T1135 - Just the beginning?

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crystals
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Re: T1135 - Just the beginning?

Post by crystals » 17 Apr 2011 00:08

Another question re T1135. Let's say the taxpayer only owns shares cost >Can$100,000 from one corporation. Does he have to file T1135 if
(a) the corporation is registered in Canada, and has no operation outside of Canada;
(b) the corporation is commonly known to be Canadian, but has a substantial business outside of Canada. For example, Research In Motion
(c) the corporation is commonly known to be non-Canadian, but has a substantial business in Canada. For example, Microsoft or Ford.
(d) the corporation is not registered in Canadian and has not operation in Canada;
The answers to (a) and (d) are obvious. Is there any room for debate in cases (b) and (c)?
If one owns shares of "Microsoft", are all these shares of a US corporation? Or can he consider he owns some shares of "Microsoft Canada", and some shares of "Microsoft USA" , and some "Microsoft China", etc.? That way, his foreign shares may not exceed $100,000.

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Re: T1135 - Just the beginning?

Post by kcowan » 17 Apr 2011 08:46

crystals wrote:(4) Is there a free software that has T1135 and support EFile?
Uile supports it and I submit it just in case for our Mexican condo. It might be free depending on your income, or age. But for most working people, it is not.

(The reason I submit it is that, although we do not rent out the condo now, we might do so in the future for a number of reasons.)
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Re: T1135 - Just the beginning?

Post by Arby » 17 Apr 2011 10:19

You can't Efile the T1135 form. If your tax software produces a T1135, you need to print out the T1135 and mail it to CRA. You can still Efile the rest of your tax package except for the T1135.

Excerpt from the T1135 form:
If you do not have to file a tax return or a partnership information return, or you
use E-file, send this statement separately to
:
Ottawa Technology Centre
Data Assessment and Evaluations Program
Foreign Reporting Unit
875 Heron Road
Ottawa ON K1A 1A2
BTW, you asked about Efile, but if you actually meant NetFile, the same restrictions mentioned above also apply to NetFile, i.e. you have to print out the T1135 and mail it separately when NetFiling.
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Re: T1135 - Just the beginning?

Post by Norbert Schlenker » 17 Apr 2011 10:45

crystals wrote:Another question re T1135. Let's say the taxpayer only owns shares cost >Can$100,000 from one corporation. Does he have to file T1135 if
(a) the corporation is registered in Canada, and has no operation outside of Canada;
(b) the corporation is commonly known to be Canadian, but has a substantial business outside of Canada. For example, Research In Motion
(c) the corporation is commonly known to be non-Canadian, but has a substantial business in Canada. For example, Microsoft or Ford.
(d) the corporation is not registered in Canadian and has not operation in Canada;
The answers to (a) and (d) are obvious. Is there any room for debate in cases (b) and (c)?
If one owns shares of "Microsoft", are all these shares of a US corporation? Or can he consider he owns some shares of "Microsoft Canada", and some shares of "Microsoft USA" , and some "Microsoft China", etc.? That way, his foreign shares may not exceed $100,000.
(b) no, (c) yes.

The rest is overthinking IMHO. Just file the form.
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Re: T1135 - Just the beginning?

Post by AltaRed » 17 Apr 2011 12:32

Interesting. I have yet to mail in the T1135 form separately from Netfiling the returns. I suppose I had better get with the program,eh?
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Re: T1135 - Just the beginning?

Post by Bylo Selhi » 17 Apr 2011 16:23

crystals wrote:(1) EFile everything else, print and hand fill T1135 then mail in T1135 only;
The T1135 is completely separate from a tax return as far as CRA is concerned. It's your responsibility to get that form to Ottawa on time if you want to avoid heavy penalties, even if your foreign assets haven't changed and even if you've declared and paid tax on income from those assets via a T1 or T2 return. See upthread (last year) for a taste of the horrorshow that can ensue if your T1135 is late.

