Example 3 - Memo Re Character of Crypto Income (Final)

DELIVERED BY EMAIL: XXXXXX@gmail.
com
PRIVILEGED & CONFIDENTIAL
November 23, 2021
Mr. XXX
333 Limeridge Road W
Hamilton, ON
L3V 1T0
Dear Mr. XXX:
Re: Income Characterization of Proceeds from Cryptocurrency Transactions &

Voluntary Disclosure
Our File No.: XXXX-XXXX
CONTENTS
SCOPE OF OPINIONS.......................................................................................................3
QUESTIONS PRESENTED & SHORT ANSWERS.......................................................4
Characterization of Cryptocurrency Proceeds in 2017, 2018, 2019, and 2020...............4
Compliance Issues & Recommendations for Voluntary-Disclosure Application..........5
Suggestions for Further Research: Incorporation............................................................7
FACTS...................................................................................................................................8
Background...........................................................................................................................8
XXX Enters the Cryptocurrency Market: 2017 Purchases and Sales of
Cryptocurrency....................................................................................................................8
ETH Transactions.............................................................................................................10
BTC Transactions.............................................................................................................11
IOT Transactions..............................................................................................................12
BCH Transactions............................................................................................................12
XXX’s 2017 Income-Tax Return......................................................................................12
XXX’s 2018 Cryptocurrency Transactions.....................................................................13
Rotfleisch & Samulovitch Professional Corporation 2822 Danforth Avenue T: 416-367-4222

Barristers & Solicitors Toronto, ON M4C 1M1 F: 416-367-8649
Mr. XXX Page 2
Tax Matter: Re: Income Tax Income Characterization of Proceeds from Cryptocurrency Transactions & Voluntary Disclosure
November 23, 2021
LTC Transactions.............................................................................................................14
BTG Transactions.............................................................................................................15
ADA Transactions............................................................................................................21
Other Relevant Details.......................................................................................................22
ANALYSIS.........................................................................................................................22
Introduction: Tax Implications of Cryptocurrency Transactions.................................23
Capital or Income: Distinguishing Between Trading and Investing.............................24
An Adventure in the Nature of Trade: A Single Transaction With Intent to Resell for
Profit....................................................................................................................................25
Cases Finding that Taxpayer Engaged in Adventure in the Nature of Trade...................28
Cases Finding No Adventure in the Nature of Trade.......................................................31
General Principles on Discerning an Adventure in the Nature of Trade..........................34
In 2017, 2018, 2019 and 2020, XXX Engaged in an Adventure in the Nature of Trade
When Transacting with ETH, BCH, BTC, IOT, LTC, BTG, and ADA.......................35
A Trader: One with Special Knowledge of a Particular Market...................................37
Cases Finding that Taxpayer was a Trader.......................................................................38
Cases Finding that Taxpayer Did Not Engage in Trading...............................................39
XXX’s 2017, 2018, 2019 and 2020 Transactions Involving ETH, BCH, BTC, IOT,
LTC, BTG, and ADA Might Render Him a Trader.......................................................41
Compliance Issues & Recommendations for Voluntary-Disclosure Application........43

Mr. XXX Page 3
November 23, 2021
GST/HST Implications: Cryptocurrency Trading May be an Exempt Supply of Financial

Services.............................................................................................................................45
Suggestion for Further Research: Incorporation............................................................48
CONCLUSION...................................................................................................................49
SCOPE OF OPINIONS
The opinions set out in this letter are based on the current provisions of the Income Tax Act1
(“ITA”), the Excise Tax Act2 (“ETA”), and our understanding of the current administrative
practices of the Canada Revenue Agency (“CRA”). The opinions set out in this letter do not
address any other federal or provincial legislation, and they do not address foreign tax
legislation.
Our opinions are based on the law as of the date hereof. The laws may be changed by either
future statutory amendment or judicial decisions. These changes may have retroactive
application to the subject matter of this letter. Moreover, these changes may have a material,
adverse impact on the opinions expressed herein. We will not update this opinion for any
such changes.
The opinions expressed in this memo do not consider the implications of any event taking
place after December 31, 2020, and, unless it expressly indicates otherwise, any word or
phrase herein that refers to a point in time or to a period of time excludes any point or period
after December 31, 2020.
We have not applied for an advance income-tax ruling for the subject matter of this letter.
The CRA may not agree with some or all of the opinions set out herein and may reassess
contrary to the opinion expressed herein.
QUESTIONS PRESENTED & SHORT ANSWERS
Characterization of Cryptocurrency Proceeds in 2017, 2018, 2019, and 2020
In 2017, XXX earned about $317.62 in profit by executing about 200 transactions involving
seven different types of cryptocurrency. In 2018, XXX executed about 59 transactions
1
Income Tax Act, RSC 1985, c. 1 (5th Supp.), as amended.
2
Excise Tax Act, RSC, 1985, c.E-15, as amended.

Mr. XXX Page 4
November 23, 2021
involving three different types of cryptocurrency and earned about $811.47. In 2019, XXX
executed a total of about 41 cryptocurrency transactions involving two different types of
cryptocurrency which resulted in net losses of about $8,438.91. In 2020, XXX earned about
$34,256.00 in profit by executing about 318 cryptocurrency transactions involving eight
different types of cryptocurrency.
Are the proceeds and losses from XXX’s 2017, 2018, 2019 and 2020 cryptocurrency
transactions on account of income or capital?
Proceeds and losses from XXX’s 2017, 2018, 2019, and 2020 cryptocurrency transactions
are on account of income. The proceeds from XXX’s cryptocurrency transactions are
business income if XXX was either (i) engaged in an adventure or concern in the nature of
trade or (ii) a trader. XXX’s cryptocurrency transactions in 2017, 2018, 2019, and 2020
constituted an adventure in the nature of trade, and they might even comprise a trading
business.
Although XXX never attended any formal courses on trading and relied on publicly available
information when deciding whether to purchase or sell cryptocurrency, he executed similar
number of transactions as did the taxpayers in cases where transaction frequency figured
heavily in the decision. Of XXX’s total profit from his cryptocurrency transactions in 2017,
about 85% came from transactions involving Bitcoin Cash, Bitcoin, and IOT. 161 of the 200
total cryptocurrency transactions in 2017 involved Bitcoin, Bitcoin Cash, IOT and Ethereum.
XXX carried out 59 cryptocurrency transactions in 2018 involving Bitcoin, Litecoin and
BitcoinGold which were responsible for 100% of his profit. In 2019, XXX executed a total of
41 cryptocurrency transactions involving Ethereum and Bitcoin which were responsible for
100% of his losses. In 2020, XXX executed a total of 318 cryptocurrency transactions, and
149 of them involved Ethereum, Bitcoin, and Cardano. XXX’s dispositions of Ethereum,
Bitcoin, and Cardano were responsible for about 95% of his 2020 profit involving
cryptocurrency. Thus, from 2017 to 2019, XXX executed, on average, at least 154
transactions per year—similar in amount at issue in various cases.
XXX’s cryptocurrency transactions also fall prey to the general presumption that such
property was meant to be traded. Case law suggests that transactions involving non-income-
bearing property indicates either an adventure in the nature of trade or a trading business.
None of XXX’s cryptocurrency holdings yielded income. Granted, the presumption
favouring trading might be rebutted by showing that XXX acquired cryptocurrency as a long-
term store of value. Yet XXX’s cryptocurrency transactions undermine this claim. XXX sold
all or almost all units in the same year that he acquired them. In 2017, he sold 98% of the
Ethereum units that he acquired in that year and 94% of the Bitcoin units that he acquired in
that year. In 2018, he sold 70% of the Bitcoin units that he acquired in that year and almost
94% of the BitcoinGold units that he acquired 2 months prior to the disposition. In 2019, he
sold 65% of the Bitcoin units that he acquired in that year. And in 2020, he sold 100% of the

Mr. XXX Page 5
November 23, 2021
Bitcoin units that he had acquired in that year and that he had held during the previous year.
In the same year, he sold 100% of the Cardano units that he acquired in that year. This
activity proves inconsistent with an intention to acquire cryptocurrency as a long-term store
of value.
Hence, XXX’s cryptocurrency transactions in 2017, 2018, 2019, and 2020 constituted an
adventure in the nature of trade, and they might even comprise a trading business. As a
result, the proceeds from XXX’s cryptocurrency transactions are business income, not capital
gains.
Compliance Issues & Recommendations for Voluntary-Disclosure Application
XXX’s 2017, 2018, and 2019 income-tax return did not report any of the profits or losses
from his cryptocurrency transactions. Also, XXX has yet to file an income-tax return for the
2020 tax year.
What compliance issues arise with respect to XXX’s 2017, 2018, 2019 and 2020 tax years?
And how should XXX remedy those compliance issues?
We note the following compliance issues in relation to XXX’s 2017, 2018, 2019 and 2020
tax years:
 XXX’s 2017 income-tax return did not report any of the profits from his
cryptocurrency transactions for the year. In 2017, XXX’s cryptocurrency transactions
generated a total profit of about $317.62. As a result, XXX’s 2017 income-tax return
should have reported his cryptocurrency proceeds on account of business income.
generated a total profit of $811.47. As a result, XXX’s 2018 income-tax return should
have reported his cryptocurrency proceeds on account of business income.
 XXX’s 2019 income-tax return did not report any of the losses from his
generated an overall loss of $8,438.91. As a result, XXX’s 2019 income-tax return
should have reported his cryptocurrency losses on account of business loss.
 XXX’s 2020 income-tax return remains outstanding. In 2020, XXX’s cryptocurrency
transactions generated a total profit of $34,256.00. As a result, XXX’s 2020 income-
tax return should include his cryptocurrency proceeds on account of business income.

Mr. XXX Page 6
November 23, 2021
To remedy these errors, we recommend that XXX file an application under the CRA’s
Voluntary Disclosures Program. XXX’s voluntary-disclosure application should include the
following documents:
 A 2017 T1 adjustment request that reports XXX’s $317.62 in cryptocurrency

proceeds on income account;
 A 2019 T1 adjustment request that reports XXX’s $8,438.91 in cryptocurrency losses
on income account (The $8,438.91 loss may be utilized as a deduction against XXX’s
2019 net income and any remaining losses can be carried back to reduce profits in
2017 and 2018); and
 A 2020 T1 income-tax return that reports XXX’s $34,256.00 in cryptocurrency
proceeds on income account, as well as other income or losses from other sources of
income that relate to the 2020 taxation year.
Also, upon filing his voluntary-disclosure application, XXX must pay the estimated amount
of taxes owing (i.e., the taxes owing per the returns that are included with his voluntary-
disclosure application).
XXX’s voluntary-disclosure application need not include T1135 forms regarding his
cryptocurrency holdings during the 2017 through 2020 tax years. XXX’s cryptocurrency
does not constitute “specified foreign property” because it served as inventory in a
cryptocurrency-trading business. In addition, the total cost of XXX’s cryptocurrency
portfolio never exceeded $100,000 at any time during the period from January 1, 2017, to
December 31, 2020.
XXX’s voluntary-disclosure application need not include GST/HST returns because a

cryptocurrency-trading business constitutes an exempt supply of financial services, which
does not attract GST/HST liability.
If the VDP accepts XXX’s voluntary-disclosure application under the General Program,
XXX will qualify for the following relief: (i) waiver of all penalties that might otherwise
apply—including gross-negligence penalties—for the 2017, 2018, 2019, and 2020 tax years;
and (ii) renunciation of criminal prosecution in relation to the subject matter of the voluntary-
disclosure application. (iii) partial cancellation of interest—generally 50%—for the 2017
taxation year. (As of the date of this memo, XXX’s 2018, 2019, and 2020 tax years do not
qualify for interest relief under the General Program. As noted above, the VDP will cancel
interest relating to a particular tax year only if that year’s return is at least three years
overdue. So, as of the date of this memo, interest relief applies only to tax years for which the
return was due by or before December 31, 2018. The 2018, 2019 and 2020 tax years all fail

Mr. XXX Page 7
November 23, 2021
to meet this condition: the return for the 2018 tax year was due in 2019, the return for the
2019 tax year was due in 2020, and the return for the 2020 tax year was due in 2021.)
XXX’s voluntary-disclosure application is time-sensitive for two reasons. First, the VDP will
reject a voluntary-disclosure application—and thus deny any relief—unless the application is
“voluntary.” This essentially means that the VDP must receive XXX’s voluntary-disclosure
application before the CRA contacts XXX about any of the above-noted compliance issues.
Second, the earlier the VDP receives XXX’s voluntary-disclosure application, the earlier he
gains protection from criminal prosecution and penalties, including gross-negligence
penalties. The effective date of the disclosure is the date on which the VDP receives a
completed voluntary-disclosure application. From that date, so long as the VDP ultimately
accepts the application, the disclosing taxpayer is granted protection from penalties and
criminal prosecution relating to the information disclosed.
Suggestions for Further Research: Incorporation
If XXX intends to continue trading cryptocurrency in the same fashion as he did in 2017,
2018, 2019, and 2020, we recommend further research into whether he might benefit from
holding his trading portfolio in a corporation, which may allow XXX to benefit from the
small business deduction. It also permits tax deferral to the extent that profits are left in the
corporation rather than being distributed.
FACTS
The opinions expressed in this memo are based on the following facts and assumptions,
which have been provided to us, both orally and in writing, by you. We have not
independently verified the accuracy of these facts and assumptions except where explicitly
stated; any change to these facts could have an adverse material effect on the advice
expressed in this memo, and to the extent that any of such facts are incorrect the advice on
remedying your current situation could be adversely affected. Accordingly, we ask that you
carefully review the facts as set out below and confirm that they are correct. If there are any
errors, omissions or mistakes we request that you inform our office immediately as any
changes to the facts as set out below may have a material effect on our advice.
Background
XXX XXX was born in Canada on February 10, 1981.
XXX currently resides at 333 Limeridge Road W., Oro, Ontario L0L 1T0.

