When CRA audits charities they typically send a long questionnaire to be filled in by the charity on many different issues.  With some questionnaires, it is clear that they have a particular interest in a certain area such as foreign activities, but mostly these questionnaires are general.

 

I noticed in a general questionnaire that CRA is now asking about cryptocurrency donations.  Here are some of the questions:

 

Cryptocurrency:

  1. During the audit period, did you own cryptocurrencies?
  2. What was the estimated total cost of the cryptocurrencies you acquired?
  3. How do you keep purchase and sale records for cryptocurrency?
  4. Do you accept cryptocurrencies as a form of donation?
  5. Describe the flow of funds for a typical transaction?
  6. How do you account for the sale in your accounting system?
  7. How do you determine the CAD equivalent for your books and records?
  8. Which bank accounts are linked with your receipts and payments of cryptocurrencies?

 

 

Cryptocurrencies are treated as “gifts-in-kind” if they are donated to charity.  Unlike public securities that receive extra tax incentives when they are donated to charity, with cryptocurrencies the donor generally has to pay the capital gains but only receives the regular official donation receipt benefit.   For 99.9+% of charities answering the above questions will be easy as they have not accepted cryptocurrencies!

While there is nothing wrong with charities receiving gifts of cryptocurrency per se there are concerns in some cases that the transactions may not be properly recorded or may involve people or entities affairs are not necessarily above board or the receipt may not be accurate for various reasons.

 

CRA has a Guide for cryptocurrency users and tax professionals and a virtual currency topic – these are both geared towards individuals and for-profits.