How to take MASSIVE sats tax-free with CAPITAL GAINS EXEMPTION in Canada

Sorry for stealing Ivan’s eye-catching meme but hey…I am seeking the answer!

What exactly is the Capital Gains exemption in Canada and how can one utilize it to take MASSIVE sats tax-free OUTSIDE of your ‘registered’ TFSA?

Does it apply trading crypto?

Where on myCRA can you see what your Cap Gains exemption limit is? I’ve been using accountants for 20 years and let them do their stuff…I have no idea whether they have tapped into it or not.

I heard somewhere that capital gains are an operated on an ‘honor system’. The government ‘trusts’ that you will report your non-registered investment gains (profits).

It appears that Web3.0 or where we are headed is the tokenization of everything in the internet of ‘everything’ which is VALIDATING everything and trusting nobody which will make the nomenaclature ‘registered’ investment redundant (if I am using the correct word)…as tokenization IS registration…anyway I am still on BTC101, concerned about advancing further to soon as knowledge is good but at a measured pace…for me at least, generates far too many questions rather

Here is an article that can help answer your question: https://home.kpmg/ca/en/home/insights/2019/02/lifetime-capital-gains-exemption.html

The cap gains exemption is ~870k gross (x 50% = $435k actual taxable cap gain portion). But this doesn’t apply to capital gains from crypto. It applies to Privately held Canadian small businesses.

There are specific rules as to who/what would apply, but it is more for people who sell their business than it is for a crypto-trader.

right, I sold my business last year and accountant filed the return this year (fiscal year end Jan 1, 2020). I closed the PC this year and there have been no transactions. Can I just simply close my business account with CRA now?

That’s out of my wheelhouse, I’m not sure about the process to closing a business.

Good luck :slight_smile:

lol, that would be the trust component in my account. had her for 20 years. she does everything paper alone and snail mail…looks like ‘unwinding’ isn’t as simple as filing your last return, paying your taxes, and doing what I did at myCRA…pressed the button request to cancel account. I guess I will find out 2021!

If you find a crypto tax expert tell us what you learn!

I am no tax expert, but my gut reaction is that if the intention is to trade crypto for income, then the CRA will consider it business income and 100% taxable- i.e. not capital gains where only 50% is taxed. This is how day trading stocks is treated and trading crypto is fundamentally no different. You still get the tax advantages of a business with being able to deduct eligible expenses.

The day trading analogy makes perfect sense, thankx.

Since business vs capital gains differentiating is fuzzy, there are a handful of rules of thumb to apply to determine which is the case. Instead of me paraphrasing, here is a relatively quick and simple summary:

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Now what about this TFSA model:

  1. you place 61K in BTC or ETH now

  2. That 61K grows 1000x in less than a year, your TFSA portfolio in 600,000K now

  3. you restructure portfolio with the gains going into fixed income funds…essentially dividends

  4. you glean the dividends from the TFSA each month

is dividend income from a TFSA considered taxable income???

  1. You can’t put $ directly into BTC or ETH within your TFSA. You’d have to invest in a fund that owns BTC/ETH.

  2. Realistically, it won’t grow 1000x in less than a year.

  3. Good idea to diversify your assets. Many companies like banks or REITs provide high dividends which give good compounding potential if re-invest those dividends into those stocks (rather than withdrawing them)

  4. Dividends on U.S. stocks held in an RRSP are tax-free. RRSPs are viewed by the IRS as an account meant to provide tax-deferred pension or retirement benefits. However, TFSAs don’t fit this definition and U.S. dividends earned in a TFSA are subject to withholding tax. So either invest in Dividend-paying US stocks in your RRSP or specifically choose to invest in Dividend-paying Canadian stocks