A “Silver Lining” Playbook: Going Long on Crypto

Crypto markets took a beating

We have cringed along with you as the value of cryptocurrencies went off a cliff this year. But, as crypto-enthusiasts, we wanted fellow believers to know that the market tank has a silver lining: it brings with it tax planning opportunities.

Here are a couple tax planning opportunities presented in an economic downturn:

• Selling coin positions with sustained losses
• Roll crypto-assets into an incorporated entity to take advantage of preferential tax rates

Selling coin positions with sustained losses

If you are done with a coin (and aren’t likely to purchase it again in the coming 30 days) you can sell those coin to crystalize losses on those transactions. Use crystallized losses that occurred in 2018 to help offset your monster of a 2017 tax bill.

Rolling Crypto-Assets into a Corporation

Income Tax Act provisions allow a shareholder to “roll over” their assets into a company to take advantage of the potentially lower tax rate for Canadian Controlled Private Corporations (CCPCs) compared to the personal tax rates of the shareholders. While it’s not suitable for all situations, it can be a great tool for some to ensure they are not paying more tax than the law requires

The best way to optimize that tax planning is to roll over the crypto-assets when they are at the lowest value possible. The lower value those assets are rolled into your corporation, the higher portion of gains become sheltered in the hands of the lower taxed corporation. Makes sense right?

Get Metrics

Recent market downturns represent a significant planning opportunity for those in the long game for crypto. If you are looking to hold positions in crypto well into the future, (and you believe that the market has hit its lowest low for coming months), we recommend you speak with one of our advisors to talk about tax planning.