Cryptocurrency
is a digital representation of value that is not legal tender. It is a digital
asset, sometimes also referred to as a crypto asset or alt coin that works as a
medium of exchange for goods and services between the parties who agree to use
it.
The CRA generally treats cryptocurrency like a commodity for purposes of the Income Tax Act. Any income from transactions involving cryptocurrency is generally treated as business income or as a capital gain, depending on the circumstances. Similarly, if earnings qualify as business income or as a capital gain then any losses are treated as business losses or capital losses.
In general, possessing or holding a cryptocurrency is not taxable. But there could be tax consequences when you do any of the following:
sell or make a gift of
cryptocurrency
Trade or exchange cryptocurrency,
including disposing of one cryptocurrency to get another cryptocurrency
Convert cryptocurrency to
government-issued currency, such as Canadian dollars
Use cryptocurrency to buy goods or
service
Generally, if disposing of cryptocurrency is part of a business, the profits you make on the disposition or sale are considered business income and not a capital gain. Buying a cryptocurrency with the intention of selling it for a profit may be treated as business income, even if it’s an isolated incident, because it could be considered an adventure or concern in the nature of trade.
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