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Gifting Crypto in Eyes of CRA

Although CRA has specific guidelines around gifting, there is none for cryptocurrency. We must utilize existing rules to gauge how CRA currently views gifts in the form of crypto assets.
Analysis by
Nitin Ashok, CPA, CFA
April 19, 2022 5:22 AM
|
3 Min Read.
Gifting Crypto in Eyes of CRA
Table of Contents

    Introduction

    Although CRA has specific guidelines around gifting, there is none for cryptocurrency. We must utilize existing rules to gauge how CRA currently views gifts in the form of crypto assets. 

    The definition of a gift: The exchange of monetary value from one party to another, with nothing received in return, or expected in the future.

    Let's take a look at all the implications of gifting different types of assets in the crypto world:

    Gifting/donating Cryptocurrency to a Charity

    Only charities registered with the CRA can accept cryptocurrency donations and are able to provide receipts to the donator for the tax benefits. Most charities will only accept donations or gifts in the form of Bitcoin or Ethereum, making it easier for them to sell.

    • In Canada, the entire cryptocurrency donation may not always be deductible. So it's important to see how your donation credits work. 

    Gifting Cryptocurrency to Friends and Family

    There is no specific ‘gift’ allowance in Canada, meaning gifting crypto assets is recognized as a disposal by CRA.

    All normal rules apply when gifting crypto assets to family or friends as if you are disposing of the asset. You will be required to find the adjusted cost basis of the crypto asset you are gifting.

    Any gain will be calculated by taking the fair market value at the time of the gift less your cost basis.

    • FMV - Cost Basis = Gain

    50% of your gain will then be taxable as a capital gain by CRA.

    Gifting NFTs

    NFTs are also considered as capital assets (no specific guidance is available from CRA yet on NFTs), meaning capital gains will be chargeable to any gain made on the disposal of an NFT. Gifting NFTs will be viewed as a disposal by CRA. So, you will need to pay capital gains tax on 50% of any gain made before the gift date.

    Conclusion

    Gifting crypto assets can be a great way to share your gains with your family and friends and get them invested into the space without any upfront investment from them. However, you have to be careful when you give gifts to not attract unwanted tax consequences.. 

    Disclaimer: CRAs relationship with Cryptocurrency

    Although CRA continues to slowly create guidelines for Canadians investing in cryptocurrency, they are still way behind several other developed countries when it comes to the rules surrounding taxation. Many DeFi protocols, such as yield farming and staking are yet to receive proper guidance from CRA. We should expect to see the number of guidelines rapidly increase as Canadian investors call for them but until then, crypto investors have to take positions that may or may not be accepted by CRA. 

    *Opinions are for discussion purposes only. This does not represent the views of MetaCounts Cashflow Inc. or its affiliates. Furthermore, this does not constitute legal, accounting, or tax advice of any kind and should not be relied upon as such.

    Disclaimer: The information provided on this website is for general informational purposes only and should not be considered professional advice. While we strive to ensure accuracy, accounting and financial regulations are subject to change, and it is recommended to consult a qualified professional before making any financial decisions. The use of futurecpa.ca does not create a client relationship, and we do not endorse or guarantee the accuracy of third-party content. We value confidentiality but cannot guarantee the security of transmitted information. The content on futurecpa.ca may change without notice. By using this website, you agree to these terms and conditions. For personalized advice, please contact us by filling our contact form or reach out to us at help@futurecpa.ca.
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    General

    Gifting Crypto in Eyes of CRA

    Introduction

    Although CRA has specific guidelines around gifting, there is none for cryptocurrency. We must utilize existing rules to gauge how CRA currently views gifts in the form of crypto assets. 

    The definition of a gift: The exchange of monetary value from one party to another, with nothing received in return, or expected in the future.

    Let's take a look at all the implications of gifting different types of assets in the crypto world:

    Gifting/donating Cryptocurrency to a Charity

    Only charities registered with the CRA can accept cryptocurrency donations and are able to provide receipts to the donator for the tax benefits. Most charities will only accept donations or gifts in the form of Bitcoin or Ethereum, making it easier for them to sell.

    • In Canada, the entire cryptocurrency donation may not always be deductible. So it's important to see how your donation credits work. 

    Gifting Cryptocurrency to Friends and Family

    There is no specific ‘gift’ allowance in Canada, meaning gifting crypto assets is recognized as a disposal by CRA.

    All normal rules apply when gifting crypto assets to family or friends as if you are disposing of the asset. You will be required to find the adjusted cost basis of the crypto asset you are gifting.

    Any gain will be calculated by taking the fair market value at the time of the gift less your cost basis.

    • FMV - Cost Basis = Gain

    50% of your gain will then be taxable as a capital gain by CRA.

    Gifting NFTs

    NFTs are also considered as capital assets (no specific guidance is available from CRA yet on NFTs), meaning capital gains will be chargeable to any gain made on the disposal of an NFT. Gifting NFTs will be viewed as a disposal by CRA. So, you will need to pay capital gains tax on 50% of any gain made before the gift date.

    Conclusion

    Gifting crypto assets can be a great way to share your gains with your family and friends and get them invested into the space without any upfront investment from them. However, you have to be careful when you give gifts to not attract unwanted tax consequences.. 

    Disclaimer: CRAs relationship with Cryptocurrency

    Although CRA continues to slowly create guidelines for Canadians investing in cryptocurrency, they are still way behind several other developed countries when it comes to the rules surrounding taxation. Many DeFi protocols, such as yield farming and staking are yet to receive proper guidance from CRA. We should expect to see the number of guidelines rapidly increase as Canadian investors call for them but until then, crypto investors have to take positions that may or may not be accepted by CRA. 

    *Opinions are for discussion purposes only. This does not represent the views of MetaCounts Cashflow Inc. or its affiliates. Furthermore, this does not constitute legal, accounting, or tax advice of any kind and should not be relied upon as such.

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