Red Pulse ICO – Invested and Moved to Exchange for Sale

Question

Hi

I see you’ve helped others with crypto tax issues, hopefully you can help me with my question.

I recently invested in the new Red Pulse token ICO. I invested around $2,000 and I’ll be selling eventually once the tokens are listed on a new exchange (hoping for bitfinex or Bitrex). I expect (or this is my thesis) that the coins will appreciate significantly from my original entry price.

My question is this…should I transfer these coins to a Canadian corporation so I can pay less tax in the future when I sell them?

Is there any other way of saving on tax?

Thanks

XXXX

Answer

Hi XXXXX

Congrats on getting a piece of the Red Pulse ICO, people seem to be excited about this one. I’m not sure if there’s any real advantage to transferring in your coins to a new corporation unless you’re worried about outside liability issues and you want to use the corporation as a credit proofing vehicle. If you need this protection you’ll need to make special elections under section 85 of the Canadian income tax act to ensure the coins are not deemed to be disposed when transferred to the corp.

If you already had capital in an existing corporation it would have made sense to use those funds to purchase the RPX ICO, however form your email it does not sound like this is the case.

If you’re interested on saving tax on the eventual sale I would suggest not converting the RPX coins to any other crypto currencies or cash (you’ll likely have to go to Ether or Bitcoin before cash). If you make a conversion you’ll have a disposition of the coin for tax purposes and will potentially incur a capital gain. That would only occur however if the coin appreciates in value relative to the coin purchased, for example Bitcoin or Ether.

If you hold on to your RPX coins and don’t convert them you won’t be required to pay tax on the gain until such time as they are converted.

Hope that helps.