Canadian Non-Resident to Resident

Tax Questions
#1

I’m a Canadian citizen. I lived and worked overseas in Asia for 4+ years. During that time, I was a Canadian non-resident, and so I didn’t have Canadian tax obligations (tho I paid government taxes in all the countries I lived and worked in). During that time I was living overseas I bought some crypto-currencies - first bought in 2016. In the middle of 2018, I returned to Canada and became a Canadian resident again, owing and paying Canadian taxes like every other Canadian resident. My question is this:

How do I calculate my crypto tax obligations? So I continued trading crypto for crypto since I came back to Canada. Do I just start counting from the date that I returned to Canada? So I use Koinly to import all my trades, starting from the day I got back into Canada? When I import that data, Koinly says it counts the purchase price of crypto that I had in my wallets since that date as 0 zero - since all that was purchased back before I became a resident of Canada again. Is that fine? It seems like it would then underestimate my losses, since it counts the purchase price of these alt-coins at zero. Is the relevant info the price of the cryptos I owned the day I became a Canadian resident again, and then the gains or losses will be the deviation from that price on the date of entry?

#2

Hi, usually countries will allow you to assume a cost for the old coins that was either equal to your actual cost or equal to the fair market value of the coins on the date you entered the country. You should check with the CRA to get some clarification on this.

#3

Thank you for your reply here. I’m just finding this so difficult to work through. I have an example that might demonstrate to you where I find myself getting stuck.

So let’s say we took the fair market-value of the coins on the day I re-entered Canada and became a resident again. Let’s just imagine the sum-total of the fair-market value of all my crypto assets is $50,000 on the day I entered Canada. Then imagine I engage in lots of crypto-to-crypto transactions since, and while at some point in 2019 the sum total reaches an ‘all-time low’ of $10,000, today the value sits at roughly $30,000.

On this example, in general, would this work out to be a capital gain of, say, $20,000 (assuming I put in $10,000 initially in 2016?) In general, would the CRA evaluate my experience with crypto as a ‘net gain’, since I gained relative to my initial input (even if that initial input was all back in 2016 when I was a non-resident)?

Or would the CRA look at this all more as a tax loss of about $20,000, since I entered the country with $50,000 at fair-market value, but I now only have $30,000 (bear market woes)? For, strictly speaking, while I am up overall since my initial buy-in back in 2016, I’ve most definitely - in general - just seen my crypto account diminish relative to the day I stepped back in Canada.

My intuition is that this is a ‘loss’ according to the CRA purposes, but I could be interpreting this wrong as I am biased in my own favor. But I can’t shake the idea that, relative to what I had when I first stepped foot back in Canada, I am decidedly down $20,000.

Am I mistaken here?

#4

The total value of your holdings doesn’t really play any role here, it’s more about the market value at the time of your crypto to crypto trades. If your initial cost was $50k in BTC and you traded this BTC for 200 ETH at a time when total value of your BTC was $80k then you would have a profit of $30k (even if the value of your ETH were to fall down to $20k at the end of the year).

#5

Thanks again for your response. I do get what you are saying: what needs to be accounted for is the market value at the time of my crypto-to-crypto trades. That’s where your software will be able to help.

In my example above though, I was trying to work through the ‘general question’ as regards my tax situation: overall, in my situation, am I probably going to be looking - overall - as regards my crypto holdings, at capital gains? Or a capital loss? And I’m thinking more and more it appears to be a capital loss.

For, implied in my example above is the fact that - overall - my crypto-to crypto trades since I’ve been back in Canada, will have resulted more often in losses. That is, for me to have gone from $50,000 in 2018 to $30,000 in 2020, there are going to be more trades in which I bought high and sold lower, than the other way around. That is implied by the fact that, since 2018, I’ve technically lost money in crypto.

So I completely understand that what is required is to use your software to calculate the market values of the individual trades (that’s what your software automates), but I’m just saying, that if I am to be down $20,000 since 2018, I must have had more trades where the value when I bought ended up being higher than the value of when I sold. The prices of the cryptos that I bought, tended to go down.

Thinking through this, it is seeming more and more that I’m going to be calculating out a tax loss.