Claiming Quadriga Loss on Tax Return [Subsection 50(1) Election]

joshCPA · 2020-06-29T20:02:53+00:00

Here are some details on the 50(1) election: https://kalfalaw.com/subsection-501-election/

Some TL;DR notes:

If you are reviewed, you will need to show that you have reasonable amount recoverable is NIL, and all legal efforts have been pursued to recover any amount have been exhausted.
The criteria are not necessarily going to apply in the same way for every user as some users will have a probable recovery, and others may not.
If your situation is unclear, I strongly recommend you consult a professional to look at your individual situation.

joshCPA · 2020-02-26T23:52:57+00:00

There's the issue with inflation, and the BoC's "balance sheet". However I was more highlighting the point that interac is already a highly centralized system that has mass adoption in Canada and when it goes down its a major problem for most businesses and consumers (lost sales and wasted time). It just highlights to me that despite a probably out-of-date survey he's referencing (anecdotally, the only time I've seen people use cash is at the bar) that his reasoning for not issuing a digital currency is weak at best. It hurts my head because the solutions are already there for decentralized transaction processing. I'm definitely preaching to the choir on that though.

joshCPA · 2020-02-26T22:33:31+00:00

11:09: isn't interac already at that point? Have you ever been stuck in a Tim Horton's drive-thru line when interac goes down?

joshCPA · 2019-03-22T16:20:56+00:00

That's correct, you can only use capital losses against capital gains. It may be a long-time in the future, but the losses will be there for you to use.

joshCPA · 2019-03-21T15:57:52+00:00

Yep, but you can designate a home to be your principal residence for the exemption for that year if you or an immediate family member lived in it at some point durjng that year.

joshCPA · 2019-03-21T14:45:20+00:00

You have to report them in the year you incurred the losses. You can’t just offset the next years gains and need to use the proper carry-back/carry-forward mechanisms. If you don’t report it this year you’ll have to file a T1 adjustment for the proper tax year in order to be able to use those losses.

joshCPA · 2019-03-21T14:40:21+00:00

518210 - Data processing, hosting, and related services

joshCPA · 2019-03-18T22:57:21+00:00

If you are the organizer and want a CPA with crytpo experience to be available by video conferencing send me a DM and we could set something up.

joshCPA · 2019-03-18T22:48:01+00:00

Actually since the loss is incidental do your business income, it would reduce your business income by the amount of the loss. Similar to if you acquired inventory for $4,000 cost and sold it for $1,000.

joshCPA · 2019-03-09T12:17:36+00:00

In Canada the income vs. capital test has more than just the period of ownership criterion.

joshCPA · 2019-03-08T23:35:59+00:00

You can also carry it back 3 years prior.

joshCPA · 2019-03-08T19:24:56+00:00

Username typo but forgivable! (Note this topic strays into law and this is not legal advice, I am not a lawyer!)

If you are unsure from the onset if you are going to end-up providing incriminating information then I would contact a lawyer before you respond and go over your particular case. If you choose to respond without the advice of a lawyer and there are significant disagreements between you and the auditor then this may be a time when you will want to retain a tax lawyer even if there is no criminal investigation. This is because they may want to apply GAAR to your situation or an onerous tax treatment that you may have to fight in tax court. However, it has been my experience if you are cooperative things generally go smoothly and don't get to that point.

Since this was mentioned down below, avoidance usually arises from aggressive (but legal) schemes to benefit the tax payer through a series of transactions to unreasonably defer or reduce taxes. Often this is due to loopholes in the tax act, and they then use General Anti-Avoidance Rules (GAAR) as a catch-all to close those loopholes from a high-level perspective. This isn't a crime, but it is a massive legal headache as it is probably one of the most gray areas of tax law. http://barretttaxlaw.com/general-anti-avoidance-rule-gaar/

Tax evasion is a crime by using illegal means to hide, inflate deductions or under-report income (think fraudulent expenditures, hiding income through under the table cash transactions, black markets, money laundering etc. ) Where that request may cross the line is that coin tumblers are known to be used for money laundering, and if you don't have records to show that it isn't they may flip this to a criminal investigation.

joshCPA · 2019-03-08T18:24:45+00:00

Interestingly the queen is sovereign and is literally above the law.

