T1135 - Just the beginning?

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Re: T1135 - Just the beginning?

Post by kcowan » 03 May 2011 17:41

I think that you are out-thinking the people that put T1135 in place. I beleive it is an attempt to capture offshore holdings that are not getting reported anywhere else. Bylo has been caught in this trap which seems to indicate that they will use it for other punitive reasons.

So I think you need to develop a trust in the CRA that they will not go after you for routine holdings in a Canadian investment account.
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Re: T1135 - Just the beginning?

Post by travesty » 03 May 2011 18:08

Do US stocks held in an RRSP count?

Edit:

Answering my own question, in the negative, from the FAQ:

Code: Select all

                                        Q. I have a self-directed registered retirement savings plan (RRSP) which has
                                           over $100,000 in foreign securities. Does the trust (i.e., the RRSP) have to
                                           file Form T1135?
                                        A. A trust governed by a RRSP does not have to file Form T1135.

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Re: T1135 - Just the beginning?

Post by Bylo Selhi » 03 May 2011 18:26

kcowan wrote:I think that you are out-thinking the people that put T1135 in place. I beleive it is an attempt to capture offshore holdings that are not getting reported anywhere else. Bylo has been caught in this trap which seems to indicate that they will use it for other punitive reasons.
I wasn't "caught" for having "offshore holdings" but rather because of an administrative error (filing the T1135 a month or so late.) While I understand CRA's need to go after those "offshore holdings" their approach is ham-fisted and the penalties for innocent infractions, i.e. those where there are no "offshore holdings" and/or no income tax has been evaded, draconian. If they'd simply exempt the T1135 requirement when foreign assets like stocks and bonds are held in Canadian brokerage accounts, for which the brokers already provide them with full disclosure, they'd be able to eliminate 90% of the paper shuffling and unproductive work that the T1135 people do.

Jimbo claimed he found $11B in "efficiencies" a week after the budget was tabled and a couple of days after the election writ was dropped. He was coy about where these efficiencies would come from. Let me suggest that the T1135 department at CRA would be a good place to start looking.
So I think you need to develop a trust in the CRA that they will not go after you for routine holdings in a Canadian investment account.
I don't think this has anything to do with trusting CRA. They already know or can get information on what you've got in Canadian brokerage accounts. After all the brokers issue T-slips in respect of income and capital gains on those holdings. It's hard to imagine that the brokers would put up any fight to protect their clients' privacy from CRA.

Paradoxically the "paranoids" who are concerned that their Canadian assets are within CRA's grasp are among those who thus move their assets offshore. They're not going to file T1135s no matter how draconian the CRA makes non-compliance.
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Re: T1135 - Just the beginning?

Post by newguy » 03 May 2011 18:53

Bylo Selhi wrote:Paradoxically the "paranoids" who are concerned that their Canadian assets are within CRA's grasp are among those who thus move their assets offshore. They're not going to file T1135s no matter how draconian the CRA makes non-compliance.
Hmmmm, starting to sound like my LGR argument. :wink:

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Re: T1135 - Just the beginning?

Post by bombayshuffle » 04 May 2011 12:32

Arby wrote:
snowback96 wrote:I just re-read the instructions for the T1135 and it specifically says that you need to separately mail in your form if you "E-File". It does not say anything about "Net-File". I had previously assumed that E-File and Net-File were the same thing, but they are not. According to CRA, "EFILE is a service that lets authorized service providers send individual income tax return information to us over the Internet." On the other hand, Net-File is what you would use if you DIY. I wonder if this is just careless wording on the part of CRA??? I think you'd have a strong case if they came after you for not separately mailing in your T1135 after Net-Filing. (Of course, you're probably better off filing the form than running that risk. Better safe than sorry.)
You'e correct that the T1135 form doesn't mention Netfile, however the Netfile FAQs indicate the T1135 should be mailed. See item 7.

true, but on the back of the form,as snowback96 writes, it clearly states "E-file", it makes no metion of Netfile.
I do not use "E-file", I use 'Netfile', so as far as I am concerned they are two separate entities - it is not for a mere taxpayer to make assumptions, surely.

I am also surprised that in 2011, one pays $25 or so for software to do everything over the internet, yet one still has to purchase a stamp and envelope and post it.
still, that is irrelevant, I am just a bit worried that i find myself in exactly the same situation as bbsj below.

question is, does that open a can of worms - posting in a T1135, bearing in mind that in the past 2 years had not?

2 years' worth of $2500 fine is not really acceptable, not for evading tax, simply relying that Tax Filing software would actually file one's taxes...

bbsj wrote:I have been using Netfile via Ufile for the past several years ( and have not mailed the T1135 form separately), and two years ago they asked me to explain my Foreign Property. I sent them the TDWaterhouse T5 slips and couple of weeks later they returned my T5 slips and asked me to keep them as CRA have not kept a copy. But, they did not ask me about mailing the T1135. However, today I have printed the T1135 for 2010 and mailed it.

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Re: T1135 - Just the beginning?

Post by AltaRed » 06 May 2011 21:17

Part of the problem in Ufile speak is using 'should file' the T1135 rather than saying 'must file'. Or maybe they know something we do not.
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Re: T1135 - Just the beginning?

