Tax Guide For Crypto & Bitcoin Businesses: Computing Inventory Costs

Introduction: Cryptocurrency-Trading Businesses in Canada

Canadian cryptocurrency-trading businesses face unique challenges. The mostly unregulated market brings higher risk of fraud and cyber-crime. The volatile markets may bleed profits. And some cryptocurrency traders don't even realize that they're carrying on a business, misreporting their profits as capital gains.

This article aims to educate cryptocurrency traders on a fundamental income-tax issue: calculating the costs of their cryptocurrency inventory for tax purposes. This article first discusses how Canada's tax system distinguishes a cryptocurrency-trading business, for which cryptocurrency is inventory, from a cryptocurrency investor, for whom cryptocurrency is a capital property. It then analyzes how a cryptocurrency-trading business should compute and claim its inventory costs for income-tax purposes. It concludes by offering pro tax tips for Canadian cryptocurrency-trading businesses.