The poster from an accounting firm makes several claims and presents them as FACT. The fact that he is a Chartered Accountant (allegedly) lends him credibility, however there are several points in his writeup that are not telling the whole side of the story. Their post is here
I replied late to the party, and missed all the activity - never the less I think it's important my voice gets heard for you to balance out your own choices at tax time.
The fact is this Metrics CA firm hasn't challenged or tested any of their assumptions about STAKING, and Business versus Hobby income. I don't think there is adaquate case presidence to validate their claims. Here is my reply to their post.
ARGUABLY some of his information is plain WRONG! I will identify my reasons. Some of my examples are from the IRS and I state that upfront but generally CRA has not issued guidance, so looking at other countries that have issued guidance is a good starting point.
Okay where to begin. /u/MetricsCPA/ states:
DECENTRALIZED TRADING
This is what I would refer to as exchanges like Kyber, MKR, and Uniswap. These do not have a centralized order book and record of transactions - Ie, you will not be able to get a list of your trades 8 months after you do it for tax purposes.
WRONG - literally by definition a decentralized trade is stamped into an immutable blockchain that can be looked up indefinitly in the future, anytime you want. You can use this tool here to look up most DEXs for all time.
Next:
STAKING
/u/MetricsCPA/ states that this is mostly INTEREST, and make a comparison to a bank paying you interest.
WRONG!
Staking of cryptocurrency
The Canadian Revenue Agency has not released specific guidance for staking of cryptocurrency. Because staking is similar in nature to mining of cryptocurrencies, the safest approach is to treat received coins from staking in a similar fashion to mining.
If your mining is just a personal hobby, you will only pay capital gains tax when you later sell (dispose of) the received coins. Because you didn’t pay anything for the coins originally, the cost basis should be considered as zero so that your capital gains are equal to the market value (in CAD) at the time when you sell the coins in the future.
The CRA says that it will be decided case by case if your activity is classified as a business or just a hobby.
SOURCE: https://coinpanda.io/crypto-taxes-canada-cra/
CRYPTO isn't money! It isn't a Security (although it can be), it isn't a currency. CRA hasn't provided clear direction.
CRA has issued direction here: The CRA generally treats cryptocurrency like a commodity for purposes of the Income Tax Act. ... Not all taxpayers who buy and sell cryptocurrency are carrying on business activity.
/u/MetricsCPA/ points out that most mining activity is treated as business income.. However says himself that they have never challenged the findings or lost a case by claiming otherwise!! If a CA firm always picks a path that is worst for their client, of course CRA won't say no.
If you are a 'hobbyist' your staking rewards can and should be recorded as a $0 ACB and when you sell later, you pay the full capital gain. By automatically saying any rewards are INCOME you are screwing your clients. I mean it's not right that they are getting rewards for sustaining a system (Commodities).. A better comparison othan your bank example would be a Fruit Farm that bears fruit. Should you be taxed on the apples that are made? Well I guess, YES if you are a business. This is not even getting into the philisophical discussion that rewards from staking dilute the coin supply and technically should devalue the market cap and price of a certain coin that you are already holding!
Liquidity Provision
WRONG AGAIN!
One view is that you technically have never disposed of your coins into the liquidity pool - you have wrapped them in a smart contract! This is not a disposision and doesn't trigger a tax event. See here
OTHER USEFULL REFERENCES
https://tokentax.co/guides/defi-crypto-tax/
https://barretttaxlaw.com/tax-treatment-of-cryptocurrency-theft-and-loss/
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