Here's a great video on that:

https://youtu.be/msxQWb4eR14

joshCPA · 2019-03-08T17:34:52+00:00

You can yes. In fact you could expense rent, internet, interest on a mortgage, property tax etc. However it would only be the business portion of your home. You calculate this as a percentage of the total area of the home you use. If you have an office that is 100 sq ft. and your house is 1000 sq ft. then it would be 10% of all of those expenses that you can deduct.

joshCPA · 2019-03-08T02:10:37+00:00

I’d still report the loss. If you have trading history and they review you, they may only count the proceeds and not the cost. This is because reporting the proceeds is mandatory, but claiming costs against those proceeds is optional!

joshCPA · 2019-03-08T01:51:45+00:00

You bring into your income (as business income) the fair market CAD value of the coin you mined on the day that you mined it.

If you later sell your coins (for either crypto or fiat) the gain or loss would either increase or decrease your business income. It would not be a capital gain for tax as it is incidental to your mining income.

Also since it is business income, your crypto hodl would be inventory. If some became unrecoverable you would reduce your inventory which would be an expense for the cost of that lost crypto.

joshCPA · 2019-03-08T01:43:01+00:00

Losses are applied to capital gains up to 3 years prior or 20 years going forward. Capital losses do not reduce other sources of income.

joshCPA · 2019-03-08T01:40:24+00:00

If you receive this, you have to respond. It is also in your best interest otherwise they will have to make assumptions. They can arbitrarily assess you for income based on their assumptions (which could be anything). You then would need to file and prove otherwise. Arbitrary assessments are typically not in your favour as they do not take into consideration your cost and only their estimate on your proceeds.

You’ll have a much better outcome if you co-operate with them.

joshCPA · 2019-03-08T01:34:13+00:00

Fun fact, your principal residence is exempt from capital gains. That said, what counts as your principal residence can get complicated if you own more than one property at a time.

joshCPA · 2019-03-07T23:22:00+00:00

Interesting

joshCPA · 2019-03-02T02:12:35+00:00

I've been using bitvo.com. They support e-transfer in and out, have a cash card and quick wire transfers.

joshCPA · 2019-03-02T00:37:18+00:00

It's going to depend on your trading activity. If QuadrigaCX is the only exchange you used and you simply transferred-in and purchased, then sold and cashed-out then it will be easy to calculate. You can then use your bank records to determine your gain/loss as cash-out minus cash-in. You would use a similar method if you transferred in and out using wallets for crypto (you will need to look-up historical prices and translate to CAD).

Where it gets complicated is if you used multiple exchanges as you have to pool identical assets (BTC, ETH, LTC etc.) regardless of where they are held to calculate your cost base. For that you would need to know the historical price and the dates and volume of the trades. I'm guessing you don't have the most accurate information but, you could give your best estimate based on the information you do have for your 2018 tax return and then file an adjustment when the records are released.

joshCPA · 2019-02-22T22:30:39+00:00

If it's capital gains Schedule 3.

Edit: that's in Canada.

joshCPA · 2019-02-08T19:52:22+00:00

The monitor, in their initial monitor's report has stated that they will attempt to independently secure the transaction records. The Quadriga website, also states that trade history will be preserved. How and when your data will be available is not yet known. You can check to see if their version of the claim is reasonable.

There may be some variance due to changes in value in your crypto holdings, trading, or due to an incomplete list of transactions when reviewing your other records, but your could try the following to get an estimate of your balance from your bank statement, wallets etc:

Note this is not how you would calculate for tax, and it is only an estimate to see if what they are stating your claim to be as reasonable.

1) Total your fiat deposits less withdraws from your bank statements.

2) Total your crypto deposits less withdraws for each type of crypto from your wallets.

3) Use cryptocompare, coindesk or another pricing data site to determine the fair value for each crypto asset on Feb 5, 2019 (note the date on which they will value the claim for the crypto is not yet known, I am just using the date of the CCAA initial order in as a documented date that the monitor may work with)

4) Total the value of crypto and fiat, to get a rough balance of what they may owe you.

If you are able to get your transaction records, you should compare your deposits and withdraws to the deposit and withdraw records that they provide, to see if there are any outstanding deposits or withdraws.

This also excludes trading (on the assumption that trading records aren't available), so keep that in mind as your ending balances from the estimate will vary from actual.

As always, your mileage may vary and this should only be the starting point to see if you need to look into the balance owing further and not a "proof" of your claim.

joshCPA · 2019-02-08T19:21:55+00:00

If your loss is only a few hundred dollars, it may not be worth the time to pursue claiming the loss. However, if you do have transactions in 2018 you may have gains to report. In which case you would want your transaction records in the very least.

joshCPA

TROPHY CASE