Is Your Crypto Activity
Taxable?

Question 1: I Only HODL. Do I Have to Report Anything
to the CRA?

This was the most-asked question during my Bitcoin Well livestream, and the answer is mostly good news.
Buying crypto with Canadian dollars and holding it isn't a taxable event. There's no line on your return for
crypto you own, and no minimum amount that makes holding taxable.

The catch is what counts as holding. Swapping one coin for another isn't HODLing, and neither is earning
staking rewards, even if you never cash out to CAD.

One more thing for larger stacks. If the total cost of crypto you hold outside Canada, such as on a foreign
exchange, was more than $100,000 at any point in the year, you may need to file Form T1135. It's a reporting
form, not a tax, but the penalties for missing it add up quickly.

Question 2: Are Crypto-to-Crypto Swaps Taxable in Canada?

Yes. This is the answer people push back on most, because no Canadian dollars ever hit their account. Totally
understandable, but not how the CRA sees it.

To the CRA, a swap is a trade of one property for another. You've disposed of the first coin at its value that day,
so any gain or loss is reported.

Here's how it plays out. Anna bought 1 ETH for $1,500. Months later she swaps it for SOL when that ETH is
worth $2,000. Anna has a $500 capital gain, even though she never cashed out. Her SOL now has a cost of
$2,000, which matters the day she sells it.

The same rule applies when you swap into a stablecoin or buy something with bitcoin. It also works in your
favour: a swap at a loss creates a capital loss you can use against your gains.

Question 3: Why Does My Crypto Tax Report Show Gains I
Never Made?

Jeff came to me with a Koinly report showing a $40,000 gain. He's an engineer in Calgary who has been
staking and trading for six years, and he knew he hadn't made anywhere near that much.

The first thing I did was compare the balances in Koinly with what he actually held. Koinly showed most of his
ETH as sold, when it was sitting safely on his Ledger. Every transfer to his cold wallet had been recorded as a
sale.

Once we matched both sides of those transfers, his gain dropped to about $9,000. His first words were, "I
almost filed it the way it was."

Here's why it happens. Say you move BTC from Kraken to your Ledger. If the Ledger isn't connected properly
in your software, the coins leaving Kraken look like they vanished. Then BTC appears on the Ledger with no
purchase history, so the software assumes you bought it at today's price. When you sell later, the report
calculates a gain that never happened.

Moving crypto between your own wallets isn't taxable. The fix is making sure your software sees both sides of
every transfer.

Question 4: Which Purchase Price Does the CRA Use When
I Sell Crypto?

A crypto investor asked me this: "If I bought five times before selling, which buy does the CRA use?" The
answer is none of them on its own.

First, you're not taxed on the full amount you cash out. You're taxed on the gain, which is your sale price
minus your adjusted cost base (ACB) and any selling costs.

Canada doesn't use your first buy or your most recent one. It uses your average cost across all your wallets
and exchanges.

Say you buy 1 BTC at $1,000 and another at $890. Your average cost is $945 per BTC. If you sell 1 BTC at $800,
you have a capital loss of $145, based on the average.

The CRA also expects you to use a reasonable method and stick with it year to year. Switching methods or
pricing sources depending on what helps you that year is where scrutiny starts.

Question 5: Are Staking and Mining Rewards Taxed
When I Receive Them?

A client told me recently, "I'm only mining a bit of BTC. I didn't think it really counted." It's a reasonable
assumption. Small amounts land quietly in your wallet, and nothing feels like a tax moment.

The CRA treats crypto you earn as income. Its business income guide (T2125 guide - see p.11) names trading,
mining, staking and yield farming directly as activities to report.

There are two layers to keep in mind. When the reward lands in your wallet, its value that day is income.
When you sell it later, you have a capital gain or loss measured from that same value.

Whether the income is reported as business income depends on how much you do and how you do it. Small
or large, though, it still counts.