T1135 - Just the beginning?

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Re: T1135 - Just the beginning?

Post by BRIAN5000 » 28 Mar 2013 11:09

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Bylo Selhi
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Re: T1135 - Just the beginning?

Post by Bylo Selhi » 03 Apr 2013 09:48

<RANT>
I hope Steve and Jimbo follow through on their budget proposals re the T1135. I just got the tax paperwork for our holdco. The accountant will e-file the return but she insists that I still have to print off the T1135, sign it, and then mail it to CRA's "Foreign Reporting Unit" in Ottawa :roll:

If Tony the Twit[terer] really wants to cut the cost of the federal bureaucracy...
</RANT>
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Re: T1135 - Just the beginning?

Post by Dilettante72 » 04 Apr 2013 01:46

This whole T1135 penalty business is just crazy. How do the CRA directors blinding applying the law to the letter can sleep at night is beyond me. I'll add "Doug McLean" to my list of people who do not make this planet a better place.

BTW, if anyone wonders what to do if (s)he realizes that T1135s are late, one way out is to use the Voluntary Disclosure Program:

"Justice Favreau presiding over the case at the Tax Court noted that pursuant to CRA’s policy the only means to a relief from the penalty was to apply under the Voluntary Disclosure Program" (source)

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Re: T1135 - Just the beginning?

Post by SoninlawofGus » 10 Apr 2013 13:09

I think the thread title is worth pondering. Bylo's recent experience is sobering -- being strongly penalized for what, on the surface, would seem to be a minor infraction, where the penalty clearly did not fit the "crime." I'm sad to see this happening in Canada. Being an EX-expat American, I know the penalties can be worse by orders of magnitude for similar infractions south of the border. The US FBAR and FATCA and Canada's enforcement of T1135 are following the same trends (and the very recent European G5 FATCA-like agreement), and it all revolves around foreign investments. Whether these investments are honest and legal (and reported) or not does not seem to matter very much if penalties can be assessed to the unknowing. And that's the crux of the matter for me: the IRS and CRA have known for decades that they could go after folks who didn''t know the nuances of these laws, but now they are doing that.

Seeing first-hand just how scary things are getting from an American perspective, I hope that Canada does not go too far down this road. We're already seeing a lot in the media about offshore accounts, and I have no problem with catching those who are deliberately and illegally evading taxes. But I fear that any new laws will catch a lot of otherwise innocent small fish as well. In tax law, ignorance of the law is no excuse, which means that if the CRA decides to lower T1135 filing limits to $50,000 and increases penalties, with little fanfare, and you miss filing or try to catch up -- you're busted. And "busted" seems to be right word, too. I don't know what civil or criminal infraction would be exactly equivalent to what Bylo paid, but if he filed two of those T1135 suckers a bit late, he could have paid $5000. In money terms, that's equivalent to the maximum penalty of assaulting a police officer and resisting arrest.

In tax law, what the US does can also be very relevant to the average Canadian. And it's not just estate tax. For example, the US could increase withholding tax to 30% for all non-US banks and brokerages (oh, right, they already passed a law that does this to anyone who risks banking or investing with an institution that won't comply with FATCA). It's at the point where we have to remain ever-vigilant of the content of our foreign holdings, our investment limits in those holdings, and how the tax laws work here and abroad. And we can't assume that the laws, or the application of those laws, have not changed in the past six months or so....

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Re: T1135 - Just the beginning?

Post by DavidR » 10 Apr 2013 14:01

CRA could also do a better job on deciding what must be reported.

Bank accounts outside Canada? Sure.
Interests in non-resident trusts? Sure.
Loans to non-residents? I guess so.
Shares of Canadian corporations on deposit with a foreign broker? Sure.

Foreign stocks held in your Canadian brokerage account?
>> Why must that be reported???? The firms by law issue T5 slips and T3 slips and Summaries of Dispositions for all your investments - Canadian and foreign...

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Re: T1135 - Just the beginning?

Post by deaddog » 21 Apr 2013 20:12

DavidR wrote:

Foreign stocks held in your Canadian brokerage account?
>> Why must that be reported???? The firms by law issue T5 slips and T3 slips and Summaries of Dispositions for all your investments - Canadian and foreign...
Does it include holdings inside a registered account? (RRSP or TFSA)

One more thing: The question asks for a total cost. Is that the ACB of the security or the market value?
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Re: T1135 - Just the beginning?

Post by Bylo Selhi » 21 Apr 2013 21:27

deaddog wrote:Does it include holdings inside a registered account? (RRSP or TFSA)
No. Which is even more absurd.
Is that the ACB of the security or the market value?
ACB in CA$.
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Re: T1135 - Just the beginning?

