I'm bullish on Bitcoin longterm and think it will appreciate well in the coming year or so and overall in the next few years (despite still being volatile).
If one were to borrow and invest in a non registered account:
1. Can you write off the interest expense if you buy Bitcoin from an exchange and hold in cold storage?
2. If you buy an etf -and can write off the interest expense- what are the trade offs in buying a spot etf (FBTC) vs. a yielding etf (BTCY.B)?
My thought is the monthly dividend payment on a yielding product would be about twice the interest expense in this case so that would be a benefit over the spot etf if there's sideways price action or bitcoin volatility. Can you comment on the basic tax implications of this plan as well as the investment plan. All things considered would it be preferable to own the spot etf? Any other thoughts or suggestions would be welcome.
Thanks very much
To deduct interest, an investment needs to have to pay, or the expectation to pay, dividends or interest. If only capital gains, interest is not deductible. If holding in a wallet, it would be hard to argue it earns interest. However, if one buys an ETF and holds it in an account with other interest/dividend securities, then it is deductible. As long is there is some incoming income. With multiple securities one cannot tell which security is being margined. On distributions, tax will be a combination of capital gains and return of capital, primarily. Investors have complained that BTCY.B does not track the spot price very well. It is up 62% this year vs BTC spot up 69% (but higher if converted to C$. Still, considering the income pay out, we would not consider that too bad. With spot, no tax is payable until sold. We would lean to spot. If BTC is going to 'run', we would rather have it not encumbered by covered calls, which could limit (relative) gains under such conditions.