Mr. XXX Page 8
November 23, 2021
XXX is employed as an IT systems administrator. XXX receives T4 slips from his employer,
and XXX’s employer withholds Canadian income tax from his salary.
XXX has never received any formal education or training in securities trading, finance, or
commerce.
XXX has always been a Canadian tax resident.
XXX Enters the Cryptocurrency Market: 2017 Purchases and Sales of Cryptocurrency
In July 2017, XXX first entered the cryptocurrency market by purchasing Ethereum (“ETH”)
cryptocurrency through the cryptocurrency exchange Coinbase.
XXX funded this initial purchase of ETH with money that came entirely from his personal
savings, which in turn stemmed from his employment income.
Moreover, XXX did not borrow money to purchase any cryptocurrency that he acquired in
2017. To purchase cryptocurrency in 2017, XXX used funds from two sources: (1) the
proceeds from his cryptocurrency dispositions in the same year; and (2) his personal savings
from his employment income.
XXX’s total profit from cryptocurrency transactions in 2017 was approximately $317.62.3
which stemmed from dispositions of 7 types of cryptocurrency:
 Ethereum (“ETH”),
 Bitcoin (“BTC”),
 OmiseGo (“OMG”),
 IOT,
 QTUM,
 Litecoin (“LTC”), and
 Bitcoin Cash (“BCH”).
XXX used three different cryptocurrency exchanges in 2017: Coinbase, QuadrigaCX, and
Bitfinex.
3
All fiat currency is in Canadian dollars unless explicitly noted otherwise. This figure represents the result of A
minus B, where A is the total fair market value, calculated in Canadian currency, of all property (including fiat
currency and cryptocurrency) that Mark received from cryptocurrency dispositions during the year, and B is
the total fair market value, calculated in Canadian currency, of all property (including fiat currency and
cryptocurrency) for which Mark acquired the cryptocurrency that he disposed during the year.

Mr. XXX Page 9
November 23, 2021
In 2017, XXX executed a total of 200 cryptocurrency transactions: 133 acquisitions and 67
dispositions.
XXX’s first transaction in 2017 occurred on July 30, 2017. His last transaction in 2017
occurred on December 26, 2017. XXX therefore executed an average of 9.4 cryptocurrency
transactions per week during this period.
The earliest acquisition in 2017 occurred on July 30, 2017, when XXX bought
0.38925252ETH for $100USD. The earliest disposition in 2017 occurred on November 3,
2017, when XXX sold 0.14397BTC for $13,32.24CAD. The duration between the earliest
2017 acquisition and the earliest 2017 disposition was 96 days.
XXX’s dispositions of BCH, BTC, and IOT were responsible for about 85% of his 2017
profit. 161 of the 200 total cryptocurrency transactions in 2017 involved ETH, BCH, BTC,
and IOT. The sections below will detail XXX’s transactions with these four cryptocurrencies:
ETH, BCH, BTC, and IOT.
ETH Transactions
In 2017, XXX acquired a total of 18.9076519 ETH units for $8,890.23,4 thereby spending an
average of $474.97 per unit, and he sold a total of 18.5355044 ETH units for $8,838.23. 5
XXX acquired the 18.5355044 ETH units at a total average cost of $8,804.01 Hence, the sale
of the 18.5355044 ETH units generated a total profit of $34.21.
The remainder of this section outlines XXX’s transactions involving ETH.
From July 30, 2017 to November 1, 2017, XXX began to acquire ETH in transactions
occurring every 2-5days on Coinbase exchange. The ETH was acquired in USD in varying
amounts from 37.99USD to 108USD per transaction. This resulted in accumulation of
5.8290268ETH.
From November 5, 2017, to November 6, 2017, XXX made a disposition of 1.56365336ETH

for 73.7134092OMG over 20 transactions. XXX made a disposition of an additional
1.57118114ETH for 45.7844QTUM over 3 transaction and 1.55347461ETH for
1316.90413IOT over 4 transactions.
4
This figure represents the total fair market value, calculated in Canadian currency and using the average
exchange rate for the year, of all property (including fiat currency and cryptocurrency) for which Mark
acquired these units.
5
This figure represents the total fair market value, calculated in Canadian currency, of all property (including
fiat currency and cryptocurrency) that Mark received when disposing of these units.

Mr. XXX Page 10
November 23, 2021
On November 6, 2017, XXX acquired 0.80966113ETH for $322USD.
On November 8, 2017, XXX made a disposition of 1.9540002ETH for $582.35USD.
On November 16, 2017, XXX acquired 3.7087087ETH for $1238.50718 USD over two
transactions.
On November 20, 2017, XXX acquired 5.03411813 ETH for $1890.9USD over two
transactions.
On November 21, 2017 XXX acquired 3.52613711 ETH for $1678.23CAD.
On November 21, 2017, and on November 23, 2017, XXX disposed of 11.6150216ETH for
$6,055.54CAD over two transactions.
On December 26, 2017, XXX made a disposition of 0.27817346ETH for 0.01032962BTC.
BTC Transactions
In 2017, XXX acquired a total of 2.46811013 BTC units for $23,076.30, 6 thereby spending
an average of $9,349.78 per unit, and he sold a total of 2.32760822 BTC units for
$22,096.85.7 XXX acquired the 2.32760822 BTC units at a total average cost of $21,762.63
Hence, the sale of the 2.32760822 BTC units generated a total profit of $334.21.
The remainder of this section outlines XXX’s transactions involving BTC.
Between August 1, 2017, and December 26, 2017, XXX acquired 1.314411 BTC in
exchange for $8,605.73772USD over 45 transactions through Coinbase and Bitfinex.
From November 3, 2017, to November 8, 2017, XXX made dispositions totaling

0.3838048BTC for $3,684.95CAD over three transactions.
On November 8, 2017, XXX acquired 0.08324151BTC in exchange for 1316.9041IOT,

0.07725163BTC for 73.7134OMG, and 0.07224493BTC for 45.7844QTUM.
On November 8, 2017, XXX made dispositions of 0.0779078BTC for 9.4521168LTC over 4

transactions and 0.3662654BTC for $2,676.0384USD over two transactions.
6
fiat currency and cryptocurrency) for which Mark acquired these units.
7

Mr. XXX Page 11
November 23, 2021
On November 12, 2017, XXX made a disposition of 0.4343729BTC for $3,649.13CAD.
From November 12, 2017, to November 14, 2017, XXX acquired 0.87404285BTC for
$7,430.78CAD across 2 transactions.
On November 15, 2017, XXX made a disposition of 0.4696BTC for $3,379.4389USD over
three transactions.
On November 23, 2017, XXX made dispositions totaling 0.5956573BTC for $6,261.55CAD
over three transactions.
On December 26, 2017, XXX acquired 0.03658869BTC in exchange for $768.47CAD and
0.01032962BTC for 0.27817346 ETH.
IOT Transactions
In 2017, XXX acquired a total of 4,126.03744 IOT units for $3,028.08,8 thereby spending an
average of $0.734 per unit, and he sold a total of 4,126.03744 IOT units for $3,751.85.9 XXX
acquired the 4,126.03744 IOT units at a total average cost of $3,028.08. Hence, the sale of
the 4,126.03744 IOT units generated a total profit of $723.77.
The remainder of this section outlines XXX’s transactions involving IOT.

From November 5 to 6, 2017, XXX acquired 1316.9041IOT for 1.55347561ETH.
On November 8, 2017, XXX made a disposition of 1316.9041IOT for 0.08324151BTC.
From November 12, 2017, to November 16, 2017, XXX acquired 2808.357IOT for
$1,872.29348USD.
From November 13, 2017, to November 20, 2017, XXX disposed of a total of
2,809.13334IOT for $2,296.28695USD.
BCH Transactions
8
This figure represents the total fair market value, calculated in Canadian currency and using the average
exchange rate for the year, of all property (including fiat currency and cryptocurrency) for which Mark acquired
these units.
9

Mr. XXX Page 12
November 23, 2021
In 2017, XXX acquired a total of 2.93753212 BCH units for $5,792.65, 10 thereby spending
an average of $1,971.94 per unit, and he sold a total of 2.93753212 BCH units for
$5,937.42.11 XXX acquired the 2.93753212 BCH units at a total average cost of $5,792.65.
Hence, the sale of the 2.93753212 BCH units generated a total profit of $144.77.
XXX’s 2017 Income-Tax Return
XXX reported $115,126.70 as his income for the 2017 tax year. XXX reported that his total
taxable income after deductions from total income was $94,813.58. He reported that his total
payable amount in federal and Ontario taxes was $22,475.32. He also reported that his refund
amount for 2017 was $4,355.78.
XXX’s 2017 income-tax return reported none of the profits from XXX’s cryptocurrency
transactions in 2017.
XXX’s 2017 income-tax return did not include a T1135 form. The total cost of XXX’s
cryptocurrency portfolio never exceeded $100,000 at any time during the period from
January 1, 2017, to December 31, 2017; hence, he had no obligation to file a T1135 form
absent other specified foreign property.
XXX’s 2018 Cryptocurrency Transactions
XXX’s total profit from cryptocurrency transactions in 2018 was $811.4712 which stemmed
from dispositions of 3 types of cryptocurrency: BTC, LTC and BitcoinGold (“BTG”).

dispositions.
10
11
12

Mr. XXX Page 13
November 23, 2021
XXX’s first transaction in 2018 occurred on January 1, 2018. His last transaction in 2018
occurred on March 4. XXX therefore executed an average of 6 cryptocurrency transactions
per week during this period.
The earliest acquisition in 2018 occurred on January 1, 2018, when XXX bought 0.04871789
BTC units for $853USD. The earliest disposition in 2018 occurred on January 2, 2018, when
XXX sold 4.19355132LTC for 0.071583 BTC. The duration between the earliest 2018
acquisition and the earliest 2018 disposition was 1 day.
XXX used two different cryptocurrency exchanges in 2018: Coinbase and QuadrigaCX.
XXX did not borrow money to purchase any cryptocurrency that he acquired in 2018. To
purchase cryptocurrency in 2018, XXX used funds from two sources: (1) the proceeds from
his cryptocurrency dispositions in 2017 and in 2018; and (2) his personal savings from his
employment income.
The sections below will detail XXX’s transactions with these three cryptocurrencies: BTC,
LTC, and BTG.
BTC Transactions
$35,276.55.14 XXX acquired the 2.4245988 BTC units at a total average cost of $35,463.40.
Hence, the sale of the 2.4245988 BTC units generated a net loss of $186.85.
From January 1 to March 4, XXX acquired 0.44670151BTC for $6,726USD over seventeen
transactions.
From January 2 to February 14, 2018, XXX acquired 2.09382284BTC for 28,683.59CAD
over twenty-six transactions.
On January 2, 2018, XXX acquired 0.07158257BTC for 4.19355132LTC.
On January 5, 2018, XXX acquired 0.0738612BTC for 0.47214397BTG.

