T1135 - Just the beginning?

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Re: T1135 - Just the beginning?

Post by kcowan »

Yes I know about the Xs but it does not seem to make sense. Is stapling a list really the preferred method?
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T 1135

Post by bpither »

Check boxes for T1135
I am a Canadian resident and have US$73,000 cash and US$32,000 in US stocks in my non registered TD Waterhouse trading account. No other foreign (reportable) property.

Under "Type of Property" do I tick Box 1 (73,000) and 2 (32,000) "Less than 100,000"?

Or do I even need to file?
Last edited by bpither on 23 Apr 2011 00:18, edited 1 time in total.
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Re: T1135 - Just the beginning?

Post by BRIAN5000 »

Why are you ticking any box's?

You own over $100,000 in foreign investments but the cash is in a Canadian "US account" so do you need to fill out a T1135?

You don't need to report the cash, only the stocks, which are under $100,000?

http://www.cra-arc.gc.ca/tx/nnrsdnts/cm ... 5-eng.html

Foreign investment property that must be reported includes:

•amounts in foreign bank accounts
•shares in foreign companies
•interests in non-resident trusts
•bonds or debentures issued by foreign governments or foreign companies
•interests or units in offshore mutual funds
•real estate situated outside Canada
•other income-earning foreign property.

You only have to report "specified Foreign property" the way I read it that is not Us cash held in a Canadian account?
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Re: T1135 - Just the beginning?

Post by adrian2 »

So US$ cash does not count apparently, which leads to the following hypothetical scenario: you have a margin account, no US stocks or cash initially, and you buy $100k of a US stock on margin.
Your US account looks like:
XYZ current value = $100k
cash = -$100k
equity = $0
available margin = -$30k (assume you have more than enough margin available on the C$ side not to get a margin call).

This results in having to file T1135 for the year, even though your net US$ equity is zero?

Of course, using options to achieve a similar net exposure means no T1135 to be filed...
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Re: T1135 - Just the beginning?

Post by BRIAN5000 »

Examples - The following are examples of situations where a taxpayer would be required to file a T1135 return:

An individual owns shares in a non-resident corporation with a cost amount of $75,000 and a bank account in the United States with $35,000 on deposit. The return should be filed as the total cost amount of all specified foreign properties owned exceeds $100,000.
I can't find an example of $75000 stocks and $35,000 held in a Canadian Brokerage account?

http://www.can-offshore.com/tax-plannin ... 2-ccra.htm

Oh here it is, I think?

but does not include
(o.1) a right with respect to, or indebtedness of, an authorized foreign bank that is issued by, and payable or otherwise enforceable at, a branch in Canada of the bank,
http://www.taxwiki.ca/ITA+Section+233.3#(1)("specified foreign property")
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Re: T1135 - Just the beginning?

Post by bpither »

Brian5000

At first I thought the same, then I read http://www.jamiegolombek.com/printfrien ... le_id=1082. In particular the first sentence refers to T1135
If you own shares of Citigroup, Ford or Microsoft in your Canadian non-registered brokerage account, you could be facing huge penalties and interest for non-disclosure of these "offshore" assets, even if you fully included any dividends received or capital gains realized on your Canadian tax return.
and
While the requirement to disclose truly offshore or foreign investments can be justified as a means to aid the CRA's enforcement under our self-reporting, worldwide income taxation regime, the requirement to disclose foreign investments held in Canadian brokerage accounts seems to make little sense and can lead to severe penalties even if the foreign income from the "non-disclosed" investments was fully reported.
So what do you make of that? I mentioned the cash component because I realized a small capital gain (on a total US dollar cash amount of over 100,000 CDN) in my non registered account when I exercised Norbert's Gambit (Cdn Dollar purchased stock on the TSX sold in NY, and proceeds journaled into US cash account). I consider this is a part of "Total income reported on your tax return in the year from the above assets".

It doesn't take long to fill in the form even if the aforementioned scenario is not applicable ... and it may well be by an overzealous CRA enforcer. A simple (well I'd have to wait on the phone a bit longer than it takes to fill it in) phone call to CRA is probably the better approach :roll: .

Back to the up thread mentioned question ... which box should I tick?
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Re: T1135 - Just the beginning?

Post by Arby »

I found another issue with the ambiguous wording on the T1135. I have $100k of US-based shares held in my Canadian broker account. On the T1135 I tick the box for Type of Property #2 "Shares of non-resident corporations". But what box do I tick for "Where are the above investments located?" Does the question mean "where are the shares located" (which is in Canada in my Canadian broker account), or does it mean "where are the non-resident corporations located" (which is in the USA)?