Most tax software produce asks if you have more than $100k in foreign assets and create one as a matter of course. I'm surprised that yours doesn't. Note that some software has a Q&A that asks at some point if you have more than $100k in foreign assets. You have to reply, "yes" before it includes a T1135 in your return.
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Re: T1135 - Just the beginning?

Post by snowback96 » 17 Apr 2011 16:58

I prepared my taxes with UFile (which produces a T1135). I printed and mailed in my return (with T1135 attached) as opposed to NetFiling. I used the mailing label CRA sent me which means my return went to Winnipeg from what I recall. Can I assume this is fine and I do not need to send another copy of the T1135 form to the Ottawa Technology Centre in Ottawa???
Never mind, I just answered my own question. Reading the instructions, it's pretty clear that this is only an issue if you do not have to file a return or if you "E-File". Chalk one up for us Luddites! :thumbsup:
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Re: T1135 - Just the beginning?

Post by DavidR » 17 Apr 2011 17:02

snowback96 wrote: I prepared my taxes with UFile (which produces a T1135). I printed and mailed in my return (with T1135 attached) as opposed to NetFiling. I used the mailing label CRA sent me which means my return went to Winnipeg from what I recall. Can I assume this is fine and I do not need to send another copy of the T1135 form to the Ottawa Technology Centre in Ottawa???
Correct. If you 'paper-file' your T1, they want the T1135 sent with the T1.
If you are filing your T1 electronically (or not filing a T1 at all), they want the T1135 to be mailed to the address mentioned on the form (ie. Ottawa Technology Centre).

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Re: T1135 - Just the beginning?

Post by crystals » 17 Apr 2011 17:39

Thanks everyone for your replies.
Studio Tax does have a check box for foreign property, but it doesn't pull in the T1135 form.
So I'll just print the form from CRA site, and send it in through postal mail after EFile.

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Re: T1135 - Just the beginning?

Post by Phil D » 17 Apr 2011 18:55

If I hold foreign currency outside of Canada, know I have to report it on a T1135 if my total foreign assets exceed $ 100,000. And I have to report the value of foreign stocks, even if they are held in a brokerage in Canada.

However, if I hold foreign currency in a Canadian bank I have assumed that this amount is not reportable and does not count towards the $ 100,000.

Anyone disagree with this assumption ?

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Re: T1135 - Just the beginning?

Post by adrian2 » 17 Apr 2011 20:03

Bylo Selhi wrote:In part to prove to adrian2 that I read more widely than just the Red Star, this from today's Notional Pest, suggests that CRA's casting its T-1135 net far and wide. And worse, their catches are being upheld in tax court.

Own foreign securities? You may be fined $2,500
I appreciate you trying to make a proof, and some funny bon mots to boot, (although none is required to continue to be my friend :) ), but your link above is broken. A working copy can be found here.

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Re: T1135 - Just the beginning?

Post by kcowan » 18 Apr 2011 08:18

Phil D wrote:However, if I hold foreign currency in a Canadian bank I have assumed that this amount is not reportable and does not count towards the $ 100,000.

Anyone disagree with this assumption ?
I think you are correct. Such holdings get reported. They are searching for holdings that are not reported routinely to Ottawa.
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Re: T1135 - Just the beginning?

Post by Bylo Selhi » 18 Apr 2011 09:42

kcowan wrote:
Phil D wrote:Anyone disagree with this assumption ?
I think you are correct. Such holdings get reported. They are searching for holdings that are not reported routinely to Ottawa.
Don't be too sure. Many of the people (including me) who have been heavily penalized for not filing or late filing T1135s were holding US securities in their Canadian brokerage accounts. Presumably those assets are equally reported routinely, at least indirectly by way of T-3s and T5008s on income and capital gains. Yet see the update link to Golombek that adrian2 provided.

There may be an exception for currency but I'd be very careful before making any assumptions.
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Re: T1135 - Just the beginning?