13
14

Mr. XXX Page 14
November 23, 2021
From January 8 to February 22, 2018, XXX made a disposition of 2.4245988BTC for
35276.55CAD over 11 transactions.
LTC Transactions
In 2017, XXX acquired a total of 20.4649442 LTC units for $3,061.30,15 thereby spending an
average of $149.59 per unit, and, in 2018, he sold a total of 4.19355132 LTC units for
$1,625.62.16 XXX acquired the 4.19355132 LTC units at a total average cost of $627.30.
Hence, the sale of the 4.19355132 LTC units generated a profit of $998.32.
On January 2, 2018, XXX made a disposition of 4.19355132LTC for 0.07158257BTC.
BTG Transactions
On October 24, 2017, XXX acquired BTG as a result of a hard fork of the original open-
source cryptocurrency. On this date, XXX’s balance of his Bitcoin was 0.49930009, so he
would have gained access to 0.49930009 BTG on the date of the hard fork. According to the
Bitfinex Exchange, BTG trading opened on October 24, 2017 at around $154 per coin and
closed at 105.13 per coin.
On January 5, 2018, XXX made a disposition of 0.47214397BTG for 0.00738612BTC.
XXX reported $126,976.55 as his income for the 2018 tax year. XXX reported that his total
taxable income after deductions from total income was $116,190.43. He reported that his
total payable amount in federal and Ontario taxes was $31,435.84. He also reported that his
refund amount for 2018 was $275.34.
15
16

Mr. XXX Page 15
November 23, 2021
XXX’s 2019 Cryptocurrency Transactions
In 2019, XXX’s cryptocurrency transactions resulted in net losses of $8,438.9117 which

stemmed from dispositions of 2 types of cryptocurrency: ETH and BTC.

dispositions.
XXX’s first transaction in 2019 occurred on February 24, 2019. His last transaction in 2019
occurred on December 4, 2019. XXX therefore executed an average of 1 cryptocurrency
transaction per week during this period.
The earliest acquisition in 2019 occurred on February 24, 2019, when XXX bought
0.1984734 BTC for $1000CAD. The earliest disposition in 2019 occurred on May 28, 2019,
when XXX sold 0.081 Units of ETH for 21.73USDT. The duration between the earliest 2019
acquisition and the earliest 2019 disposition was 93 days.
XXX used two different cryptocurrency exchanges in 2019: Shakepay and Binance.
his cryptocurrency dispositions in 2017, 2018, and 2019; and (2) his personal savings from
his employment income.
The sections below will detail XXX’s transactions with these two cryptocurrencies: ETH and
BTC.
ETH Transactions
17

Mr. XXX Page 16
November 23, 2021
In 2019, XXX acquired a total of 30.997285 ETH units for $6,194.61, 18 thereby spending an
average of $199.84 per unit, and he sold a total of 0.13497 ETH units for $47.74. 19 XXX
acquired the 0.13497 ETH units at a total average cost of $64.11. Hence, the sale of the
0.13497 ETH units generated a net loss of $16.37.
On May 28, 2019, XXX acquired 0.13497821ETH for $50CAD. XXX made a disposition of
this amount for 36.2099473USDT over three transactions. XXX acquired an additional
0.0481518ETH for 12.9658 TUSD.
Between May 5, 2019, and September 4, 2019, XXX incurred fees of 0.00251113 ETH from
LedgerLive.
On December 4, 2019, XXX acquired 30.814155 ETH for 0.6199845BTC.
BTC Transactions
$30,623.28.21 XXX acquired the 3.0199845 BTC units at a total average cost of $39,045.82.
Hence, the sale of the 3.0199845 BTC units generated a net loss of $8422.54.
From February 24, 2019, to November 25, 2019, XXX acquired 2.85814267BTC for
$28,500CAD over sixteen transactions.
On June 21, 2019, XXX acquired 1.72607819BTC for 18,534.4726TUSD over ten
transactions
On September 4, 2019, XXX acquired 0.0028941BTC for 30.4904325TUSD.
18
19
20
21

Mr. XXX Page 17
November 23, 2021
On June 4, 2019, XXX made a disposition of 2.4BTC for 18,556.8395TUSD over seven
transactions.
On December 4, 2019, XXX made a disposition of 0.6199845BTC for 30.814155ETH.
XXX reported $133,904 as his income for the 2019 tax year. XXX reported that his total
taxable income after deductions from total income was $114,403.78. He reported that his
total payable amount in federal and Ontario taxes was $30,224.97. He also reported that his
refund amount for 2019 was $3,614.94.
XXX’s 2020 CryptoCurrency Transactions
XXX’s total profit from cryptocurrency transactions in 2020 was $34,256,22 which stemmed
from dispositions of 8 types of cryptocurrency:
 ETH,
 BTC,
 Cardano (“ADA”),
 Curve DAO (“CRV”),
 Polkadot (“DOT2”),
 Chainlink (“LINK”),
 Monero (“XMR”), and
 Ripple (“XRP”).
22
currency and cryptocurrency) that Mark received from cryptocurrency dispositions during the year, and B is the
total fair market value, calculated in Canadian currency, of all property (including fiat currency and

Mr. XXX Page 18
November 23, 2021
dispositions.
XXX’s first transaction in 2020 occurred on January 24, 2020. His last transaction in 2020
occurred on December 28, 2020. XXX therefore executed an average of 4.8 cryptocurrency
transactions per week during this period.
The earliest acquisition in 2020 occurred on January 24, 2020, when XXX bought
0.17826404 BTC for $2,000CAD. The earliest disposition in 2020 occurred on January 24,
2020, when XXX sold 0.15313095 BTC for 29,475.495 ADA. XXX’s earliest 2020
acquisition and his earliest 2020 disposition occurred on the same day.
XXX used two cryptocurrency exchanges in 2020: Shakepay and Binance.

his cryptocurrency dispositions in the same year and in previous years; and (2) his personal
savings from his employment income.
The total cost of XXX’s cryptocurrency portfolio never exceeded $100,000 at any time
during the period from January 1, 2020, to December 31, 2020.
XXX’s dispositions of ETH, BTC, and ADA were responsible for about 95% of his 2020 net
gains. 149 of the 318 total cryptocurrency transactions in 2020 involved ETH, BTC, and
ADA. The sections below will detail XXX’s transactions with these three cryptocurrencies.
ETH Transactions
In 2020, XXX acquired a total of 76.5072625 ETH units for $47,652.53, 23 thereby spending
an average of $622.85 per unit, and he sold a total of 30.5326295 ETH units for $16,363.33. 24
XXX acquired the 30.5326295 ETH units at a total average cost of $6,101.75. Hence, the
sale of the 30.5326295 ETH units generated a profit of $10,261.57.
On January 27, 2020, XXX acquired 8.7130559ETH for $2,000CAD.
23
24

Mr. XXX Page 19
November 23, 2021
On January 28, 2020, XXX made a disposition of 8.93462954ETH for 28,424.547ADA over
three transactions.
On February 18, 2020, XXX purchased a total of 16.870536ETH for 0.46213793BTC over
fourteen transactions. This amount was then deposited on Ledger live.
On August 1, 2020, XXX made a disposition of 4.748ETH for 0.15788862BTC.
On October 21, 2020, XXX acquired a total of 4.27016556ETH for 1,700USDT over two
transactions.
On October 27, 2020, XXX acquired 3.9295636ETH for 1,5468ADA. XXX further acquired
an additional 3.376624ETH for 0.1BTC over five transactions.
On October 29, 2020, XXX acquired 3.461535ETH for 0.1BTC.
On November 5, 2020, XXX acquired 2.240757ETH for 0.06209296BTC
On November 20, 2020, XXX made a disposition of 8.425ETH for 4,307.83435USDT.
On November 25, 2020, XXX made a disposition of 8.425ETH for 4,953.23855USDC
On December 16, 2020, XXX acquired a total of 33.583383ETH for 1.0136814BTC over 6
transactions
From November 25, 2020, to December 28, 2020, XXX incurred fees totaling
0.04204341ETH.
BTC Transactions
$71,211.12.26 XXX acquired the 3.7513521 BTC units at a total average cost of $47,180.51
Hence, the sale of the 3.7513521 BTC units generated a profit of $24,030.61.
25
26

Mr. XXX Page 20
November 23, 2021
On January 24, 2020, XXX acquired 0.17826404BTC for $2,000CAD. XXX then disposed
of this BTC when acquiring 34249.716ADA.
On February 18, 2020, XXX made a disposition of 0.46213793BTC for 16.870536ETH over
14 transactions.
On August 1, 2020, XXX acquired 0.15788862BTC for 4.748ETH.
On August 13, 2020, XXX acquired 0.24698277BTC for 2928.04625TUSD
On August 24, 2020, XXX made a disposition of 0.43999866BTC for 55.328616XMR over
six transactions.
On September 1, 2020, XXX made a disposition of 0.10034974BTC for 215.25765CRV over

five transactions.
On October 6, 2020, XXX made a disposition of 0.25999862BTC for 24.771204XMR over

four transactions.
On October 10, 2020, XXX acquired 0.33896016BTC for 33.09XMR over ten transactions.
XXX acquired an additional 0.15846818BTC for 171.1LINK over two transactions.
From October 21, 2020, to November 20, 2020, XXX disposed of 0.539936BTC for
7,701.19899USDT over 5 transactions.
From October 27, 2020, to October 29, 2020, XXX disposed of 0.20005614BTC for
6.838159ETH over six transactions.
On October 29, 2020, XXX made a disposition of 0.03801144BTC for 125.3745DOT2 over
three transactions.
On November 5, 2020, XXX made a disposition of 0.06209296BTC for 2.240757ETH.
On November 11, 2020, XXX acquired 0.17948396BTC for 636DOT2 over nine
transactions. XXX made a disposition of 0.17903242BTC to acquire 214.2855LINK.
On November 25, 2020, XXX made a disposition of 0.14279BTC for 2710.29699USDC.
On December 16, 2020, XXX made a disposition of 1.0136814BTC for 33.583383ETH over
six transactions. XXX disposed of an additional 0.13533283BTC for 530.469DOT2 over
nine transactions.

Mr. XXX Page 21
November 23, 2021
ADA Transactions
In 2020, XXX acquired a total of 78,407.98 ADA units for $6,321.17, 27 thereby spending an
average of $0.08062 per unit, and he sold a total of 78,407.98 ADA units for $15,317.93. 28
XXX acquired the 78407.98 ADA units at a total average cost of $6,321.17. Hence, the sale
of the 78407.98 ADA units generated a profit of $8,422.54.
The remainder of this section outlines XXX’s transactions involving ADA.
On January 24, 2020, XXX acquired 34249.716ADA for 0.17793396BTC over five
transactions. XXX acquired a further 65ADA for 0.16554908BNB.
On January 28, 2020, XXX acquired 28424.547ADA for 8.93462954ETH over three
transactions.
On August 7, 2020, XXX made a disposition of 20913.7ADA for 2928.05322TUSD over

three transactions.
On October 21, 2020, XXX acquired 15668.7156ADA for 1699.99425USDT over four
transactions.
On October 27, 2020, XXX made a disposition of 15468ADA for 3.96295636ETH.
On November 25, 2020, XXX made a disposition of 42022.5ADA for 7147.17629USDC.
XXX has not yet filed a 2020 income-tax return.
Other Relevant Details
To date, XXX has never received a notice from the CRA about potential non-compliance
involving the 2017, 2018, 2019, or 2020 tax years, including for greater certainty any request
to file a 2020 return. Nor has XXX received any notice suggesting that the CRA or any other
27
28

Mr. XXX Page 22
November 23, 2021
authority may audit, examine, or investigate his cryptocurrency transactions or his proceeds
therefrom.
XXX spent no more than an hour per day researching cryptocurrencies or engaging in
cryptocurrency transactions. For research, XXX relied on publicly available materials—
specifically, online news releases, blog posts, and websites for cryptocurrency exchanges.
ANALYSIS
Introduction: Tax Implications of Cryptocurrency Transactions
Canada currently has very few laws dealing expressly with cryptocurrency or cryptocurrency
transactions. Most notably, Bill C-30, Budget Implementation Act, 2021, No.1, received
royal assent on June 29, 2021.29 This bill proposed to amend the ETA to treat virtual
currencies as a financial instrument. (We discuss the GST/HST implications of this
amendment in the below section entitled “GST/HST Implications: Cryptocurrency Trading is
an Exempt Supply of Financial Services.”) However, Canadian courts have yet to decide
upon a substantive tax issue relating to cryptocurrency or cryptocurrency transactions.
The CRA, provides guidance—albeit sparse—on the tax implications of transactions

involving cryptocurrency. The CRA’s position is that cryptocurrency is not legal tender but a
digital asset akin to a commodity, which can be bartered for goods or services, or purchased
and sold like securities.30 Either way, the CRA acknowledges that the profit or loss from a
cryptocurrency transaction can be on account of either capital or income.31
Yet the CRA has indicated that it will allow a taxpayer to report a commodity transaction on
account of capital so long as the taxpayer’s reporting remains consistent from year to year. 32
In particular, the CRA will allow the taxpayer to report gains or losses from commodities
29
Parliament of Canada, “An Act to implement certain provisions of the budget tabled in Parliament on April
19, 2021 and other measures“ https://www.parl.ca/LegisInfo/en/bill/43-2/C-30
30
Canada Revenue Agency, “Guide for cryptocurrency users and tax professionals” Date modified: June 26,
2021 https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/
digital-currency/cryptocurrency-guide.html.
31
Ibid; Canada Revenue Agency, Interpretation Bulletin IT-490 – Barter Transactions, July 5, 1982; Canada
Revenue Agency, Interpretation Bulletin IT-479R – Transactions in Securities, February 29, 1984; Canada
Revenue Agency, Interpretation Bulletin IT-346R – Commodity Futures and Certain Commodities, November
20, 1978.
32
Canada Revenue Agency, Interpretation Bulletin IT-346R – Commodity Futures and Certain Commodities,
November 20, 1978.

