot your brains out), you'd have to report $9.10 in capital gains.

    It's nuts and my hope is that the CRA sees how crazy this is.

    I was at a conference today and found myself sitting beside an investment advisor who was there to learn more about blockchain so he could navigate the questions he was beginning to get from people. In his view, the CRA probably doesn't have to capacity to micro-police this. And he shared that he thinks all we have to do as citizens is "our best" when it comes to reasonably reporting our gains based on our understanding of the law.

    I think in your scenario 2, it's fair to say that the fluctuation of BTC on a particular day isn't going to be so massive that when you use it to buy everyday things, the difference is minimal and kind of crazy to be reporting. But if you're buying a house for a cool half mil... well, you may just have to do the calc.

    Hope that is just a touch clearer than mud ;)

  • PeZzyPeZzy Member
    Plenty of calculation advice, but how do you go about actually filling out the Capital Gains schedule 3 for a non-business sale? Personal use property is the only section that looks like it might fit.
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