BITCOIN – TAX IMPLICATION

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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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