Mr. XXX Page 23
November 23, 2021
transactions in accordance with the tax treatment that he or she prefers—i.e., on account of
either capital or income.
But the CRA will not extend this preferential-reporting allowance to a taxpayer (1) who
opted for business-income treatment in 1976 or a subsequent year, (2) whose transactions are
part of a business operation that uses commodities (e.g., a distillery), (3) whose transactions
are based on special insider information (e.g., a senior officer of a sugar refinery who
personally enters into transactions in sugar), or (4) that is a corporation whose prime or sole
activity is trading in commodities. The CRA insists on income treatment for a taxpayer
falling within any of these four categories. In addition, if a taxpayer changes from capital-
gains treatment to business-income treatment, the CRA may reassess the taxpayer’s returns
and treat the gains and losses for those years on a consistent basis.33
Still, three reasons should discourage us from relying on the CRA’s preferential-reporting
allowance with respect to XXX’s cryptocurrency transactions. First, the CRA’s interpretative
publications do not have the force of law, and the CRA’s view is indeed contrary to law. The
taxpayer’s intention—not consistency in reporting—determines whether proceeds from a
transaction should be on account of income or capital. Further, the doctrine of estoppel does
not preclude the CRA from issuing an assessment that is inconsistent with a previously
released publication.34 Second, the preferential-reporting allowance stems from a publication
that the CRA released in 1978, and it is unclear whether the CRA still maintains this view.
And third, although the CRA views cryptocurrency as a commodity, the CRA may refrain
from extending to cryptocurrencies the preferential treatment for commodities. Indeed, as
differences between commodities and cryptocurrencies emerge, the CRA might even walk
back its prior analogy between the two.
The remainder of this memorandum progresses in four steps. First, it provides a detailed
review of the legal principles speaking to the distinction between capital gains and business
income. Second, it applies these principles to discern whether the sale proceeds from XXX’s
cryptocurrency transactions are capital gains or business income. Third, it identifies
compliance relating to XXX’s 2017, 2018, 2019 and 2020 tax year and suggests how he may
remedy these issues. Finally, it recommends further research that may result in reduced tax
liability from cryptocurrency transactions in the future.
Capital or Income: Distinguishing Between Trading and Investing
The ITA recognizes only two broad types of property for tax purposes:
33
Canada Revenue Agency, Technical Interpretation, Document no. 9829965 (1998).
34
Stickel v MNR, [1973] CTC 202, 73 DTC 5178 (FCA); aff’d. [1974] CTC 416, 74 DTC 6268 (SCC).

Mr. XXX Page 24
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 capital property, which creates a capital gain or loss upon disposition; and
 inventory, which figures into the computation of business income.35
The type of income that the property generates upon sale—that is, capital gains or business
income—determines whether that property is a capital property or inventory. 36 In other
words, one starts by determining the nature of the income and then characterizes the
property, not the other way around.37
Yet the ITA offers minimal guidance on determining whether the profit or loss stemming
from a disposition of property should be on account of income or capital. The ITA essentially
defines a “capital gain” as a gain from the disposition of property that would not be taxed as
ordinary income.38 It defines a “capital loss” in similar terms. 39 The ITA’s guidance on
characterizing business income proves equally unhelpful. It defines a “business” as including
“a trade” and “an adventure or concern in the nature of trade.” 40 But it does not define “trade”
or “adventure or concern in the nature of trade.” As a result, common-law principles serve to
demarcate whether proceeds from a sale are a capital gain or business income.
Basically, the proceeds from XXX’s cryptocurrency transactions are business income and
thus fully taxable if XXX was either:
 engaged in an adventure or concern in the nature of trade; or

 a trader.
The following sections explain the principles relevant to discerning whether a person is either
engaged in an adventure in the nature of trade or a trader. After shedding light on the relevant
principles, we apply them to XXX’s cryptocurrency transactions.
An Adventure in the Nature of Trade: A Single Transaction With Intent to Resell for
Profit
An adventure or concern in the nature of trade is “an isolated transaction (which lacks the
frequency or system of a trade) in which the taxpayer buys property with the intention of selling
it at a profit and then sells it (normally at a profit, but sometimes at a loss).” 41 In other words, a
35
Friesen v Canada, [1995] 3 SCR 103, at para 28.
36
Ibid.
37
Ibid.
38
ITA, s. 39(1)(a).
39
Ibid, s. 39(1)(b).
40
Ibid, s. 248(1), “business.” The definition of a business, however, excludes “an office or employment.”
41
Peter W. Hogg, Joanne E. Magee, & Jinyan Li, Principles of Canadian Income Tax Law, 5th ed (Carswell:
Toronto, 2013), at 333; cited with approval in Canada Safeway Limited v Canada, 2008 FCA 24, at para 40.

Mr. XXX Page 25
November 23, 2021
taxpayer may carry on a business even if he or she engaged in an isolated purchase and sale of a
single asset.
Courts observe several criteria to determine whether a disposition of property was an

adventure in the nature of trade:42
 The nature of the property sold. Although virtually any form of property may
be acquired to be dealt in, those forms of property, such as manufactured
articles, which are generally the subject of trading only are rarely the subject
of investment. Property which does not yield to its owner an income or
personal enjoyment simply by virtue of its ownership is more likely to have
been acquired for the purpose of sale than property that does.
 The length of period of ownership. Generally, property meant to be dealt in is
realized within a short time after acquisition. Nevertheless, there are many
exceptions to this general rule.
 The frequency or number of other similar transactions by the taxpayer. If the
same sort of property has been sold in succession over a period of years or
there are several sales at about the same date, a presumption arises that there
has been dealing in respect of the property.
 Work expended on or in connection with the property realized. If effort is put
into bringing the property into a more marketable condition during the
ownership of the taxpayer or if special efforts are made to find or attract
purchasers (such as the opening of an office or advertising) there is some
evidence of dealing in the property.
 The circumstances that were responsible for the sale of the property. There
may exist some explanation, such as a sudden emergency or an opportunity
calling for ready money, that will preclude a finding that the plan of dealing
in the property was what caused the original purchase.
 Motive. The motive of the taxpayer is never irrelevant in any of these cases.
The intention at the time of acquiring an asset as inferred from surrounding
circumstances and direct evidence is one of the most important elements in
determining whether a gain is of a capital or income nature.43
The taxpayer’s motive or intent at the time of acquiring the property is the most important
criterion that courts consider when distinguishing between an adventure in the nature of trade
and an investment.44
42
Also see: Freisen v Canada, [1995] 3 SCR 103, at paras 15-17.
43
Happy Valley Farms Ltd v Her Majesty the Queen, 86 DTC 6421 (FCTD), at para 14.
44
Happy Valley Farms Ltd v Her Majesty the Queen, 86 DTC 6421 (FCTD), at para 14 (The taxpayer’s “motive or
intention, in addition to consideration of the taxpayer’s whole course of conduct while in possession of the
asset, is what in the end generally influences the finding of the Court.”); Peter W. Hogg, Joanne E. Magee, &

Mr. XXX Page 26
November 23, 2021
To discern a taxpayer’s intention on acquiring the property, courts focus on the objective
factors surrounding both the purchase and the sale of that property. In other words, courts
determine a taxpayer’s intent by looking at the nature of the property sold, the length of
ownership, the frequency of transactions, the work expended to attract purchasers, and the
circumstances surrounding the sale.45
Of course, a taxpayer may have more than one motivation for purchasing a property. The
taxpayer might, for instance, acquire property with a primary intention of using it in a non-
speculative way but an alternate intention of selling it at a profit if the primary purpose
proves unworkable. If the taxpayer sells the property in accordance with the alternate or
secondary intention, the profit will be on account of income rather than capital.
Regal Heights v MNR46 is the leading case on secondary intention doctrine. In Regal Heights,
the taxpayer acquired undeveloped land with the primary intention of building a shopping
mall on the site. The taxpayer began developing the area. But the taxpayer abandoned the
plan after discovering that another shopping mall was being built only two miles away from
the taxpayer’s lot. In response, the taxpayer sold the land at a profit. The Supreme Court of
Canada held that the profit was business income. The Court found that the taxpayer’s
primary intention was to develop a shopping mall on the land. But the Court also observed
that the taxpayer understood that the shopping-mall plan had a good chance of failing, and
the taxpayer’s secondary intention was to sell the land at a profit should the shopping-mall
plan fail. The Court decided that the existence of the secondary intention made the sale an
adventure in the nature of trade.
The Federal Court of Appeal has since clarified that the secondary intention to sell must exist
at the time that the taxpayer acquired the property, and it must have been a reason that
motivated the taxpayer to acquire the property. 47 For instance, in Canada Safeway Limited v
Canada,48 a corporate taxpayer, who operated a grocery chain, sold its joint-venture interest in a
piece of land on which the taxpayer intended to build a shopping centre. The taxpayer entered
the joint venture on the basis that the shopping centre’s construction would allow it to capture
the grocery market in an area of increasing residential growth. The land was zoned as
residential. So, to begin constructing the shopping centre, the taxpayer would need to rezone the
land as commercial. The rezoning failed, and the taxpayer sold its interest in the joint venture.
Despite the taxpayer’s seeming long-term interest for the joint venture, the Federal Court of
Appeal held that the sale was an adventure in the nature of trade. The court found that the
taxpayer’s joint-venture partner enticed the taxpayer into entering the joint venture with a
Jinyan Li, Principles of Canadian Income Tax Law, 8th ed (Carswell: Toronto, 2013), at 360.
45
Ibid.
46
Regal Heights v MNR, [1960] CTC 384, 60 DTC 1270 (SCC).
47
Riecher v R, [1975] CTC 659, 76 DTC 6001 (FCA); Hiwako Investments v R, [1978] CTC 378, 78 DTC 6281 (FCA).
48
Canada Safeway Limited v Canada, 2008 FCA 24.

Mr. XXX Page 27
November 23, 2021
contingency plan should rezoning not take place. In this case, the two would sell the land to a
residential developer for an anticipated profit. Indeed, the taxpayer’s joint-venture agreement
contemplated both scenarios. The court thus concluded that, when the taxpayer entered the joint-
venture agreement, it had a secondary intention to profit from selling its interest. The court
characterized the taxpayer’s intention as a “dual intention, as opposed to an alternative
intention.”49
The following two sections illustrate these principles with (i) cases finding that a taxpayer
engaged in an adventure in the nature of trade and (ii) cases finding that a taxpayer did not
engage in an adventure in the nature of trade. Afterwards, the memo discusses the general
principles emerging from the jurisprudence on adventure in the nature of trade and applies
them to XXX’s facts.
Cases Finding that Taxpayer Engaged in Adventure in the Nature of Trade
In Dube v R,50 the court assessed the taxpayer’s intention by looking at the taxpayer’s skill,
the period of ownership, and the frequency of transactions. The taxpayer was a building
inspector. He purchased a building and sold it within six months. He used the sale profit to
purchase a second building, which he again sold within six months. He finally purchased a
third building, which he used as his residence and office. The Tax Court of Canada held that
the profits from the two building sales were business income. The court concluded that the
taxpayer intended to sell the buildings rather than keep them for rental purposes. The
taxpayer testified that he only sold the buildings when he realized that he could not afford the
renovations required to turn the buildings into rental properties. Moreover, the taxpayer
alleged that he came to this realization after he purchased the buildings. The taxpayer’s
testimony failed to convince the court. The court reasoned that, had he intended to retain the
two buildings, the taxpayer would have inspected them and determined renovation costs
before purchasing them. In support, the court pointed to the taxpayer’s skills as a building
inspector.
In Zsebok v the Queen,51 the taxpayer’s full-time employment required him to keep abreast of
developments in the international market and allowed him to trade during work hours. As a
result, the taxpayer sat in front of his office computer for long hours daily and monitored his
personal-investment data. The court held that the extent of the taxpayer’s trading and
research time indicated that his securities transactions constituted an adventure in the nature
of trade. The taxpayer’s losses were thus on account of income. Zsebok suggests that courts
49
Ibid, at para 71.
50
Dube v R, [2007] 2 CTC 2437, 2007 DTC 468 (TCC).
51
Zsebok v the Queen, 2012 TCC 99.