Post by AltaRed » 18 Apr 2011 09:43

Phil D wrote:However, if I hold foreign currency in a Canadian bank I have assumed that this amount is not reportable and does not count towards the $ 100,000.
That has always been my assumption as well. I have USD cash in my brokerage account that I do not include in the total.
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Re: T1135 - Just the beginning?

Post by kcowan » 18 Apr 2011 10:29

Bylo Selhi wrote:Many of the people (including me) who have been heavily penalized for not filing or late filing T1135s were holding US securities in their Canadian brokerage accounts. Presumably those assets are equally reported routinely, at least indirectly by way of T-3s and T5008s on income and capital gains. Yet see the update link to Golombek that adrian2 provided...
Do you mind supplying some details as to what got you offside with the CRA and how much the fine was?
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Re: T1135 - Just the beginning?

Post by Bylo Selhi » 18 Apr 2011 10:42

kcowan wrote:Do you mind supplying some details as to what got you offside with the CRA and how much the fine was?
Read all the way upthread ;)
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Re: T1135 - Just the beginning?

Post by kcowan » 18 Apr 2011 11:05

Bylo Selhi wrote:
kcowan wrote:Do you mind supplying some details as to what got you offside with the CRA and how much the fine was?
Read all the way upthread ;)
Thanks. Do you think the fact it was in a holdco was a factor? $2500! Wow an expensive lesson for tardiness. It seems you would have gotten a $2500 late filing fee too. Is there any chance that they are holding that back in case you file an objection?
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Re: T1135 - Just the beginning?

Post by IdOp » 18 Apr 2011 11:44

AltaRed wrote:
Phil D wrote:However, if I hold foreign currency in a Canadian bank I have assumed that this amount is not reportable and does not count towards the $ 100,000.
That has always been my assumption as well. I have USD cash in my brokerage account that I do not include in the total.
I think this is correct too. On page 2 of the Instructions for the form, it says Specified Foreign Property includes "Funds in foreign bank accounts". Surely that would have to be written quite differently if they also meant to include foreign funds in Canadian bank accounts. What is missing is below that, under "Specified foreign property does not include", where they don't explicitly exempt funds held in Canada. It would be clearer if they did say that. Turning to page 3 of the Instructions, under Type of Property, the reference to funds (as in money) occurs at "1. Funds held outside Canada". Again there is no indication that funds held in Canada would count.

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Re: T1135 - Just the beginning?

Post by Bylo Selhi » 18 Apr 2011 13:07

kcowan wrote:Do you think the fact it was in a holdco was a factor?
Not at all. Recall that (a) the holdco had been filing T-1135s for years, (b) the assets were held at TDW Canada, who issued T-slips on the income they generated and (c) the holdco paid out all income to shareholders so it didn't owe any taxes directly. IOW there was no tax evasion, attempted or otherwise. It was simply a simple clerical error on our part. The taxpayers of Canada didn't lose a cent due to our tardiness.
It seems you would have gotten a $2500 late filing fee too. Is there any chance that they are holding that back in case you file an objection?
No tax was/is owing. They've got nothing on their side other than poorly-drafted legislation that they're exploiting gratuitously.

The only reason this doesn't get more traction in the news, e.g. like the penalties for people who "overcontributed" to the TFSA out of confusion about the rules, is that in this case, by definition, the victims all have at least $100k in "foreign" assets. That not only suggests to the general public that we're "rich" but also that we're either unpatriotic or tax evaders or both.
IdOp wrote:Surely that would have to be written quite differently if they also meant to include foreign funds in Canadian bank accounts.
Again, don't be too sure. For example, is a debt obligation issued by government of Canada in US$ considered foreign assets? Is a debt obligation issued by the US Treasury in US$ held in a Canadian brokerage account considered foreign? What about a debt obligation issued by an overseas government that's in CA$ held with the same Candian broker?

