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More guidance from the CRA on bitcoin activities and transactions

By Timothy Fitzsimmons

Following the recent Internal Revenue Service (IRS) publication on the US tax treatment of bitcoin activities and transactions, the Canada Revenue Agency (CRA) has issued further guidance on the Canadian tax issues arising in respect of the virtual currency.

In CRA Document No. 2014-052511E5 ‘Virtual Currencies (Bitcoins)’ (28 March 2014), the CRA was asked several questions about bitcoin activities and transactions (not all of the underlying facts are described in the technical interpretation, but we can infer what the taxpayer asked from the responses provided by the CRA).

In respect of bitcoin ‘mining’, the CRA noted the difference between business and personal activities. In Stewart v The Queen (2002 SCC 46), the Supreme Court of Canada stated that an activity may be commercial in nature if the taxpayer had a subjective intention to profit and there was evidence of business-like behaviour supporting such intention. Whether a particular activity is undertaken for profit is a question of fact that can only be determined on a case-by-case basis. The CRA stated that, in this case, the taxpayer appeared to be operating a bitcoin mining business…

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