Mr. XXX Page 28
November 23, 2021
require an extensive time commitment before concluding that a taxpayer’s transactions

constitute trading.
Generally, courts presume that a property without a personal-use dimension and unable to
yield income—e.g., commodities—is purchased for resale.52 As a result, any profit or loss on
disposing of that property is on account of income. For instance, in MNR v Taylor,53 a
taxpayer, in an isolated transaction, purchased 1,500 tons of lead, which he then sold for a
profit. The court held that the transaction was an adventure in the nature of trade, which
meant that the taxpayer’s profit was on account of income. The court’s reasoning pointed out
that the taxpayer could do nothing but sell such an asset. Likewise, courts have reached the
same conclusion where the transaction involved commercial quantities of toilet paper, 54
whiskey,55 sugar,56 and sulfuric acid.57 In Freisen v Canada,58 the Supreme Court of Canada
decided that a loss from a disposition of land was on account of business income because the
“land involved was undeveloped real estate which was suitable for resale but unsuitable as an
income producing investment or for the personal enjoyment of [the taxpayer].”59
In Canada Safeway Limited v Canada,60 (discussed above) a corporate taxpayer, who operated a
grocery chain, sold its joint-venture interest in a piece of land on which the taxpayer intended to
build a shopping centre. The taxpayer entered the joint venture on the basis that the shopping
centre’s construction would allow it to capture the grocery market in an area of increasing
residential growth. The land was zoned as residential. So, to begin constructing the shopping
centre, the taxpayer would need to rezone the land as commercial. The rezoning failed, and the
taxpayer sold its interest in the joint venture. Despite the taxpayer’s seeming long-term interest
for the joint venture, the Federal Court of Appeal held that the sale was an adventure in the
nature of trade. The court found that the taxpayer’s joint-venture partner enticed the taxpayer
into entering the joint venture with a contingency plan should rezoning not take place. In this
case, the two would sell the land to a residential developer for an anticipated profit. Indeed, the
taxpayer’s joint-venture agreement contemplated both scenarios. The court thus concluded that,
when it entered the joint-venture agreement, the taxpayer had a secondary intention to profit
from selling its interest. The court characterized the taxpayer’s intention as a “dual intention, as
opposed to an alternative intention.”61
52
Toronto, 2013), at 361.
53
MNR v Taylor, [1956] CTC 189, 56 DTC 1125 (Ex. Crt.)
54
Rutledge v CIR, (1929) 14 TC 490 (Scotland Ct. Sess.)
55
CIR v Fraser (1942) 24 TC 498 (Scotland Ct. Sess.)
56
Atlantic Sugar Refineries v MNR, [1948] CTC 326 (Ex. Crt.); affirmed [1949] CTC 196, 49 DTC 602 (SCC).
57
Honeyman v MNR, [1955] CTC 151, 55 DTC 1094 (Ex. Crt.)
58
Friesen v Canada, [1995] 3 SCR 103.
59
Ibid, at para 18.
60
Canada Safeway Limited v Canada, 2008 FCA 24.
61
Ibid, at para 71.

Mr. XXX Page 29
November 23, 2021
The court in Zsebok v the Queen62 held that a taxpayer engaged in an adventure in the nature
of trade. During the four years at issue, the taxpayer performed 93 share trades in his margin
account and 12 trades in his RSP account. The taxpayer’s strategy “was to identify highly
volatile shares trading in high volume with a view to maximizing his earnings while playing the
range.”63 His average duration for holding a share was about 60 days, but many shares were held
for only a few days or hours. The court made the following observations about the taxpayer’s
activities:
 He “tended to trade in only three stocks, with an average value of about $10. In 2001,
the number of shares purchased was 20,500, the number sold was 32,600. In 2002,
70,800 purchased, 22,700 sold. In 2003, 311,900 purchased, 345,000 sold. In 2004,
151,000 purchased, 66,000 sold.”64
 “Whenever the [taxpayer] had enough cash on hand or sufficient borrowing power, he
was back in the market, hoping to make a few pennies on each transaction eventually
adding up to a big profit.”65
 “He was heavily over-leveraged, a fact often indicative of a speculative intent.
Nevertheless, his trading continued apace, until the range flattened or the Appellant’s
funds ran out. Oftentimes, what small gains he made during these trading skirmishes
were wiped out by commissions and borrowing costs.”66
 “With the possible exception of Nortel, none of the shares traded by the Appellant was
of the ‘blue chip’ variety.”67
These findings led the court to conclude that the taxpayer had engaged in an adventure in the
nature of trade and thereby incurred business losses from the trades in his margin account
and RSP.
In Mittal v The Queen,68 the court held that a taxpayer’s losses from share transactions were
fully deductible business losses because the taxpayer had engaged in an adventure in the
nature of trade. The court based its decision its findings that: (1) the taxpayer performed 160
trades throughout the year (even though the taxpayer averaged only about three trades per
week); (2) the taxpayer testified that his intention was “to be a good enough trader to earn
62
63
Ibid, at para 17.
64
Ibid, at 18.
65
Ibid, at para 20.
66
Ibid.
67
Ibid, at para 21.
68
Mittal v The Queen, 2012 TCC 417.

Mr. XXX Page 30
November 23, 2021
ongoing profits from trading activity”69; and (3) the taxpayer spent approximately 25 hours
each week on trading and research.70
Finally, in Wong v The Queen,71 the court concluded that a taxpayer’s proceeds from selling
shares were business income because the taxpayer was “a classic example of someone
engaged in an adventure in the nature of trade.”72 In particular, during the five years at issue,
the taxpayer performed over 600 transactions, purchasing over 226,000 and selling over
216,000 shares in blue-chip stocks. Further, the taxpayer held most securities for no more
than a few days, with some being purchased and sold on the same day.
Cases Finding No Adventure in the Nature of Trade
In both MNR v Lawee73 and Montfort Lakes Estates v R,74 the Federal Court found that the
respective taxpayers had acquired land to provide security against inflation over a long term
without any intention for a quick resale. In Lawee, the taxpayer held the land for nine years
before selling; in Montfort, the taxpayer sold the land 18 years after purchase. As a result, in
both cases, the court held that the profit was a capital gain.
A securities transaction is generally presumed to be an investment and thus on capital

account. In Irrigation Industries v MNR,75 the Supreme Court of Canada held that the profits
from a disposition of shares were on account of capital even though the taxpayer purchased
the shares a month prior to the sale with borrowed funds. The Court affirmed a presumption
that a taxpayer is investing when he or she deals with shares:
In my opinion, a person who puts money into a business enterprise by the

purchase of the shares of a company on an isolated occasion, and not as a part of
his regular business, cannot be said to have engaged in an adventure in the nature
of trade merely because the purchase was speculative in that, at that time, he did
not intend to hold the shares indefinitely, but intended, if possible, to sell them at
a profit as soon as he reasonably could. I think that there must be clearer
indications of "trade" than this before it can be said that there has been an
adventure in the nature of trade. ...
69
Ibid, at para 23.
70
Ibid, at para 27.
71
Wong v The Queen, 2013 TCC 130.
72
Ibid, at para 34.
73
MNR v Lawee, [1972] CTC 359, 72 DTC 6342 (Fed. TD)
74
Montfort Lakes Estates v R, [1980] CTC 27, 79 DTC 5467 (Fed. TD)
75
Irrigation Industries Ltd v MNR, [1962] SCR 346, 1962 CanLII 55 (SCC).

Mr. XXX Page 31
November 23, 2021
Corporate shares are in a different position because they constitute something the
purchase of which is, in itself, an investment. They are not, in themselves, articles
of commerce, but represent an interest in a corporation which is itself created for
the purpose of doing business. Their acquisition is a well-recognized method of
investing capital in a business enterprise.76
Mutual-fund transactions also give rise to a presumption of investment.77
In Wood v MNR,78 the Supreme Court of Canada noted that the use of personal savings
instead of borrowed funds to purchase the disposed property “was consistent with the making
of personal investments out of [one’s] savings and not with the carrying on of a business.”79
In this case, the taxpayer purchased 13 mortgages at a discount; he funded the purchases
exclusively with his savings. He then realized a profit when the mortgages reached maturity.
The Court held that the taxpayer’s profits were on account of capital.
In Leng v The Queen,80 the taxpayer, who was an assistant professor specializing in cancer
research, purchased, at any one time, hundreds of shares in various public corporations. He
often sold the purchased batch later on during the same day. During the four tax years at
issue, the taxpayer had approximately 17 buy-sell transactions. The taxpayer professed that,
due to his flexible work schedule, he had time to take courses in share trading and study the
market. Yet the court concluded that the taxpayer was not an insider with specialized
knowledge of the shares that he acquired, and it held that the proceeds of disposition were on
account of capital. In particular, the court noted that the taxpayer “purchased shares—as did
thousands of Canadians—to make a profit but he was not carrying on a business in pursuit of
that profit. The fact that a person buys and sells shares at a short interval is not, by itself,
conclusive that the person is a trader or that the venture was in the nature of trade.”81
In Pollock v the Queen,82 the taxpayers claimed that the losses they incurred from selling
high-risk tech shares were fully deductible business losses. The court decided that the losses
were in fact capital losses. The court’s decision boiled down to four factors.83 First, in a prior
tax year, when the taxpayers realized gains from similar share transactions, they reported
those gains as capital gains. Second, the taxpayers traded infrequently: during the year at
issue, the taxpayers sold seven types of stock on only three separate occasions. Third, the
76
Ibid, at 350-352.
77
Eg., see: Goorah v The Queen, 2001 CanLII 753 (TCC), at para 63. Also see: Mandryk v The Queen, 89 DTC
5062.
78
Wood v MNR, [1969] CTC 57, 69 DTC 5073
79
Ibid, at 60, 5075.
80
Leng v The Queen, 2007 TCC 59 (CanLII); [2007] 2 CTC 2456.
81
Ibid, at para 12.
82
Pollock v The Queen, 2008 TCC 115.
83
Ibid, at para 16.

Mr. XXX Page 32
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taxpayers held all their shares for over a year, with most shares being held for three to five
years. Finally, the taxpayers retained certain shares despite a dramatic rise in market value
lasting over a year; instead, they sold the shares only after the share price plummeted. The
taxpayers’ failure to take advantage of an opportunity for a quick flip figured heavily in the
court’s decision.
Like the taxpayers in Pollock, the taxpayer in Azrak v the Queen84reported his losses from
selling public shares were business losses, yet he previously reported his gains from similar
transactions as capital gains. The court held that the taxpayer’s transactions failed to
comprise a business. The court primarily noted the taxpayer’s inactivity during the two years
in issue: In 2003, the taxpayer made no purchases and one sale of shares that had been held
for about two years. In 2004, the taxpayer made 14 purchases and 12 sales.
And finally, in Kriplani v The Queen,85 the taxpayer’s past reporting again made the
difference in the court’s decision. From 1999 through 2004, the taxpayer’s trades per year
ranged from 0 to 34. During those years, she consistently reported the gains or losses on
account of capital. In 2005, the taxpayer made 19 trades but decided to claim her $5,000 loss
on account of business income. The court noted that the taxpayer’s “level of activity [was]
modest in terms of transactions,”86 but it also pointed out that “the sales involved stocks held
for relatively short periods of time, a few days to four months.”87 The court ultimately
decided that the taxpayer’s past reporting of similar share transactions on capital account
“clearly tip[ed] the overall picture to one where one must conclude that the transactions were
on capital account.”88
General Principles on Discerning an Adventure in the Nature of Trade
In essence, no one factor emerges as singularly important for determining whether a sale was
an adventure in the nature of trade. Typically, several factors in aggregate will determine the
issue. As a result, the jurisprudence often appears inconsistent.
Yet five general principles emerge:89
1. The boundary between business income and capital gains cannot easily be drawn and, as
a consequence, consideration of various factors, including the taxpayer’s intent at the
time of acquiring the property at issue, becomes necessary for a proper determination.
84
Arak v The Queen, 2008 TCC 217.
85
Kriplani v The Queen, 2011 TCC 542.
86
Ibid, at para 16.
87
Ibid, at para 23.
88
Ibid, at paras 30-31.
89
Canada Safeway Limited v Canada, 2008 FCA 24, at para 61.

