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Canadians - Tax form T1135 - Time to get serious and complete this form.


KinAlberta
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The Canadian CRA's form 1135 is one serious income tax form needing to be completed.  It's a MUST DO for those with over $100,000 in certain foreign property, traded and private securities, etc.

 

Last year I understand that the CRA granted some leniency to their requirements, but for the 2014 tax year, they are going to be serious about their reporting requirements. Failure can lead to significant fines and/or penalties.

 

So is anyone thinking about this, properly tracking their transactions, etc.  If so could you explain what and how you are doing it?

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Based on CRAs site:

 

The CRA has implemented changes to Form T1135 for the 2014 and later tax years. The changes will allow taxpayers to report aggregate amounts for specified foreign property held in accounts with registered securities dealers and Canadian trust companies rather than providing the detail of each such property. This reporting method requires taxpayers to provide the aggregate fair market value of the property in these accounts by country. In addition the T3/T5 reporting exception has been eliminated.  http://www.cra-arc.gc.ca/E/pbg/tf/t1135/README.html

 

Where did you get "traded and private securities, etc."?

 

Tks,

S

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Wonderful. I guess I'll be obliged to do more math to calculate the income earned from foreign investments in CAD. It wasn't so bad for the cost amount as I trade very infrequently. On the other hand, there are a lot of dividends.

 

Where did you get "traded and private securities, etc."?

 

The form contains a section for shares of non-resident corporations, which I guess is what the OP meant by "traded and private securities".

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I have never found the T1135 to be a particularly well explained form.  But who really cares?  Just fill it out, whether you need to or not.  I'm serious, this is like a version of the Pascal's Wager with two combinations of decisions and outcomes:

 

1) You fill out T1135, and CRA believes you needed to ==> you're good!

2) You fill out T1135 and CRA doesn't believe you need to ==> you wasted 15 minutes and a postage stamp

3) You don't fill out T1135, and CRA believes you need to ==> you get a couple thousand dollar fine

4) You don't fill out T1135, and CRA doesn't believe you need to ==> you're good!

 

 

My take is that if there is even a modicum of uncertainty, just take the 15 minutes to fill it out and buy a postage stamp to mail it in.  The fine is nasty and federal tax court is inflexible, as a gentleman by the name of Bylo discovered a few years ago...

 

SJ

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ourkid8, that looks like great news.  The last time I looked, the CRA provided a temporary solution for 2013 and clearly stated that the proposed rules were taking place for 2014.

 

The private securities comment.  I was just going by memory - I believe it included things like US T-bills, bonds etc.

 

An article from last year about "transitional" relief..

http://www.bdo.ca/en/library/services/tax/pages/tax-alert-changes-to-foreign-income-verification-statement-form-t1135.aspx

 

 

 

UNDERSTANDING THE NEW T1135

Francois Bernier / May 6, 2014

excerpt:

 

"WHAT IS SPECIFIED FOREIGN PROPERTY (SFP)?

Subject to the exceptions noted below, SFP includes:

 

-Funds in foreign bank accounts;

-Shares of foreign corporations (even if held in Canadian brokerage accounts);

-Interests in foreign mutual funds;

-Shares of Canadian corporations on deposit with a foreign broker;

-Debts owed by non-residents including bonds, debentures, mortgages, and notes receivable;

-Interests in a non-resident trust;

-Interests in a partnership that holds specified foreign property;

-Land and buildings located outside Canada (foreign rental property);

-Tangible and intangible properties located outside Canada;

-Life insurance policies issued by a foreign insurer;

-Precious metals, gold certificates, and futures contracts held outside Canada."

 

http://www.advisor.ca/tax/tax-news/understanding-the-new-t1135-151683

 

 

Canada: T1135 Reporting – A Moving Target

Last Updated: July 22 2014

Article by Michael Kukelko

MNP

excerpt:

 

 

 

"Why Worry?"

 

"... Form T1135 requires reporting by Canadian resident individuals (as well as trusts and most corporations) of foreign property holdings in excess of threshold amounts (i.e. cost amount more than CAD $100,000) to provide information to the Canadian tax authorities to address these concerns. Generally, the penalty for failure to file a Form T1135 is $2,500 for each instance of failure (i.e. for an individual taxpayer, for each year of failure). ..."

 

 

 

"An Opportunity or a Threat?"

 

For 2013 and future years, it is very important for taxpayers to ..."

 

"It's also essential to recognize that many taxpayers, often unknowingly, have not adequately reviewed their potential T1135 filing requirements in 2012 and prior taxation years. ..."

 

 

 

"One More Thing

 

Recently (July 8, 2014), CRA released a revised Form T1135 and related guidelines for 2014 and subsequent years. Essentially, CRA is extending the "transitional reporting method," with some modifications, to the 2014 and subsequent taxation year while eliminating the T3 / T5 reporting exception."

 

 

 

http://www.mondaq.com/canada/x/329226/Income+Tax/T1135+Reporting+A+Moving+Target

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Also...............

 

Property held in a registered account such as an RRSP or TFSA is not included in Specified Foreign Property.  Foreign investment property also does not include:

 

1) any property used mainly for personal use and enjoyment, such as a vehicle, vacation property, jewellery, artwork, or any other such      property, and

 

2) assets used only in an active business, such as a business inventory or the equipment and building used in a business.

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Thanks for posting this! I would have completely missed this if not for this board.

 

Looks like most individual Canadians on this board would be able to take advantage of Category 7

 

7. Property held in an account with a Canadian registered

securities dealer or a Canadian trust company

A taxpayer who held specified foreign property with a Canadian registered

securities dealer (as defined in subsection 248(1) of the Act) or with a

Canadian trust company (as determined under paragraph (b) of the definition

of restricted financial institution in subsection 248(1) of the Act) is permitted to

report the aggregate amount of all such property in this category.

 

 

Also, NB: Please note that currently Form T1135 cannot be filed electronically, yet.

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