IMO, either get it clearly in writing, i.e. the legislation or a written ruling from CRA, or take five minutes and a postage stamp to send them a T-1135. If the assets are held at a Canadian (or US) financial institution there's no privacy issue because they already know you have it by way of at least T-slips (or information sharing with IRS.) If it's held elsewhere, then you may have some ethical or philosophical issues.
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Re: T1135 - Just the beginning?

Post by IdOp » 18 Apr 2011 13:47

Bylo Selhi wrote:[Again, don't be too sure. For example, is a debt obligation issued by government of Canada in US$ considered foreign assets? Is a debt obligation issued by the US Treasury in US$ held in a Canadian brokerage account considered foreign? What about a debt obligation issued by an overseas government that's in CA$ held with the same Candian broker?
Those examples sound like marketable securities rather than currency, checks and drafts (negotiable instruments), so you'd have to read, e.g., part 3. on page 3. The original question by Phil D sounded like he was basically talking about currency on deposit at a bank or broker, and my comments were limited to that case.

Don't get me wrong, this form and its instructions are flawed in so many ways it isn't even funny.

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Re: T1135 - Just the beginning?

Post by Bylo Selhi » 18 Apr 2011 14:08

IdOp wrote:Those examples sound like marketable securities rather than currency.
Fair enough. I was also thinking of the requirement to declare $10k at the border where the definition of "currency" and "monetary instruments" is quite broad.

My point is simply that if in doubt, submit. It's completely benign (unless you're breaking the law in the first place.)
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Re: T1135 - Just the beginning?

Post by pianoboy » 18 Apr 2011 17:00

Hello all -- I've just joined. Awesome discussion so far. I've got a related T1135 question for you, regarding the definition of a 'foreign bank account':

As you know, the T1135 is required for "funds in foreign bank accounts". So forget stocks, etc., and say I just have $100,000+ USD cash sitting in an account with OptionsXPress Canada. What I'm interested in determining is whether this is deemed to be a Canadian account or foreign account. Here's why it is ambiguous:

OptionsXPress Canada is actually headquartered in the U.S., *however*, they use a Canadian carrying broker / clearing agency called Penson Financial Services, located in Canada, to serve Canadian customers. They state that Penson is the "custodian of customer assets", among all other duties related to account management. So technically, I believe my funds are being held by a Canadian carrying broker (Penson) in an account sitting in Canada. But the CRA may view Penson as just being a proxy to OptionsXPress, an American company. Both OptionsXPress Canada and Penson are members of the CIPF and IIROC.

Any thoughts? Note: I don't think Interactive Brokers Canada has this ambiguity since they are actually headquartered in Canada.

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Re: T1135 - Just the beginning?

Post by kcowan » 18 Apr 2011 20:13

The T1135 allows you to select just one foreign country. What happens if you aggregate your holdings across national boundaries? e.g. a condo in Mexico, a bank account in Mexico, a bank account in the US and some US holdings in a several Canadian brokers?
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Re: T1135 - Just the beginning?

Post by OhGreatGuru » 18 Apr 2011 20:28

kcowan wrote:The T1135 allows you to select just one foreign country. What happens if you aggregate your holdings across national boundaries? e.g. a condo in Mexico, a bank account in Mexico, a bank account in the US and some US holdings in a several Canadian brokers?
Write out a list, staple it to the form, and let CRA figure out how to enter it in their computer.

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Re: T1135 - Just the beginning?

Post by Peculiar_Investor » 18 Apr 2011 20:37

kcowan wrote:The T1135 allows you to select just one foreign country.
As you sure? From T1135 - Foreign Income Verification Statement you are asked: "Where are the above investments located? (Check appropriate box(es))". There are boxes for US, UK, Europe (other than UK), Southeast Asia, Caribbean, and Other.

From my read of the document, there is no need to provide a list of assets, just a list of six Types of Property, with a check box required based on the "total cost of investment" for each type, +1 M, +700K, +500K, +300K, +100K and Less than 100K.
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