Mr. XXX Page 33
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2. For the transaction to constitute an adventure in the nature of trade, the possibility of
resale, as an operating motivation for the purchase, must have been in the mind of the
taxpayer. In order to make that determination, a court must draw inferences from all of
the circumstances. In other words, the taxpayer’s whole course of conduct has to be
assessed.
3. A secondary intention must have existed at the time of acquiring the property, and it
must have been an operating motivation in the acquisition of the property.
4. The fact that the taxpayer contemplated the possibility of resale of his or her property is
not, in itself, sufficient to conclude in the existence of an adventure in the nature of
trade.
5. The oral evidence of the taxpayer with respect to his or her intention is not conclusive
and has to be tested in the light of all the surrounding circumstances.
The following section discusses whether, in light of the aforementioned cases and principles,
XXX’s cryptocurrency transactions constituted an adventure in the nature of trade.
In 2017, 2018, 2019 and 2020, XXX Engaged in an Adventure in the Nature of Trade
When Transacting with ETH, BCH, BTC, IOT, LTC, BTG, and ADA
XXX’s 2017 transactions involving ETH, BCH, BTC, and IOT constituted an adventure in
the nature of trade. His 2018 transactions involving BTC, LTC and BTG constituted an
adventure in the nature of trade. His 2019 transactions involving ETH and BTC constituted
an adventure in the nature of trade. And his 2020 transactions involving ETH, BTC, and
ADA constituted an adventure in the nature of trade.
On one hand, one can distinguish XXX’s ETH, BCH, BTC, IOT, LTC, BTG, and ADA
transactions from those in the cases finding against an adventure in the nature of trade.
Although, like the taxpayer in Leng v The Queen,90 XXX relied on publicly available
information, the sheer quantity of his cryptocurrency transactions far surpasses that at issue
in either Leng or Wood. In Leng, the taxpayer had about 17 buy-sell transactions in each of
four tax years. In Wood, the taxpayer purchased 13 mortgages, and realized a gain when the
mortgages matured. In 2017, XXX carried out 200 total cryptocurrency transactions
involving seven different cryptocurrencies and 161 of the 200 total cryptocurrency
transactions involved ETH, BCH, BTC, and IOT. In 2018, he carried out 54 total
cryptocurrency transactions involving BTC, LTC, and BTG. In 2019, he carried out 41 total
cryptocurrency transactions involving ETH and BTC. In 2020, he carried out 318 total
cryptocurrency transactions involving eight different cryptocurrencies and 149 of the 318
total cryptocurrency transactions involved ETH, BTC, and ADA. The frequency of XXX’s
90

Mr. XXX Page 34
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cryptocurrency transactions also distinguishes them from the transactions in Pollock v the
Queen,91 where, during the year at issue, the taxpayers sold seven types of stock on only three
separate occasions.
In addition, unlike the Pollock taxpayers who held their shares for over a year, for certain
units of cryptocurrency, XXX sold all or almost all units in the same year that he acquired
them. In 2017, he sold 98% of the ETH units that he acquired in that year and 94% of the
BTC units that he acquired in that year. In 2018, he sold 70% of the BTC units that he
acquired in that year and almost 94% of the BTG units that he acquired 2 months prior to the
disposition. In 2019, he sold 65% of the BTC units that he acquired in that year. And in 2020,
he sold 100% of the BTC units that he had acquired in that year and that he had held during
the previous year. In the same year, he sold 100% of the ADA units that he acquired in that
year.
On the other hand, XXX’s ETH, BCH, BTC, IOT, LTC, BTG, and ADA transactions
compare favorably with those in the cases finding in favor of an adventure in the nature of
trade.
In particular, XXX executed about as many or more transactions than did taxpayers in cases
where transaction frequency played heavily in the decision. In 2017, XXX carried out 200
total cryptocurrency transactions involving seven different cryptocurrencies and 161 of the
200 total cryptocurrency transactions involved ETH, BCH, BTC, and IOT. In 2018, he
carried out 54 total cryptocurrency transactions involving BTC, LTC, and BTG. In 2019, he
carried out 41 total cryptocurrency transactions involving ETH and BTC. In 2020, he carried
out 318 total cryptocurrency transactions involving eight different cryptocurrencies and 149
of the 318 total cryptocurrency transactions involved ETH, BTC, and ADA. His 2018 and
2019 transactions fare better than those of the taxpayer in Zsebok92 (105 trades in a year) and
those of the taxpayer in Wong93 (about 120 trades per year). However, his 2017 and 2020
transactions exceed those of the taxpayers in Zsebok, Wong, and Mittal94(160 trades in a year)
combined.
property was meant to be traded. MNR v Taylor95 and Freisen v Canada96 suggest that
transactions involving non-income-bearing property might imply an adventure in the nature
of trade. And none of XXX’s cryptocurrency holdings yielded income. Moreover, unlike
91
92
93
Wong v The Queen, 2013 TCC 130.
94
Mittal v The Queen, 2012 TCC 417.
95
MNR v Taylor, [1956] CTC 189, 56 DTC 1125 (Ex. Crt.)
96
Friesen v Canada, [1995] 3 SCR 103.

Mr. XXX Page 35
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shares, cryptocurrency does not “represent an interest in a corporation which is itself created
for the purpose of doing business.”97
Although the presumption favouring trading can be rebutted, XXX’s cryptocurrency

transactions fail to do so. Some commodity purchasers, for instance, view certain
commodities (like gold) as a means of providing security against inflation, the volatility of
paper currency, or the instability of governments.98 These purchasers therefore buy, say, gold
as a long-term store of value, and they intend to hold the commodity for as long as possible.
Although no reported cases have held that the profit from a commodities transaction was on
account of capital,99 courts have held that profits from the sale of undeveloped land were on
capital account. In both MNR v Lawee100 and Montfort Lakes Estates v R,101 the Federal Court
found that the respective taxpayers had acquired land to provide security against inflation
over a long term without any intention for a quick resale. As a result, in both cases, the court
held that the profit was a capital gain. The reasoning in these cases could seemingly extend to
taxpayers who purchased commodities—and commodity-like articles, such as
cryptocurrency. Still, even if this reasoning extends to cryptocurrency transactions, it cannot
secure capital treatment for XXX’s cryptocurrency transactions involving ETH, BCH, BTC,
IOT, LTC, BTG, and ADA. XXX sold all or almost all of these units in the same year that he
acquired them. In 2017, he sold 98% of the ETH units that he acquired in that year and 94%
of the BTC units that he acquired in that year. In 2018, he sold 70% of the BTC units that he
acquired in that year and almost 94% of the BTG units that he acquired 2 months prior to the
disposition. In 2019, he sold 65% of the BTC units that he acquired in that year. And in 2020,
he sold 100% of the BTC units that he had acquired in that year and that he had held during
the previous year. In the same year, he sold 100% of the ADA units that he acquired in that
year. This activity proves inconsistent with an intention to acquire these cryptocurrencies as a
long-term store of value.
In summary, jurisprudence supports the proposition that XXX’s transactions involving ETH,
BCH, BTC, IOT, LTC, BTG, and ADA constituted an adventure in the nature of trade.
A Trader: One with Special Knowledge of a Particular Market
The criteria for determining whether an individual engaged in an adventure in the nature of
trade are also relevant for determining whether an individual is a trader. 102 But a trader, in
97
Irrigation Industries Ltd v MNR, [1962] SCR 346, 1962 CanLII 55 (SCC), at 350-352.
98
Toronto, 2013), at 370.
99
Ibid.
100
MNR v Lawee, [1972] CTC 359, 72 DTC 6342 (Fed. TD)
101
Montfort Lakes Estates v R, [1980] CTC 27, 79 DTC 5467 (Fed. TD)
102
Zsebok v the Queen, 2012 TCC 99, at paras 6-7.

Mr. XXX Page 36
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addition to satisfying those criteria, must possess “a particular or special knowledge of the
market in which he trades.”103 In fact, it is this latter characteristic that accounts for the
difference between a trader and one engaged in an adventure in the nature of trade.104
For example, the court in Zsebok v the Queen105 (discussed above) held that the taxpayer
engaged in an adventure in the nature of trade yet was not a trader. The taxpayer performed
93 share trades in his margin account and 12 trades in his RSP account during the four tax
years at issue. His average duration for holding a share was about 60 days, but many shares
were held for only a few days or hours. While these facts led the court to conclude that the
taxpayer had engaged in an adventure in the nature of trade, the court also held that the
taxpayer “lacked the special knowledge necessary to make him a ‘trader.’” 106 While the
taxpayer was familiar with various internet tools that could be used to track the market, these
were available to the general public by paying a subscription fee. In addition, the court
reasoned that neither the taxpayer’s education in economics and accounting nor his
occupation, which saw him handling his employer company’s acquisition of shares in a
corporate takeover, provided the taxpayer with “specialized knowledge of the shares
traded.”107
The following two sections examine (i) cases finding that a taxpayer was a trader and (ii)
cases finding that a taxpayer did not engage in trading. Afterwards, the memo draws a
conclusion by comparing these cases to XXX’s facts.
Cases Finding that Taxpayer was a Trader
In Scott v MNR,108 the Supreme Court of Canada held that a real-estate lawyer was a trader
and thus earned business income because, over a period of eight years, he purchased 149
mortgages at a discount and realized a profit by holding these obligations until maturity.
In Hawa v the Queen,109 a taxpayer, during the year at issue, carried out 151 purchase
transactions involving shares in 16 companies. The shares from each purchase were held for
short periods of time. The court concluded that “the evidence [was] overwhelming that [the
taxpayer] was trading in shares.”110 In addition, the court clarified that the taxpayer’s
103
Kane v Canada, [1995] 1 CTC 1 (FCTD), at para 23; quoted with approval in Zsebok v the Queen, 2012 TCC
99, at para 7.
104
Zsebok v the Queen, 2012 TCC 99, at para 7.
105
106
Ibid, at para 11.
107
Ibid, at paras 8, 10, and 11.
108
Scott v MNR, [1963] CTC 176, 63 DTC 1121 (SCC).
109
Hawa v the Queen, 2006 TCC 612 (Bowman, C.J.).
110
Ibid, at para 8.

Mr. XXX Page 37
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commercial activity went beyond an adventure in the nature of trade; the taxpayer was a
trader.111
Cases Finding that Taxpayer Did Not Engage in Trading
Courts typically conclude that a taxpayer is not a trader in cases where the taxpayer lacks
specialized knowledge in the particular market. In Zsebok v the Queen112 (discussed above),
the court held that the taxpayer not a trader because he lacked specialized knowledge of the
shares traded. The taxpayer performed 93 share trades in his margin account and 12 trades in
his RSP account during the four tax years at issue. His average duration for holding a share
was about 60 days, but many shares were held for only a few days or hours. The taxpayer’s
full-time employment required him to keep abreast of developments in the international
market and allowed him to trade during work hours. As a result, the taxpayer sat in front of
his office computer for long hours daily and monitored his personal-investment data. Yet the
court also held that the taxpayer “lacked the special knowledge necessary to make him a
‘trader.’”113 While the taxpayer was familiar with various internet tools that could be used to
track the market, these were available to the general public by paying a subscription fee. In
addition, the court reasoned that neither the taxpayer’s education in economics and
accounting nor his occupation, in which he oversaw a share acquisition by his employer
during a corporate takeover, provided the taxpayer with “specialized knowledge of the shares
traded.”114
The taxpayer’s lack of specialized knowledge also figured into the court’s decision in Leng v
The Queen.115 In this case, the taxpayer, who was an assistant professor specializing in cancer
research, purchased, at any one time, hundreds of shares in various public corporations. He
often sold the purchased batch later on during the same day. During the four tax years at
issue, the taxpayer had approximately 17 buy-sell transactions. The taxpayer professed that,
due to his flexible work schedule, he had time to take courses in share trading and study the
market. Yet the court concluded that the taxpayer was not an insider with specialized
knowledge of the shares that he acquired, and it held that the proceeds of disposition were on
account of capital. In particular, the court noted that the taxpayer “purchased shares - as did
thousands of Canadians - to make a profit but he was not carrying on a business in pursuit of
111
Ibid, at para 11 (“I think that a concerted commercial activity of buying and selling shares over an extended
period of time can more appropriately be described as the carrying of a business in the ordinary sense of that
word without resort to the concept of ‘adventure in the nature of trade’”) .
112
113
Ibid, at para 11.
114
Ibid, at paras 8, 10, and 11.
115

Mr. XXX Page 38
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that profit. The fact that a person buys and sells shares at a short interval is not, by itself,
conclusive that the person is a trader or that the venture was in the nature of trade.”116
Courts may also conclude that a taxpayer is not a trader where the taxpayer fails to cut losses
or retains shares despite the opportunity for a profitable sale. In Pollock v the Queen,117 the
taxpayers claimed that the losses they incurred from selling high-risk tech shares were fully
deductible business losses. The court decided that the losses were in fact capital losses. The
court’s decision boiled down to four factors.118 First, in a prior tax year, when the taxpayers
realized gains from similar share transactions, they reported those gains as capital gains.
Second, the taxpayers traded infrequently: during the year at issue, the taxpayers sold seven
types of stock on only three separate occasions. Third, the taxpayers held all their shares for
over a year, with most shares being held for three to five years. Finally, the taxpayers
retained certain shares despite a dramatic rise in market value lasting over a year; instead,
they sold the shares only after the share price plummeted. The taxpayer’s failure to take
advantage of an opportunity for a quick flip figured heavily in the court’s decision.
Again, in Turner v The Queen,119 a taxpayer’s failure to dispose of shares that plummeted in
value resulted in the court’s finding that the taxpayer’s losses were capital losses. In Turner,
the taxpayer, an electrical engineer, began investing heavily in shares of a single company.
The share price nosedived from $25 per share to $0.5 per share. Yet the taxpayer not only
retained his shares he purchased more in hopes that the share price would turn around. The
company went bankrupt, and the taxpayer lost everything. The court concluded that the
taxpayer was not carrying on business. Its reasoning focused on the taxpayer’s failure to sell
and diversify:
The Appellant dealt only in one security, Central. If he were in the business of
trading in securities, one would expect a much more diversified portfolio. He
held on to the shares of Central when they were continually decreasing in value.
If he was a trader, he would have sold the shares and cut his losses so that he
could recoup whatever he could and invest in other securities. That is how a
trader makes money or minimizes his losses. He buys and sells. When a taxpayer
enters into an isolated transaction or only a few transactions, he is not a trader.120
A taxpayer’s prior reporting of transactions on tax returns may also influence the court’s
decision. Like the taxpayers in Pollock, the taxpayer in Azrak v the Queen121reported his
losses from selling public shares were business losses, yet he previously reported his gains
116
Ibid, at para 12.
117
118
Ibid, at para 16.
119
Turner v The Queen, 2016 TCC 77.
120
Ibid, at para 22.
121
Arak v The Queen, 2008 TCC 217.