Post by yancy » 30 May 2011 23:46

In late 2008 I purchased in a non-registered Canadian-based account a bond greater than $100,000 (Cdn) issued by GE Capital Canada Funding Company. The tax slip issued by my broker for the 2009 tax year listed half the coupon payments as Canadian income and half as foreign income. The tax slip for 2010 listed all the coupon payments as foreign income.

All taxes were reported on my annual tax returns, but I did not file the T1135, believing this is not a foreign entity.

GE Capital Canada was incorporated in Nova Scotia, has its registered office there and its principal place of business is in Mississauga. It is a wholly owned affiliate of General Electric Capital Corporation.

Any thoughts on whether GE Capital Canada is, in fact, by CRA's definition a foreign entity?

I guess I could simply file T1135s for 2008-10 under the voluntary disclosure program on the premise that this is a non-Canadian company, but would prefer not to deal with the tax bureaucracy unless I have to.

Thanks.

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Re: T1135 - Just the beginning?

Post by kcowan » 31 May 2011 11:33

I would ask GE Capital Canada to explain why the reporting slips are not consistent from one year to the next. Based on what they tell you, you may need to seek a ruling from the CRA. This seems to be all CYA since nothing will change.

(If it was foreign interest income, was tax withheld?)
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Re: T1135 - Just the beginning?

Post by Bylo Selhi » 31 May 2011 11:51

yancy wrote:The tax slip issued by my broker for the 2009 tax year listed half the coupon payments as Canadian income and half as foreign income. The tax slip for 2010 listed all the coupon payments as foreign income.
That doesn't mean that the security is considered a foreign asset under T-1135 rules. Consider a Canadian based mutual fund that invests solely outside of Canada. Its distributions could all be foreign income every year yet the fund wouldn't be subject to T-1135 reporting.

As kcowan says, contact GE Capital about the status of their security and whether you need to report your holdings on a T-1135. (My bet is no and no.)
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Re: T1135 - Just the beginning?

Post by yancy » 01 Jun 2011 00:36

Thanks for the suggestions, kcowan and Bylo Selhi.

I contacted GE's investor relations division and they emailed me the bond's prospectus, which states GE Capital Canada Funding Co. is a "Canadian resident," which seems to rule out the need to file a T1135.

My broker suggests that the change on the tax slip from Canadian income to foreign income was part of GE Capital's financial rejigging during the financial meltdown.

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Re: T1135 - Just the beginning?

Post by Bylo Selhi » 25 Mar 2012 14:01

The saga continues. One small victory for taxpayers
The most recent T1135 case, decided this month, may provide a glimmer of hope in situations where you innocently file the T1135 late...

The judge took issue with the application of the penalty since "in this case - Mr. Douglas took reasonable actions to comply with his income tax obligations." The judge felt Mr. Douglas's conclusions were "reasonable."

The judge said it would be "unfair to penalize Mr. Douglas for failure to comply with a filing deadline in these circumstances-. Although the penalty (for late-filing the T1135) is strict - this Court has held that even strict penalties should not be applied if a taxpayer has taken all reasonable measures to comply with the legislation."

As Mr. Douglas was not "cavalier" about his need to file his T1135 and was "diligent in his compliance efforts and he acted reasonably, and competently," the judge decided to cancel the penalty assessed and awarded Mr. Douglas court costs as well.

This is a significant victory for taxpayers and suggests some sympathy may in fact be available through the court system...

If you have already been assessed a late-filing penalty, you may be best to challenge it directly in Tax Court before a similarly sympathetic judge.
This "significant victory for taxpayers" applies only to taxpayers who have the time, guts and deep enough pockets to take CRA to court over such a relatively small amount in the hope they're lucky enough to draw a "similarly sympathetic judge." I don't like those odds. Much better would be for CRA to apply some common sense in administering the ITA when it's clear that the taxpayer wasn't trying to evade tax.
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Re: T1135 - Just the beginning?

Post by IdOp » 25 Mar 2012 16:18

Thank you, that's a timely reminder to fill in this form, which I was well on my way to forgetting until the last minute.

It also reminds me that last year I asked CRA for written confirmation that they received my T1135. They provided: nothing. :( Now if I could fine them $25/day for being late. :evil:

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Re: T1135 - Just the beginning?

Post by Springbok » 25 Mar 2012 20:20

Bylo Selhi wrote: This "significant victory for taxpayers" applies only to taxpayers who have the time, guts and deep enough pockets to take CRA to court over such a relatively small amount in the hope they're lucky enough to draw a "similarly sympathetic judge." I don't like those odds. Much better would be for CRA to apply some common sense in administering the ITA when it's clear that the taxpayer wasn't trying to evade tax.
A Tax court is not like a regular court. You can quite easily defend yourself. And, CRA will often back down for small amounts because it just not worth THEIR while to go to court. And if they lose, they look bad and may perhaps not get a promotion or whatever.

No first hand experience, but I used to do consulting for CRA and this is what I was told on the QT by their auditors.

This link gives a rough idea of Tax Court and other avenues for appeal.

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Re: T1135 - Just the beginning?

