Cryptocurrency Trading Taxes: Capital Gains vs Business Income Explained — CPA Firm Near You, Montreal

Introduction

Cryptocurrency traders in Quebec often misunderstand how CRA and Revenu Québec classify crypto profits. Whether you trade Bitcoin, Ethereum, Solana, DeFi tokens, NFTs, or altcoins, the tax treatment depends on whether your activity is considered capital gains or business income. This distinction drastically changes how much tax you pay. Because crypto trading is heavily monitored and exchange data is shared with tax authorities, incorrect reporting is one of the fastest ways to trigger an audit. This guide explains how crypto trading is taxed and how a CPA firm near you in Montreal can help you report transactions accurately.

Legal and Regulatory Framework

Under the Income Tax Act and the Taxation Act of Quebec, cryptocurrency is treated as a commodity, not a currency. This means:
• Crypto is taxed when disposed of (sold, traded, converted, spent, or gifted)
• Crypto-to-crypto trades are taxable events
• Mining, staking, airdrops, and liquidity rewards may trigger taxable income
• NFTs have separate rules depending on whether they are art or investment assets

The key question is whether your trading activity generates:
• Capital gains — only 50 percent taxable, or
• Business income — 100 percent taxable

The classification depends on intent, volume, behavior, and organization of your trading.

Key Court Decisions

Courts have held that crypto trading follows the same principles as securities and commodities:
• High-frequency, organized trading suggests business income
• Occasional or long-term investing suggests capital gains
• Leverage, technical analysis, systematic strategies, and trading groups support business classification
• Hobby or personal experimentation does not negate taxable income
• Taxpayers must track the Adjusted Cost Base (ACB) precisely

Judges have also ruled that CRA can use exchange records and blockchain data to reconstruct a trader’s history when reporting is incomplete.

Why CRA and Revenu Québec Target Crypto Traders

Crypto is a major audit priority because taxpayers often:
• Fail to report crypto-to-crypto trades
• Ignore staking, mining, and liquidity rewards
• Treat trading as a hobby despite high-frequency activity
• Forget to track ACB across exchanges
• Mix personal wallets with trading wallets
• Underreport NFT flips or DeFi yields
• Rely on screenshots rather than full transaction logs

CRA obtains data from Binance, Coinbase, Kraken, Shakepay, Newton, Crypto.com, OpenSea, and DeFi aggregators.

Mackisen Strategy

At Mackisen CPA Montreal, we help traders determine whether they should report as capital gains or business income. We:
• Reconstruct trading histories across multiple exchanges and wallets
• Calculate ACB for buys, trades, and transfers
• Recognize staking, mining, and liquidity rewards correctly
• Identify whether trading qualifies as a business
• Prepare GST/QST filings for business-income traders
• Create complete crypto income summaries for CRA and Revenu Québec
• Provide audit-defense packages backed by verifiable blockchain records

Real Client Experience

A Montreal trader made thousands of crypto-to-crypto trades across three exchanges but reported only cash withdrawals. CRA reassessed for unreported business income. We reconstructed all trades using CSV and blockchain explorers, calculated correct ACB, and negotiated a significantly reduced tax bill. Another client received staking rewards without tracking FMV; we rebuilt the record and ensured accurate reporting.

Common Questions

How do I know if my trading is capital gains or business income?

Depends on frequency, organization, profit motive, and trading behavior.

Are crypto-to-crypto trades taxable?

Yes. Each trade triggers a disposition at fair market value.

Are staking rewards taxable?

Yes, at the moment you receive them, based on FMV.

Do I need to report NFTs?

Yes. NFT flips and royalties are taxable events.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps crypto investors and traders accurately classify and report their transactions. Whether you invest casually or trade full-time, our expert team ensures precision, transparency, and audit-proof compliance.