Mining and airdrops both generate crypto without a direct purchase, but the CRA treats them differently depending on context.
Mining
Mining uses computing power to validate blockchain transactions and earn new coins. The CRA distinguishes between two types:
Individual mining (hobby or small-scale): likely taxed as capital gains when you eventually sell the mined tokens. The value of the tokens at the time of mining may form the cost basis.
Mining as a business: if your mining activity is commercial in scale, with dedicated hardware, a profit motive, and a systematic approach, the CRA is likely to treat proceeds as business income. Business income is taxed at your full marginal rate.
The distinction isn't always obvious. If you're mining as a side activity rather than a primary income source, you may still be classified as running a business if you're operating in a businesslike way. A tax professional can help you assess your specific situation.
Airdrops
The CRA hasn't formally addressed airdrop taxation. The conservative position, and the one most tax professionals recommend, is to treat airdrops as income at the time of receipt, based on fair market value in CAD.
Summ categorises airdrops as a separate transaction type in its export, so your accountant can adjust the treatment if needed for your specific situation.
Once you receive airdropped tokens, any future gain or loss on disposal is a capital gains event. Since the CRA uses ACB, your cost basis for airdropped tokens is the fair market value at receipt, not zero, unless the tokens had no market value at that point.
Record keeping
For both mining and airdrops, keep records of:
- The date of receipt
- The fair market value in CAD at that date
- The quantity received
- The source (mining pool, protocol, etc.)
Without this, calculating your cost basis later becomes very difficult.
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