{"id":411,"date":"2018-01-03T15:03:59","date_gmt":"2018-01-03T20:03:59","guid":{"rendered":"https:\/\/timestampmag.com\/?p=411"},"modified":"2018-01-03T15:03:59","modified_gmt":"2018-01-03T20:03:59","slug":"will-bitcoin-taxation-turn-to-nightmare","status":"publish","type":"post","link":"https:\/\/timestampmag.com\/2018\/01\/03\/will-bitcoin-taxation-turn-to-nightmare\/","title":{"rendered":"Will Bitcoin Taxation Turn Into an Accounting Nightmare for Canadian Users?"},"content":{"rendered":"

Canada\u2019s approach to Bitcoin taxation will not turn into an \u200eaccounting nightmare for its users, at least for now, as the government \u201chas no plans\u201d to change tack on how \u200ethe digital asset class is treated under current tax laws.\u200e<\/p>\n

Finance Minister Bill Morneau told\u00a0Bloomberg on the sidelines of the World \u200eEconomic Forum in Davos<\/a>\u00a0that his country isn\u2019t planning changes to existing tax code to deal \u200ewith the digital coins.\u200e<\/p>\n

He added: \u201cWe don\u2019t have any specific Bitcoin or crypto-currency \u200eoverhaul in the works. The main focus on Bitcoin is making \u200esure that we understand what\u2019s going on underneath that market, to \u200emake sure that we aren\u2019t introducing any risks into our economy, \u200ewhether they be risks like money laundering or terrorist financing. \u200eAs an investment, Bitcoin taxation isn\u2019t unique in any \u200eway.\u201d\u200e<\/p>\n

\u200eWhen examining Canada\u2019s approach to the taxation of such currencies, \u200ehowever, the most basic question is whether they are treated as \u200ecurrency or property or even income. Indeed, the nation\u2019s decades-old \u200etax rules leave too much room for uncertainty, and \u200ealready open the door for some detailed and voluminous accounting.\u200e<\/p>\n

Several issues to consider<\/h2>\n

Morneau\u2019s speech contrast with those of the Canadian Securities Administrators (CSA), comprised of the country\u2019s thirteen key financial market regulators across their respective provinces, which has recently publicized plans to regulate digital token sales. Additionally, Canada\u2019s central bank chief \u200eStephen Poloz said\u00a0on the fingers of the same event that Bitcoin is a gamble<\/a>, and that he looks to \u200ecoordinate efforts with global regulators to form policies and develop rules \u200earound the digital coins.\u200e<\/p>\n

The CSA stated that this new fundraising phenomenon should be categorised as securities, at least in some cases. This implies that certain ICOs\/ITOs would now need to follow Canadian securities laws, which requires assessing the economic realities of the offering to protect participating investors.<\/p>\n

That said, besides the actual computation of tax, there are other compliance \u200eissues that the Canadian legislator will have to consider.\u00a0 \u200e<\/p>\n

Should the lawmakers decide to treat the cryptocurrency as property, the burning question will be how a taxpayer will maintain \u200eadequate records to determine the correct amount of tax. What is more of a wild card, though, the taxable amount will be the spread between the buy and sell prices, assuming \u200ethe coin is appreciated in value since purchase. And even if the \u200eaccount for basis was determined correctly, then we have to \u200eexamine the other side of the transaction, the value of purchases made \u200ewith virtual currencies.\u200e<\/p>\n

As an example, if a cryptocurrency investor bought one bitcoin at $6,000 in September 2017 and \u200ethen decided to sell the coins at $16,000 in December 2017, \u200ethat means he \u200erealizes $10,000 worth of taxable gains.<\/p>\n

IRS approach to Bitcoin taxation<\/h2>\n

Digital coins such as bitcoin have attracted attention of global regulators from different angles. There are now \u200esubstantive efforts to regulate the new-aged asset and provide guidance on, among other things, \u200ethe securities law, anti-money laundering, accounting and tax treatment of \u200ecryptocurrencies.\u200e<\/p>\n

This focus has resulted in the U.S. releasing guidance on the reporting \u200eand taxation requirement for the sale, purchase, and trade of \u200ecryptocurrency.<\/p>\n

The IRS treats new virtual currencies as property for federal income tax \u200epurposes, but the authority taxes operations of mining as an income. Although some grey areas still remain, a recent tax overhaul\u200e effectively closed that area by applying taxes when one crypto\u200ecurrency is swapped for another.\u200e<\/p>\n","protected":false},"excerpt":{"rendered":"

Canada\u2019s approach to Bitcoin taxation will not turn into an \u200eaccounting nightmare for its users, at least for now, as the government \u201chas no plans\u201d to change tack on how \u200ethe digital asset class is treated under current tax laws.\u200e Finance Minister Bill Morneau told\u00a0Bloomberg on the sidelines of the World \u200eEconomic Forum in Davos\u00a0that […]<\/p>\n","protected":false},"author":3,"featured_media":412,"comment_status":"open","ping_status":"open","sticky":false,"template":"single-default-ns.php","format":"standard","meta":{"footnotes":""},"categories":[23],"tags":[30,2,3,4,10,11],"_links":{"self":[{"href":"https:\/\/timestampmag.com\/wp-json\/wp\/v2\/posts\/411"}],"collection":[{"href":"https:\/\/timestampmag.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/timestampmag.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/timestampmag.com\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/timestampmag.com\/wp-json\/wp\/v2\/comments?post=411"}],"version-history":[{"count":0,"href":"https:\/\/timestampmag.com\/wp-json\/wp\/v2\/posts\/411\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/timestampmag.com\/wp-json\/wp\/v2\/media\/412"}],"wp:attachment":[{"href":"https:\/\/timestampmag.com\/wp-json\/wp\/v2\/media?parent=411"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/timestampmag.com\/wp-json\/wp\/v2\/categories?post=411"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/timestampmag.com\/wp-json\/wp\/v2\/tags?post=411"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}