Mr. XXX Page 39
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from similar transactions as capital gains. The court held that the taxpayer’s transactions
failed to comprise a business. The court primarily noted the taxpayer’s inactivity during the
two years in issue: In 2003, the taxpayer made no purchases and one sale of shares that had
been held for about two years. In 2004, the taxpayer made 14 purchases and 12 sales.
Again, in Kriplani v The Queen,122 the taxpayer’s past reporting made the difference in the
court’s decision. From 1999 through 2004, the taxpayer’s trades per year ranged from 0 to
34. During those years, she consistently reported the gains or losses on account of capital. In
2005, the taxpayer made 19 trades but decided to claim her $5,000 loss on account of
business income. The court noted that the taxpayer’s “level of activity [was] modest in terms
of transactions,”123 but it also pointed out that “the sales involved stocks held for relatively
short periods of time, a few days to four months.”124 The court ultimately decided that the
taxpayer’s past reporting of similar share transactions on capital account “clearly tip[ed] the
overall picture to one where one must conclude that the transactions were on capital
account.”125
The following section discusses whether, in light of the aforementioned cases, XXX’s
cryptocurrency transactions rendered him a trader.
XXX’s 2017, 2018, 2019 and 2020 Transactions Involving ETH, BCH, BTC, IOT, LTC,
BTG, and ADA Might Render Him a Trader
XXX may have carried on a trading business with respect to his 2017 transactions involving
ETH, BCH, BTC, and IOT; his 2018 transactions involving BTC, LTC and BTG; his 2019
transactions involving ETH and BTC; and his 2020 transactions involving ETH, BTC, and
ADA.
On the one hand, XXX seemingly lacks the specialized market knowledge that a trader
requires. Like the taxpayers in Zsebok v the Queen126 and Leng v The Queen,127 XXX
obtained no specialized knowledge about the cryptocurrency that he purchased and sold, and
he relied on information that was publicly available when making purchase or sale decisions.
For the same reason, XXX is unlike the taxpayer in Scott v MNR,128 who was a real-estate
lawyer dealing in real-estate and mortgage agreements and thus presumably had specialized
knowledge of the sort contemplated in Zsebok and Leng.
122
Kriplani v The Queen, 2011 TCC 542.
123
Ibid, at para 16.
124
Ibid, at para 23.
125
Ibid, at paras 30-31.
126
127
128

Mr. XXX Page 40
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Yet XXX executed, on average, a similar number of transactions as did the taxpayers in
trading cases where transaction frequency played heavily in the decision. For instance, in
Scott v MNR,129 the Supreme Court of Canada held that a real-estate lawyer was a trader
earning business income because, over a period of eight years, he purchased 149 agreements
and mortgages at a discount and realized a profit by holding these obligations until maturity.
In Hawa v the Queen,130 the court held that the taxpayer was a trader because, during the year
at issue, he carried out 151 trades involving shares in 16 companies. In 2017, XXX carried
out 200 total cryptocurrency transactions involving seven different cryptocurrencies and 161
of the 200 total cryptocurrency transactions involved ETH, BCH, BTC, and IOT. In 2018, he
carried out 54 total cryptocurrency transactions involving BTC, LTC, and BTG. In 2019, he
carried out 41 total cryptocurrency transactions involving ETH and BTC. In 2020, he carried
out 318 total cryptocurrency transactions involving eight different cryptocurrencies and 149
of the 318 total cryptocurrency transactions involved ETH, BTC, and ADA. Thus, from 2017
to 2020, XXX executed an average of 153 transactions per year—similar in amount at issue
in each Scott and Hawa.
Admittedly, it remains unclear whether frequent transactions suffice to render one a trader in
the absence of specialized knowledge. That said, the court in Hawa focused its analysis on
transaction frequency and did not even consider the taxpayer’s expertise or lack thereof.
Since XXX averaged a similar number of transactions as did the taxpayer in Hawa, XXX’s
dealings in ETH, BCH, BTC, IOT, LTC, BTG, and ADA plausibly comprise a trading
business.
In summary, jurisprudence supports the proposition that XXX’s transactions involving ETH,
BCH, BTC, IOT, LTC, BTG, and ADA might constitute a trading business.
The foregoing analysis shows that the profits and losses from XXX’s 2017, 2018, 2019 and
2020 cryptocurrency transactions are on income account, not capital account. In light of this
conclusion, we note the following compliance issues in relation to XXX’s 2017, 2018, 2019,
and 2020 tax years:
generated a total profit of about $317.62. As a result, XXX’s 2017 income-tax return
should have reported his cryptocurrency proceeds on account of business income.
129
130
Hawa v the Queen, 2006 TCC 612 (Bowman, C.J.).

Mr. XXX Page 41
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generated a total profit of $811.47. As a result, XXX’s 2018 income-tax return should
have reported his cryptocurrency proceeds on account of business income.
 XXX’s 2019 income-tax return did not report any of the losses from his
generated an overall loss of $8,438.91. As a result, XXX’s 2019 income-tax return
should have reported his cryptocurrency losses on account of business loss.
To remedy these errors, we recommend that XXX proceed with an application under the
CRA’s Voluntary Disclosures Program (“VDP”). Under the VDP’s General Program, the
relief available is as follows:
1. waiver of all otherwise applicable penalties—including gross-negligence penalties—

for any of the 10 taxation years immediately preceding the calendar year in which the
voluntary-disclosure application was filed;
2. partial cancellation of interest—generally 50%—arising in each taxation year that
meets the following two conditions: (a) the tax year precedes the three most recent tax
years for which a return was due as of the date that the voluntary-disclosure
application was filed, and (b) the tax year falls within the 10 taxation years
immediately preceding the calendar year in which the voluntary-disclosure
application was filed; and
3. renunciation of criminal prosecution in relation to the subject matter of the voluntary-
disclosure application.131
Hence, if the VDP accepts the XXX’s voluntary-disclosure application under the General
Program, XXX will qualify for the following relief: (i) waiver of all penalties that might
otherwise apply—including gross-negligence penalties—for the 2017, 2018, 2019, and 2020
tax years; (ii) renunciation of criminal prosecution in relation to the subject matter of the
voluntary-disclosure application; and (iii) partial cancellation of interest—generally 50%—
for the 2017 taxation year. (As of the date of this memo, XXX’s 2018, 2019, and 2020 tax
years do not qualify for interest relief under the General Program. As noted above, the VDP
will cancel interest relating to a particular tax year only if that year’s return is at least three
years overdue. So, as of the date of this memo, interest relief applies only to tax years for
which the return was due by or before December 31, 2018. The 2018, 2019 and 2020 tax
years all fail to meet this condition: the return for the 2018 tax year was due in 2019, the
131
Canada Revenue Agency, IC00-1R6, Voluntary Disclosures Program, December 15, 2017 (“IC00-1R6”), at
paras 13 and 15.

Mr. XXX Page 42
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return for the 2019 tax year was due in 2020, and the return for the 2020 tax year was due in
2021.)
Even if the VDP accepts XXX’s voluntary-disclosure application under the less-favorable
Limited Program, the VDP will still waive gross-negligence penalties and forego criminal
prosecution.132 (Under the Limited Program, no interest relief is available, and penalties other
than gross-negligence penalties may still apply.)
That said, XXX’s voluntary-disclosure application is time-sensitive for two reasons. First, the
VDP will reject a voluntary-disclosure application—and thus deny any relief—unless the
application is “voluntary.”133 This essentially means that the VDP must receive XXX’s
voluntary-disclosure application before the CRA contacts XXX about any of the above-noted
compliance issues.134 Second, the earlier the VDP receives XXX’s voluntary-disclosure
application, the earlier he gains protection from criminal prosecution and penalties, including
gross-negligence penalties. The effective date of the disclosure is the date on which the VDP
receives a completed voluntary-disclosure application. 135 From that date, so long as the VDP
ultimately accepts the application, the disclosing taxpayer is granted protection from
penalties and criminal prosecution relating to the information disclosed.136
XXX’s voluntary-disclosure application should include the following documents:

on income account (The $8,438.91 loss may be utilized to deduct XXX’s 2019 net
income.); and
 A 2020 T1 income-tax return that reports XXX’s employment income as well as
$34,256.00 in cryptocurrency proceeds on income account.
The VDP also requires that, upon filing his voluntary-disclosure application, XXX pay the
estimated amount of taxes owing137 (i.e., the taxes owing per the returns that are included
with XXX’s voluntary-disclosure application).
132
IC00-1R6, at paras 14 and 16.
133
IC00-1R6, at paras 28.
134
IC00-1R6, at paras 29-31.
135
IC00-1R6, at paras 50-51.
136
Ibid.
137
IC00-1R6, at para 39.

Mr. XXX Page 43
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XXX’s voluntary-disclosure application need not include a T1135 form regarding his
cryptocurrency holdings during the 2017 through 2020 tax years. First, XXX’s
cryptocurrency fails to meet the definition of a “specified foreign property” because his
cryptocurrency qualifies as inventory (e.g., inventory in a cryptocurrency-trading
business).138 Second, even if XXX’s cryptocurrency satisfies the definition of a “specified
foreign property,” the total cost of XXX’s cryptocurrency portfolio never exceeded $100,000
at any time during the period from January 1, 2017, to December 31, 2020. As a result,
XXX’s cryptocurrency portfolio did not trigger the requirement to file a T1135 form in any
tax year from 2017 to 2020.
XXX’s voluntary-disclosure application need not include GST/HST returns because, as of

June 29, 2021, a cryptocurrency-trading business constitutes an exempt supply of financial
services. The following section discusses the GST/HST implications of a cryptocurrency-
trading business.
GST/HST Implications: CryptoCurrency Trading is an Exempt Supply of Financial Services
The ETA’s exempt-supply regime for financial services indicates that a cryptocurrency-
trading business does not attract GST/HST liability.
GST/HST is imposed on “every recipient of a taxable supply made in Canada.” 139 While the
tax is levied on the recipient of a taxable supply (the purchaser), the person who makes the
supply (the vendor) bears the obligation to actually collect the tax. 140 Moreover, per its
administrative policy, the CRA will generally pursue not the recipient but the supplier for
outstanding GST/HST.141 A “taxable supply” is a “the provision of property or a service in
any manner142 […] that is made in the course of a commercial activity 143.” A “commercial
activity” includes both “a business” and “an adventure or concern in the nature of trade,” but
it excludes such activities if they constitute an “exempt supply.”144
138
The definition of “specified foreign property” excludes any property that “is used or held exclusively in the
course of carrying on an active business”: ITA, s. 233.3(1), “specified foreign property,” para (j).
139
ETA, ss. 165(1), (2).
140
ETA, s. 221(1)
141
Canada Revenue Agency, GST/HST policy statement P-112R, “Assessment of Tax Payable where a Purchaser
is Insolvent,” March 8, 2000.
142
ETA, s. 123(1), “supply.” A “supply” expressly includes “sale, transfer, barter, exchange, licence, rental,
lease, gift or disposition.”
143
ETA, s. 123(1) “taxable supply.”
144
Ibid., “commercial activity,” “exempt supply.” Schedule V of the ETA lists all exempt supplies.

