Nicolas Godbout, fiscaliste et planificateur financier, M. Fisc., Pl. Fin

Can we report capital gains on cryptocurrencies in our spouse’s income tax return?

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Hi Nicolas,

I have a question regarding capital gains for next year (2021). Can I report 100% capital gains on cryptocurrency (or some% at least) to my wife, since we are married and the investments are made from our joint bank account? In addition, investment decisions are taken jointly.

Mr L.

Hello Mr L.,

It is the attribution rules and the concept of beneficial owner that are at stake here.

Income from cryptocurrencies – such as Bitcoin and Ethereum, to name a few – must be reported by their beneficial owners. Beneficial ownership is a question of fact, but if the original savings come from both of you, you are both owners and you will need to report it pro rata to your down payment.

The fact that you are married does not change that; we cannot decide who will declare the income according to what is tax advantageous. Rules prevent giving funds/investments to the spouse so that it is her and not you who is taxed on the income. This is called the attribution rules.

These rules provide that the author of the transfer (you) will have to tax on the income generated by the sums which have been given to the spouse. There are many exceptions. For example, if we lend to the spouse and charge a minimum interest to the latter, but for this, it would be necessary to demonstrate that there was really a loan and the interest should have been paid before a specific date (prescribed rate spousal loan).

So in your case, you have to determine who put the money in the joint account. These are the people who will have to impose themselves proportionately. I recommend that you talk with one of our tax experts, because there are nuances to consider and I do not have all the information in hand to properly advise you.

Nicolas Godbout, M Fisc., Pl. Fin