Post by Dilettante72 » 27 Jun 2013 09:17

:thumbsup: I'm celebrating, since I now only have to make sure my US ETfs all generate T5s...

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Re: T1135 - Just the beginning?

Post by MALDI_ToF » 27 Jun 2013 09:54

But if you have say $50,000 cash in a US Bank Account and $70,000 in shares of say APPL held in BMO IL would you still have over $100,000. The article gives two point of view where you would as you have over $100,000, but another that says you don't as the $70,000 isn't included. I would think you have to report you have it but not report the income. What about in the case where you own shares of something like BRK.b (or A class) that doesn't pay out a divided? I don't think that would show up on a T5 or T3

Probably safest to report it. Perhaps CRA will be more forgiving in the first few years as people figure out what must be reported.
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Re: T1135 - Just the beginning?

Post by Dilettante72 » 27 Jun 2013 10:22

MALDI_ToF wrote:But if you have say $50,000 cash in a US Bank Account and $70,000 in shares of say APPL held in BMO IL would you still have over $100,000. The article gives two point of view where you would as you have over $100,000, but another that says you don't as the $70,000 isn't included.
My understanding of "excluded" is that it's... excluded from the calculation. It would not make much sense otherwise; everybody with 100k+ of US shares at a canadian stock broker would still have to file the T1135... If the shares don't pay out dividends, then no T5 => must file. If they do pay out dividends, then even with DRIP, at some point your cash > 0 => total would be 100k+ => must file. That would defeat the purpose.

Actually, that's not completely true, since I guess you could use a margin account so the US cash balance is always in the negative, but still, the meaning is pretty clear IMO. The foreign assets that the CRA already knows about through a T5 are excluded. I'd say "about time"!


Looks like I was wrong, see other replies
MALDI_ToF wrote:What about in the case where you own shares of something like BRK.b (or A class) that doesn't pay out a divided? I don't think that would show up on a T5 or T3.
That's clear. These shares are not excluded and must be reported if 100k+.
Last edited by Dilettante72 on 28 Jun 2013 11:59, edited 1 time in total.

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Re: T1135 - Just the beginning?

Post by IdOp » 27 Jun 2013 15:13

I guess the CRA must own shares of Adobe Systems. Seems that new form, with its fill-ability, can only be displayed by their pdf reader. :evil:

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Re: T1135 - Just the beginning?

Post by snowback96 » 27 Jun 2013 17:42

Hmmmm.... I wonder how US Individual Retirement Arrangements (IRAs) are handled? The old form specifically said IRAs were exempt. This new form is silent on the topic. Does this mean they are no longer exempt and, if so, where on the form they would get reported?

And it still cannot be filed electronically. WTF?

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Re: T1135 - Just the beginning?

Post by ig17 » 27 Jun 2013 18:40

MALDI_ToF wrote:But if you have say $50,000 cash in a US Bank Account and $70,000 in shares of say APPL held in BMO IL would you still have over $100,000. The article gives two point of view where you would as you have over $100,000, but another that says you don't as the $70,000 isn't included.
You probably read the earlier version of the article. Advisor.ca updated the article today with this clarification from CRA:
Would someone have to file the T1135 if they have other foreign property, plus dividend stocks adding up to more than $100,000? (For instance, if you own $60,000 in foreign dividend stock [and get a T5] and $50,000 in rental real estate, for a total of $110,000 in foreign property.)

Advisor.ca obtained guidance from CRA on this issue.

“The requirement to file a T1135 is based on the total cost amount of all specified foreign property held at any time in the year whether all, or any portion, of this property is subject to the reporting exclusion,” says CRA spokesperson Philippe Brideau (emphasis added).

So in the example given, you would have to file the T1135 since the foreign property totals $110,000.

“The taxpayer would check the reporting exclusion box because a portion of the foreign property (i.e. $60,000 of foreign shares) received a T5 in the year and is therefore eligible for the reporting exclusion. The details of the remaining $50,000 of specified foreign property would be reported in the appropriate table on the T1135,” says Brideau.

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Re: T1135 - Just the beginning?

Post by IdOp » 27 Jun 2013 19:04

Thanks for pointing out the revised version of the article ig17, that seems a lot clearer now.

So to summarize it in my own words:

* You have to file the T1135 if you have > $100k of certain foreign property. For having to file, it doesn't matter if this property had income or not, nor whether any income was on a T5.

* If you had income on a T5, you check a box and don't have to give the details of where that property was held, country and amount.

Does that sound about right?