Mr. XXX Page 44
November 23, 2021
One such the exempt supply is a “financial service,” 145 which includes both (1) the purchase
or sale of a “financial instrument” and (2) the use of a “financial instrument” as a method of
payment.146
A cryptocurrency-trading business constitutes an exempt supply because, as of June 29,

2021, cryptocurrency meets the ETA’s definition of “financial instrument.”147 The ETA was
amended under Bill C-30, which received royal assent on June 29, 2021. As a result, a
“virtual payment instrument” now qualifies as a “financial instrument”. 148 A “virtual payment
instrument” refers to “property that is a digital representation of value, that functions as a
medium of exchange and that only exists at a digital address of a publicly distributed ledger.”
149
But a virtual payment instrument excludes three types of property: (1) property that
“confers a right, whether immediate or future and whether absolute or contingent, to be
exchanged or redeemed for money or specific property or services or to be converted into
money or specific property or services”; (2) property that “is primarily for use within, or as
part of, a gaming platform, an affinity or rewards program or a similar platform or program;”
and (3) property that “is prescribed property.” 150 As of the date on the first page of this letter,
Parliament has not defined “prescribed property.”151
All of the cryptocurrencies that XXX traded between 2017 and 2020 will likely meet the
definition of a “virtual payment instrument.” Each was a digital representation of value
functioning as a medium of exchange and existing only at a digital address of a publicly
distributed ledger. Moreover, none of three exclusions apply to any of XXX’s
cryptocurrency. As such, XXX’s cryptocurrencies qualify as “financial instruments.” And
XXX’s cryptocurrency transactions therefore constitute an exempt supply of financial
services.
In summary, the ETA was recently amended to include cryptocurrency in the definition of
financial instrument in subsection 123(1). As a result of this new amendment, a
cryptocurrency-trading business is an exempt supply of financial services. Mark may
therefore exclude GST/HST returns from his voluntary-disclosure application.
145
ETA, Schedule V, Part VII.
146
ETA, s. 123(1), “financial service,” paragraphs (c), (d), (e) and (f).
147
ETA, s. 123(1), “financial instrument.”
148
Bill C-30, An Act to implement certain provisions of the budget tabled in Parliament on April 19, 2021 and
other measures, 2nd Sess, 43rd Parl, 2021.
149
ETA, s. 123(1), “virtual payment instrument.”
150
Ibid.
151
Canada Revenue Agency, Excise and GST/HST News - No. 107, February 2020:
https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/news107/news107-
excise-gst-hst-news-no-107-december-2019.html

Mr. XXX Page 45
November 23, 2021
Suggestion for Further Research: Incorporation
2018, 2019 and 2020, we recommend further research into whether he might benefit from
holding his trading portfolio in a corporation. A corporation may, for instance, allow XXX to
benefit from the small business deduction,152 which reduces the corporate tax rate on the first
$500,000 of active business income. It also permits tax deferral to the extent that profits are
left in the corporation rather than being distributed.
CONCLUSION
Characterization of CryptoCurrency Proceeds in 2017, 2018, 2019 and 2020
XXX’s cryptocurrency transactions in 2017, 2018, 2019, and 2020 constituted an adventure
in the nature of trade, and they might even comprise a trading business. As a result, the
proceeds from XXX’s cryptocurrency transactions are business income, not capital gains.
Although XXX never attended any formal courses on trading and relied on publicly available
information when deciding whether to purchase or sell cryptocurrency, he executed more
transactions than did the taxpayers in cases where transaction frequency figured heavily in
the decision. Of XXX’s total profit from his cryptocurrency transactions in 2017, about 85%
came from transactions involving BCH, BTC, and IOT. 161 of the 200 total cryptocurrency
transactions in 2017 involved BCH, BTC, IOT and ETH. XXX carried out 59 cryptocurrency
transactions in 2018 involving BTC, LTC and BTG which were responsible for 100% of his
profit. In 2019, XXX executed a total of 41 cryptocurrency transactions involving ETH and
BTC which were responsible for 100% of his losses. In 2020, XXX executed a total of 318
cryptocurrency transactions, and 149 of them involved ETH, BTC, and ADA. XXX’s
dispositions of ETH, BTC, and ADA were responsible for about 95% of his 2020 profit
involving cryptocurrency. From 2017 to 2019, XXX executed, on average, at least 154
transactions per year—similar in amount at issue in various cases.
property was meant to be traded. Case law suggests that transactions involving non-income-
bearing property indicates either an adventure in the nature of trade or a trading business.
None of XXX’s cryptocurrency holdings yielded income. Granted, the presumption
favouring trading might be rebutted by showing that XXX acquired cryptocurrency as a long-
term store of value. Yet XXX’s cryptocurrency transactions undermine this claim. XXX sold
all or almost all units in the same year that he acquired them. In 2017, he sold 98% of the
152
ITA, s. 125.

Mr. XXX Page 46
November 23, 2021
ETH units that he acquired in that year and 94% of the BTC units that he acquired in that
year. In 2018, he sold 70% of the BTC units that he acquired in that year and almost 94% of
the BTG units that he acquired 2 months prior to the disposition. In 2019, he sold 65% of the
BTC units that he acquired in that year. And in 2020, he sold 100% of the BTC units that he
had acquired in that year and that he had held during the previous year. In the same year, he
sold 100% of the ADA units that he acquired in that year. This activity proves inconsistent
with an intention to acquire cryptocurrency as a long-term store of value.
We note the following compliance issues in relation to XXX’s 2017, 2018, 2019 and 2020
tax years:
cryptocurrency transactions for the year. XXX’s 2018 income-tax return did not
report any of the profits from his cryptocurrency transactions for the year. XXX’s
2019 income-tax return did not report any of the losses from his cryptocurrency
transactions for the year.
 In 2017, XXX’s cryptocurrency transactions generated a total profit of about $317.62.
As a result, XXX’s 2017 income-tax return should have reported his cryptocurrency
proceeds on account of business income.
 In 2018, XXX’s cryptocurrency transactions generated a total profit of $811.47. As a
result, XXX’s 2018 income-tax return should have reported his cryptocurrency
proceeds on account of business income.
 In 2019, XXX’s cryptocurrency transactions generated an overall loss of $8,438.91.
As a result, XXX’s 2019 income-tax return should have reported his cryptocurrency
losses on account of business loss.
To remedy these errors, we recommend that XXX file an application under the CRA’s
Voluntary Disclosures Program. XXX’s voluntary-disclosure application should include the
following documents:


Mr. XXX Page 47
November 23, 2021

on income account (The $8,438.91 loss may be utilized to deduct XXX’s 2019 net
income.); and
 A 2020 T1 income-tax return that reports XXX’s employment income as well as
$34,256.00 in cryptocurrency proceeds on income account.
XXX’s voluntary-disclosure application need not include T1135 forms regarding his
cryptocurrency holdings during the 2017 through 2020 tax years. XXX’s cryptocurrency
does not constitute “specified foreign property” because it served as inventory in a
cryptocurrency-trading business. In addition, the total cost of XXX’s cryptocurrency
portfolio never exceeded $100,000 at any time during the period from January 1, 2017, to
December 31, 2020.
XXX’s voluntary-disclosure application need not include GST/HST returns because a

cryptocurrency-trading business constitutes an exempt supply of financial services, which
does not attract GST/HST liability.
If the VDP accepts the XXX’s voluntary-disclosure application under the General Program,
XXX will qualify for the following relief: (i) waiver of all penalties that might otherwise
apply—including gross-negligence penalties—for the 2017, 2018, 2019, and 2020 tax years;
and (ii) renunciation of criminal prosecution in relation to the subject matter of the voluntary-
disclosure application. (iii) partial cancellation of interest—generally 50%—for the 2017
taxation year. (As of the date of this memo, XXX’s 2018, 2019, and 2020 tax years do not
qualify for interest relief under the General Program. As noted above, the VDP will cancel
interest relating to a particular tax year only if that year’s return is at least three years
overdue. So, as of the date of this memo, interest relief applies only to tax years for which the
return was due by or before December 31, 2018. The 2018, 2019 and 2020 tax years all fail
to meet this condition: the return for the 2018 tax year was due in 2019, the return for the
2019 tax year was due in 2020, and the return for the 2020 tax year was due in 2021.) Even
if the CRA accepts XXX’s voluntary-disclosure application under the less-favorable Limited
Program, the CRA will still waive gross-negligence penalties and forego criminal
prosecution. (Under the Limited Program, no interest relief is available, and penalties other
than gross-negligence penalties may still apply.)
Suggestion for Further Research: Incorporation
2018, 2019, and 2020, we recommend further research into whether he might benefit from
holding his trading portfolio in a corporation, which may allow XXX to benefit from the
small business deduction.

Mr. XXX Page 48
November 23, 2021
Yours very truly,
ROTFLEISCH & SAMULOVITCH

PROFESSIONAL CORPORATION
Per:
Kevin Persaud, B.A. (Hon.), J.D.

Associate
KP:sk


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Example 3 - Memo Re Character of Crypto Income (Final)

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DELIVERED BY EMAIL: XXXXXX@gmail.

PRIVILEGED & CONFIDENTIAL

November 23, 2021

Dear Mr. XXX:

Re: Income Characterization of Proceeds from Cryptocurrency Transactions &

Rotfleisch & Samulovitch Professional Corporation 2822 Danforth Avenue T: 416-367-4222

Rotfleisch & Samulovitch Professional Corporation 2822 Danforth Avenue T: 416-367-4222

GST/HST Implications: Cryptocurrency Trading May be an Exempt Supply of Financial

QUESTIONS PRESENTED & SHORT ANSWERS

Characterization of Cryptocurrency Proceeds in 2017, 2018, 2019, and 2020

Rotfleisch & Samulovitch Professional Corporation 2822 Danforth Avenue T: 416-367-4222

Rotfleisch & Samulovitch Professional Corporation 2822 Danforth Avenue T: 416-367-4222

Compliance Issues & Recommendations for Voluntary-Disclosure Application

Rotfleisch & Samulovitch Professional Corporation 2822 Danforth Avenue T: 416-367-4222

 A 2017 T1 adjustment request that reports XXX’s $317.62 in cryptocurrency

XXX’s voluntary-disclosure application need not include GST/HST returns because a

Rotfleisch & Samulovitch Professional Corporation 2822 Danforth Avenue T: 416-367-4222

Suggestions for Further Research: Incorporation

XXX XXX was born in Canada on February 10, 1981.

Rotfleisch & Samulovitch Professional Corporation 2822 Danforth Avenue T: 416-367-4222

XXX has always been a Canadian tax resident.

Rotfleisch & Samulovitch Professional Corporation 2822 Danforth Avenue T: 416-367-4222

The remainder of this section outlines XXX’s transactions involving ETH.

From November 5, 2017, to November 6, 2017, XXX made a disposition of 1.56365336ETH

Rotfleisch & Samulovitch Professional Corporation 2822 Danforth Avenue T: 416-367-4222

On November 6, 2017, XXX acquired 0.80966113ETH for $322USD.

On November 8, 2017, XXX made a disposition of 1.9540002ETH for $582.35USD.

On November 21, 2017 XXX acquired 3.52613711 ETH for $1678.23CAD.

On December 26, 2017, XXX made a disposition of 0.27817346ETH for 0.01032962BTC.

The remainder of this section outlines XXX’s transactions involving BTC.

From November 3, 2017, to November 8, 2017, XXX made dispositions totaling

On November 8, 2017, XXX acquired 0.08324151BTC in exchange for 1316.9041IOT,

On November 8, 2017, XXX made dispositions of 0.0779078BTC for 9.4521168LTC over 4

Rotfleisch & Samulovitch Professional Corporation 2822 Danforth Avenue T: 416-367-4222

On November 12, 2017, XXX made a disposition of 0.4343729BTC for $3,649.13CAD.

The remainder of this section outlines XXX’s transactions involving IOT.

On November 8, 2017, XXX made a disposition of 1316.9041IOT for 0.08324151BTC.

Rotfleisch & Samulovitch Professional Corporation 2822 Danforth Avenue T: 416-367-4222

XXX’s 2017 Income-Tax Return

XXX’s 2018 Cryptocurrency Transactions

In 2018, XXX executed a total of 59 cryptocurrency transactions: 46 acquisitions and 13

Rotfleisch & Samulovitch Professional Corporation 2822 Danforth Avenue T: 416-367-4222

The remainder of this section outlines XXX’s transactions involving BTC.

On January 2, 2018, XXX acquired 0.07158257BTC for 4.19355132LTC.

On January 5, 2018, XXX acquired 0.0738612BTC for 0.47214397BTG.

Rotfleisch & Samulovitch Professional Corporation 2822 Danforth Avenue T: 416-367-4222

On January 2, 2018, XXX made a disposition of 4.19355132LTC for 0.07158257BTC.

On January 5, 2018, XXX made a disposition of 0.47214397BTG for 0.00738612BTC.

XXX’s 2018 Income-Tax Return

Rotfleisch & Samulovitch Professional Corporation 2822 Danforth Avenue T: 416-367-4222

XXX’s 2019 Cryptocurrency Transactions

In 2019, XXX’s cryptocurrency transactions resulted in net losses of $8,438.9117 which

In 2019, XXX executed a total of 41 cryptocurrency transactions: 30 acquisitions and 11

Rotfleisch & Samulovitch Professional Corporation 2822 Danforth Avenue T: 416-367-4222

The remainder of this section outlines XXX’s transactions involving ETH.

On December 4, 2019, XXX acquired 30.814155 ETH for 0.6199845BTC.

The remainder of this section outlines XXX’s transactions involving BTC.

On September 4, 2019, XXX acquired 0.0028941BTC for 30.4904325TUSD.

Rotfleisch & Samulovitch Professional Corporation 2822 Danforth Avenue T: 416-367-4222

On December 4, 2019, XXX made a disposition of 0.6199845BTC for 30.814155ETH.

XXX’s 2019 Income-Tax Return

XXX’s 2020 CryptoCurrency Transactions

Rotfleisch & Samulovitch Professional Corporation 2822 Danforth Avenue T: 416-367-4222

XXX used two cryptocurrency exchanges in 2020: Shakepay and Binance.