On a related note ... I Netfiled in a rush a few weeks ago, as I had to leave town on a family emergency. I thought I had also mailed my T1135 at the same time, but when I returned home I couldn't recall if I did mail the T1135. I called CRA and asked if they could check my account to see if they had received my T1135. CRA said it would probably be 3 or 4 weeks before my T1135 information would be posted, so CRA suggested I send a duplicate T1135 just to be safe.
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Re: T1135 - Just the beginning?

Post by snowback96 »

Arby wrote:I found another issue with the ambiguous wording on the T1135. I have $100k of US-based shares held in my Canadian broker account. On the T1135 I tick the box for Type of Property #2 "Shares of non-resident corporations". But what box do I tick for "Where are the above investments located?" Does the question mean "where are the shares located" (which is in Canada in my Canadian broker account), or does it mean "where are the non-resident corporations located" (which is in the USA)?
I would bet that the US-based shares "held" at your Cdn broker are in fact "held" by a US-based custodian (through some sort of arrangement with your Cdn broker).
Arby wrote:On a related note ... I Netfiled in a rush a few weeks ago, as I had to leave town on a family emergency. I thought I had also mailed my T1135 at the same time, but when I returned home I couldn't recall if I did mail the T1135. I called CRA and asked if they could check my account to see if they had received my T1135. CRA said it would probably be 3 or 4 weeks before my T1135 information would be posted, so CRA suggested I send a duplicate T1135 just to be safe.
Hmmmm... 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.)
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Re: T1135 - Just the beginning?

Post by Arby »

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.
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Re: T1135 - Just the beginning?

Post by bbsj »

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 DavidR »

[rant]
When will CRA smarten up and include it in the electronic submission?

[conspiracy theory]

They enjoy much higher revenues from all the penalties they can charge for failure to file.

[/conspiracy theory]
[/rant]
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Re: T1135 - Just the beginning?

Post by snowback96 »

So why even bothering to Net-File??? Either way, you need to mail something to CRA. Might as well just mail the entire return and lower the odds that they later ask for a copy of a T5 or other information request.

Plus, by mailing the entire return plus T1135 you'll know that they must have received the T1135 when you get your refund. By mailing the T1135 separately, you run the risk that it gets lost in the mail (unless you pay for registered mail). I don't particularly care if my refund comes 3-4 weeks later. I'd rather have piece of mind regarding CRA's receipt of all forms.
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Re: T1135 - Just the beginning?

Post by Bylo Selhi »

DavidR wrote:[rant]
When will CRA smarten up and include it in the electronic submission?

[conspiracy theory]

They enjoy much higher revenues from all the penalties they can charge for failure to file.

[/conspiracy theory]
[/rant]
[rant]
When will CRA smarten up and exempt foreign securities held in Canadian brokerage accounts from the T1135 requirement? (You'd think that doing so would cut that department's incoming flow of paper by at least 90% and curry favour for whichever party came up with this brilliant idea.)

[conspiracy theory]

They enjoy much higher revenues from all the penalties they can charge for failure to file.

[/conspiracy theory]
[/rant]
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Re: T1135 - Just the beginning?

Post by IdOp »

snowback96 wrote:Plus, by mailing the entire return plus T1135 you'll know that they must have received the T1135 when you get your refund.
Very true, and it's what I do too. What worries me though, and perhaps overly so, is that even though they got it, they may lose it. This would not be a big deal, except that the penalties for not filing are so severe and if they lose it at an early stage you can bet they'll say you never filed it.

What really bugs me (I'm repeating myself from way upthread here) is that they don't say on the Notice Of Assessment that "we have received your T1135 form". If they are silent about this again this year, I really have more than half a mind to write them and request confirmation of receipt in writing. <rant>Let it p*** them off. :evil: </rant>
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Re: T1135 - Just the beginning?

Post by snowback96 »

IdOp wrote:If they are silent about this again this year, I really have more than half a mind to write them and request confirmation of receipt in writing. <rant>Let it p*** them off. :evil: </rant>
That's smart. Always good to draw attention to yourself! :thumbsup:
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Re: T1135 - Just the beginning?

Post by kcowan »

Perhaps this is obvious but when you have over $100k in 2 foreign countries, do you have to submit 2 T1135 forms?
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Re: T1135 - Just the beginning?

Post by IdOp »

snowback96 wrote:
draw attention to yourself
A valid concern ... which has led to some hesitation. Still, a polite
request for confirmation shouldn't draw their ire. And, if they have the
right to fine you $2,500 for not submitting the form, shouldn't one have
the right to a confirmation when one does submit the form?

But your comment led me to a better idea: Submit the request for confirmation
right with the tax return. This has some advantages:

* Lower cost. No need for a separate letter later on.
* Much easier and less annoying for CRA. They don't have to go digging up your return several months later.
* The T1135 is right there with the request. (They haven't lost it yet.)

Sounds like a workable approach to me.
kcowan wrote:do you have to submit 2 T1135 forms?
I think one form will do, just check all appropriate boxes that apply
in the "Where are the above investments located?" area.
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Re: T1135 - Just the beginning?

