At last – some clarity from the CRA on Bitcoin mining

If you are mining bitcoins or alt-coins or have been considering getting involved with mining, it is important to be aware of the tax implications. The Canada Revenue Agency (“CRA”) has let it be known in a technical interpretation that mined digital currency, unsurprisingly, is not immune from tax treatment. For tax purposes, a key consideration to be made is whether your mining consists of a personal or a business activity. If the activity is considered a business activity the mined bitcoins may be considered inventory or capital property and taxed accordingly. If it is a business activity then expenses and certain losses associated with the mining operation can also be deducted. We know from previous CRA bulletins, that payments received in respect of, or in connection with, a business carried on by the taxpayer, must be included in the taxpayer’s income from that business. Bitcoins rewarded to miners for supporting the network and verifying transactions, where the mining activities are considered business activity, must be calculated as income. Whether your mining operation is a business or personal activity is determined on a case-by-case basis. However, there are some key elements that can facilitate making the distinction. A personal activity is endeavored to provide a personal benefit rather than a financial one; it is primarily undertaken for pleasure, entertainment, or enjoyment rather than for profit, business, or commercial reasons. Drawing on the Supreme Court’s decision Stewart v. Canada, the CRA explains that “In order for an activity to be classified as commercial in nature, the taxpayer must have the subjective intention to profit and there must be evidence of...