Cryptocurrency tax treatment

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speer1234
Posts: 10
Joined: Thu Mar 21, 2019 6:10 pm

Cryptocurrency tax treatment

Post by speer1234 » Fri Mar 22, 2019 9:39 pm

IRS treatment of Cryptocurrency? Received $4000 FMV worth of crypto in Q1 2018 for goods and services I provided to a client. Traded the the crypto throughout the year to make profit from speculation (~15 trades). Cashed out and sold the same crypto for $1000 FMV in Q4 2018. For Canadian tax purposes im treating the crypto I received as business income with the crypto itself as inventory (instead of capital) so the disposition would be a inventory loss instead of a capital loss. Im following the CRA's: "Adventure or Concern in the Nature of Trade" and the advice from a Canadian CPA.

The above scenario would be: $5000 in sales ($4,000 for the work I did + $1,000 for the proceeds of selling the bitcoin), $4000 in purchases (the cost of the bitcoin received) and an ending inventory of $0

Can I do the same on my IRS taxes? I would include the proceeds of these trades on an additional Sched C. If I could this would make things much more simple as I can simply mirror my Canadian return and the FTC's would be simple.

Im dual and required to file taxes in Canada and USA

speer1234
Posts: 10
Joined: Thu Mar 21, 2019 6:10 pm

Re: Cryptocurrency tax treatment

Post by speer1234 » Sat Mar 23, 2019 1:15 am

...I hope I can treat it as a business loss instead of investment loss.

Normally its a capital loss in Canada like the US but after further research and CPA advice I can treat the crypto as business inventory with citation to "Adventure or Concern in the Nature of Trade" notabley lines 13-15 here: https://www.canada.ca/en/revenue-agency ... trade.html

If I had to report it as a capital loss in Canada instead of inventory loss I would be paying $2000 in tax on $4000 of business income (even though I only actually received $1000 after selling all the crypto).

Im hoping I can get additional opinions from others before I decide what to do.

Treating it as an investment loss will make things much more complicated to say the least. US and CA also track stock values differently (FIFO/LIFO vs Canada's Adjusted Cost Basis "ACB").

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