Post by Bylo Selhi »

IdOp wrote:But your comment led me to a better idea: Submit the request for confirmation right with the tax return.
An even better option IMO is to attach a cheque to the T1135. Make a photocopy of the two for your records and then wait for the cheque to be cashed. Your cancelled cheque or scanned image with CRA's date stamp on the back is your proof that they got the T1135 and when they got it.

If you're expecting a refund, make the cheque for a nominal amount and indicate clearly that it's an installment payment for tax year 2011. This is far cheaper and more effective than registered mail. It even avoids the need to go to a post office to get the envelope registered.
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Re: T1135 - Just the beginning?

Post by kcowan »

IdOp wrote:
kcowan wrote:do you have to submit 2 T1135 forms?
I think one form will do, just check all appropriate boxes that apply
in the "Where are the above investments located?" area.
I suppose this will get really complex when TD has us trading directly on foreign exchanges!
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Re: T1135 - Just the beginning?

Post by Arby »

Arby wrote:I have $100k of US-based shares held in my Canadian broker account. On the T1135 I tick the box for Type of Property #2 "Shares of non-resident corporations". But what box do I tick for "Where are the above investments located?" Does the question mean "where are the shares located" (which is in Canada in my Canadian broker account), or does it mean "where are the non-resident corporations located" (which is in the USA)?
I spoke with CRA this morning and they indicated the question means "where are the shares located". Since the shares are held in my Canadian broker account, CRA said I should tick the box for "Other" (since there is no box for Canada).
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Re: T1135 - Just the beginning?

Post by IdOp »

Bylo Selhi wrote:An even better option IMO is to attach a cheque to the T1135. Make a photocopy of the two for your records and then wait for the cheque to be cashed. Your cancelled cheque or scanned image with CRA's date stamp on the back is your proof that they got the T1135 and when they got it.
Interesting idea. I would say that logically, it does not constitute proof of filing the T1135 though. A cancelled cheque is proof they cashed the cheque only, you might have removed the T1135 after taking the photocopy and before mailing. In practice though, yes, why would anyone do that.

I think a written statement from them about the T1135 is technically more binding, and contains an element of protest by making this reasonable request. If enough people did it who only hold foreign stocks in a Canadian brokerage account, CRA might try to simplify their life. (Dreaming ...)
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Re: T1135 - Just the beginning?

Post by kcowan »

Arby wrote:I spoke with CRA this morning and they indicated the question means "where are the shares located". Since the shares are held in my Canadian broker account, CRA said I should tick the box for "Other" (since there is no box for Canada).
Oh oh! That means that I have to report all my US holdings and associated revenue along with my Mexican condo that generates no revenue. Now this seems to be totally useless exercise. Thank you CRA. I would have expected no less! :evil:
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Re: T1135 - Just the beginning?

Post by Bylo Selhi »

IdOp wrote:Interesting idea. I would say that logically, it does not constitute proof of filing the T1135 though. A cancelled cheque is proof they cashed the cheque only, you might have removed the T1135 after taking the photocopy and before mailing. In practice though, yes, why would anyone do that.
You're starting to sound like a "birther." ;)

When you send a registered letter all that you've "proved" is that CRA got the envelope. Yet that's sufficient proof in a court of law that they received the contents as well. Otherwise you're committing fraud and/or perjury, the penalties for which are much more serious than a $2,500 fine.
I think a written statement from them about the T1135 is technically more binding, and contains an element of protest by making this reasonable request. If enough people did it who only hold foreign stocks in a Canadian brokerage account, CRA might try to simplify their life. (Dreaming ...)
I agree on both the concept — and the futility ;)
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Re: T1135 - Just the beginning?

Post by IdOp »

Bylo, I guess it could come down to what a judge would decide it. But putting that aside, I do think your idea has real value, thanks. I took a picture of the return with the cheque and the T1135. At the least it could be a viable fall-back, at no real cost.

I expect it's not likely to be needed; it's more the principle of having to submit and sign a separate (from the tax return) form and getting no acknowledgment by default for having complied.
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Re: T1135 - Just the beginning?

Post by travesty »

I'm curious how negative assets are treated. Adrian touched on it briefly above.

In general, is it only the "net" amount that matters? What can you net out against what?

If you have $200k in a foreign bank account, and -$200k margin or other loan in another foreign account, does it net to zero and no T1135 needed? What about -200k cash in a foreign account, and and a $200k foreign rental property? What about short and long equity positions that cancel each other out?

What about the case that you have > 100k in US equity held at a Canadian broker, and a corresponding amount of USD margin? It would be nice if they canceled out, but the speculation above is that foreign cash held in "domestic" accounts doesn't count against the limit, so would the same apply to margin balances?
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