If it's right then the purpose of the form is:

(1) report ownership of significant amount of foreign property;
and
(2) give details of property that did not have income on a T5.

Other thoughts:
Foreign property with zero income in a year might fall under case (2) ?
Taxable capital gains realized was part of the income they wanted to know about. You report these on Schedule 3 and also on the T1135.

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Re: T1135 - Just the beginning?

Post by MALDI_ToF » 27 Jun 2013 20:19

Seems to make sense now. Value must always be reported, but income only if it was not included in a T3 or T5. Should be interesting come March next year.

If only they could have made this submittable online. I guess I should be thankful I can submit the rest of my return online rather than being forced to send it all by mail.
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Re: T1135 - Just the beginning?

Post by Dilettante72 » 28 Jun 2013 12:06

Argh, so I was wrong. So basically the story is that for anyone holding 100k+ US mostly stocks at a Canadian broker, nothing much changed. We still need to file that form, even though there's scant information to provide and we still can't file electronically. It's just that filling that form for other people holding other assets just got more complicated.

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Re: T1135 - Just the beginning?

Post by adrian2 » 28 Jun 2013 12:14

Just if anybody's wondering:
CRA FAQ wrote:A husband and wife have a joint foreign bank account and joint ownership of other foreign property. The total cost of the jointly-owned foreign property is $180,000. Are they required to file Form T1135? If yes, who has to report?

The proportionate ownership of the foreign property is based on the amount contributed by each person. For example, if both the husband and the wife each contributed $90,000 of the total cost, neither one of them would have to file, as long as this is their total interest in foreign property.

However, if the contribution by either one of them is more than $100,000, that person has to file Form T1135.
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Re: T1135 - Just the beginning?

Post by leoc2 » 28 Jun 2013 12:23

What if I have $90,000 US Equity in RRSP account and $40,000 US equity in Non Registered account. Do I need to file T1135? IIRC you don't fill it in for RRSP holdings.

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Re: T1135 - Just the beginning?

Post by MALDI_ToF » 28 Jun 2013 12:27

leoc2 wrote:What if I have $90,000 US Equity in RRSP account and $40,000 US equity in Non Registered account. Do I need to file T1135? IIRC you don't fill it in for RRSP holdings.
I think assets in an RRSP have always been excluded. What about a TFSA though?
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Re: T1135 - Just the beginning?

Post by leoc2 » 28 Jun 2013 12:57

MALDI_ToF wrote:
leoc2 wrote:What if I have $90,000 US Equity in RRSP account and $40,000 US equity in Non Registered account. Do I need to file T1135? IIRC you don't fill it in for RRSP holdings.
I think assets in an RRSP have always been excluded. What about a TFSA though?
But my total assets are $130,000. Would I need to report the $40,000?

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Re: T1135 - Just the beginning?

Post by MALDI_ToF » 28 Jun 2013 13:59

leoc2 wrote:
But my total assets are $130,000. Would I need to report the $40,000?
I think the rrsp does not count towards the calculation of the $100,000 threshold.
Does Form T1135 have to be filed for a trust governed by a registered retirement savings plan (RRSP) that has more than $100,000 in foreign investments?
A trust governed by an RRSP does not have to file Form T1135. A trust governed by an RRSP is a trust described in paragraph (a) of the definition of a trust in subsection 108(1) of the Income Tax Act and is therefore excluded from the reporting requirements.
http://www.cra-arc.gc.ca/tx/nnrsdnts/cm ... #Question6

I am also sure that if you have a mutual fund or ETF that invests in foreign stocks but is domiciled in Canada (trade on CDN exchange or is a mutual fund from a Canadian bank like the TD e-series) those are also not considered to be foreign.
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Re: T1135 - Just the beginning?

Post by scorpionman » 06 Jul 2013 01:50

"Where the reporting taxpayer has received a T3 or T5 from a Canadian issuer in respect of a specified foreign property for a taxation year, that specified foreign property is excluded from the T1135 reporting requirement for that taxation year"

Suppose the tax year reported is for a non-December calendar year end - say June 2012 to June 2013, as a corporation might have.

The T5 received by CRA from the brokerage firm will occur in April as they use a December year end. So when you file your T1135 in July 2013, you will have information on there that will only show up on the T5 of December 2013, and even then it will not be accurate for the reporting year as it includes an extra 6 months. Given this non-calendar year split in T5s, would it be allowed to still check this box and not file additional info on this form?

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Re: T1135 - Just the beginning?

Post by kcowan » 06 Jul 2013 12:08

I think so. Their intention is to not duplicate offshore investments that are already covered by existing reporting.
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