Post by kcowan » 23 May 2012 09:05

FWIW I did NOT check the $100k in foreign investments this year after doing so for 3 years. I have never filed a T1135.

I have a $350K condo in Mexico and I have over $100k US investments in non-registered accounts at TDWH.
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Re: T1135 - Just the beginning?

Post by Arby » 23 May 2012 10:02

kcowan wrote:FWIW I did NOT check the $100k in foreign investments this year after doing so for 3 years. I have never filed a T1135.

I have a $350K condo in Mexico and I have over $100k US investments in non-registered accounts at TDWH.
Two questions come to mind:
- Why not file a T1135, given there are significant penalties for not reporting?
- Why announce this on a public forum, while using your real name? You'd better be extra careful in your future posts. If somebody takes offence to your posts, they could report you to CRA.

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Re: T1135 - Just the beginning?

Post by BRIAN5000 » 23 May 2012 11:55

I have never filed a T1135.
Seems to me your poking a bear with a sharp stick, hope he stays in hibernation.
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Re: T1135 - Just the beginning?

Post by kcowan » 23 May 2012 14:30

Arby wrote:If somebody takes offence to your posts, they could report you to CRA.
No problema. I determined that I checked the box in error in past years. I am clean, your honour!

(You see, I do not rent the condo. So all income gets reported in normal course to the CRA.)
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Re: T1135 - Just the beginning?

Post by scorpionman » 10 Jul 2012 09:45

This form is so complex!!

Let's say you had 10 securities. 1 was over $100k cost. The other 9 are below $100k. You report that the aggregate cost is over $100k on T1135.

Great...

1. Now for the income from these assets line, do you report the income (taxable capital gains) ONLY from the one with a cost over $100k?

2. If you own the over $100k security on margin, is margin expense part of the revenue from this security? My tax accountant said it checks out that you can include margin expense as a "negative" revenue for this line on the form.

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Re: T1135 - Just the beginning?

Post by kcowan » 10 Jul 2012 10:19

It is not clear but they use an example where the sum of two holdings is over $100k. Also you need to report the total capital gain of all dispositions during the year, not just the taxable amount. Plus you need to report any dividend income received during that year. If the disposition takes the total below $100k, you still need to report. In subsequent years, you would not.

Is this an IRA or a directly held stock account?
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Re: T1135 - Just the beginning?

Post by scorpionman » 10 Jul 2012 10:29

"you need to report the total capital gain of all dispositions during the year, not just the taxable amount"

Are you sure this is true? Another poster on this forum posted the exact opposite!

"My reading of it is that if you sold any of the property covered, whether in whole or in part, then you include that taxable capital gain (half of the actual gain or loss) together with the income earned from the property. Whether or not your taxable capital gain was later reduced or wiped out by other losses doesn't matter, because those didn't come from the foreign property.

That's how I do it, but I'm not a qualified tax expert."

(viewtopic.php?f=32&t=113917)

It's actually for a CCPC, but same as personally held.
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Re: T1135 - Just the beginning?

Post by IdOp » 10 Jul 2012 13:27

On page 3 of the T1135, Section 6, Total Income Reported, it says:
CRA wrote:Report the total amount of income (or loss) earned on the reported assets in the year. Include any taxable capital gain or loss on the disposition of the asset.
The term "taxable capital gain" is CRA-speak for capital gain after the inclusion rate is applied. For example, see the bottom of Schedule 3 to the T1 form.

That's what I was going by in making the earlier comment, but I'm still not a qualified tax expert. ;)

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Re: T1135 - Just the beginning?

Post by IdOp » 26 Jul 2012 16:17

Tim Cestnick on GlobeInvestor.com:

Yes, it is possible to fight the taxman and win.

It's the story of a man who got his $2500 fine rescinded ( :D ) by an activist judge ( :evil: ). Maybe this will embarrass CRA/the Feds into doing something, err, "reasonable"?

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Re: T1135 - Just the beginning?

Post by Bylo Selhi » 26 Jul 2012 17:21

IdOp wrote:Tim Cestnick on GlobeInvestor.com...
Jamie scooped Tim 4 months ago.
Maybe this will embarrass CRA/the Feds into doing something, err, "reasonable"?
Good luck with that.
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Re: T1135 - Just the beginning?

Post by epson600 » 21 Mar 2013 17:35

Found something while skimming over the 2013 budget.

Combating International Tax Evasion and Aggressive Tax Avoidance
# Revising the Foreign Income Verification Statement (Form T1135) to require reporting of more detailed information.

# Extending the reassessment period for taxpayers who have failed to report income from a specified foreign property on their annual income tax return and failed to properly file the Foreign Income Verification Statement (Form T1135).
http://www.budget.gc.ca/2013/doc/themes ... l-eng.html

The CRA is also in the process of developing a system that will allow Form
T1135 to be filed electronically. The CRA will announce when electronic
filing becomes available.
http://www.budget.gc.ca/2013/doc/plan/b ... 13-eng.pdf

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Re: T1135 - Just the beginning?

Post by AltaRed » 21 Mar 2013 19:20

It has been plain silly not to allow electronic filing of this form.
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