T1135 Form

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Peculiar_Investor
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Re: 2014 - T1135 Form

Post by Peculiar_Investor » 09 Mar 2015 20:23

What a pain in the arse the T1135 has become.
CRA's new T1135 wrote:Foreign currency conversion

The amounts to be reported on Form T1135 should be determined in the foreign currency then translated into Canadian dollars. Generally, when converting amounts from a foreign currency into Canadian dollars, use the exchange rate in effect at the time of the transaction (i.e. the time the income was received or the property was purchased). If you received income throughout the year, an average rate for the year is acceptable.

The following summarizes how other amounts of the form should be translated:
• Maximum funds held during the year – the average exchange rate for
the year.
• Funds held at year end – the exchange rate at the end of the year.
To save others the lookup time, for USD, according to CRA's recommend source, Monthly Average Exchange Rates: 10-Year Lookup - Bank of Canada,

Code: Select all

U.S. dollar (noon)
Low [High]  2014-07             1.07391818 CAD [0.93116963 USD]
Average     2014-01 — 2014-12   1.10474713 CAD [0.90518452 USD]
High [Low]  2014-12             1.15325238 CAD [0.86711289 USD]
and
Daily Noon Exchange Rates: 10-Year Lookup - Bank of Canada says

Code: Select all

U.S. dollar (noon)
Date        1 USD -> CAD    1 CAD -> USD
2014-12-31  1.1601          0.8620
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Re: 2014 - T1135 Form

Post by Shakespeare » 09 Mar 2015 20:27

Time to load the RRSP with all your NY ETFs and put your bonds/GICs in taxable? :wink:
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Re: 2014 - T1135 Form

Post by DenisD » 09 Mar 2015 20:29

So, if the maximum value is at year end, we will be reporting two different values for our US stocks on the same day. :roll: :D

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Re: 2014 - T1135 Form

Post by Bylo Selhi » 09 Mar 2015 20:33

Shakespeare wrote:Time to load the RRSP with all your NY ETFs and put your bonds/GICs in taxable? :wink:
Actually it's a plot by the Canadian brokerage industry to "encourage" us to buy TSX-listed ETFs so they can make more money. After all the current Minister of Finance was head of the Investment Dealers Association of Canada. Q.E.D. ;)
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Re: 2014 - T1135 Form

Post by AltaRed » 09 Mar 2015 21:07

Peculiar_Investor wrote:To save others the lookup time, for USD, according to CRA's recommend source, Monthly Average Exchange Rates: 10-Year Lookup - Bank of Canada,

Code: Select all

U.S. dollar (noon)
Low [High]  2014-07             1.07391818 CAD [0.93116963 USD]
Average     2014-01 — 2014-12   1.10474713 CAD [0.90518452 USD]
High [Low]  2014-12             1.15325238 CAD [0.86711289 USD]
and
Daily Noon Exchange Rates: 10-Year Lookup - Bank of Canada says

Code: Select all

U.S. dollar (noon)
Date        1 USD -> CAD    1 CAD -> USD
2014-12-31  1.1601          0.8620
Actually, the recommended average annual rate is 1.10446640 rather than your 1.10474713 but who is quibbling about the 4th decimal place? :wink:

In my case, the CAD value of maximum funds held during the year, at the average annual forex rate (1.1044664), turns out to be somewhat less than the funds held at year end with the exchange rate at the end of the year (1.1601). How can year maximum be less than year end? So I defaulted to the year end value for both values on the form. I'll probably spend 3 yrs in the fed pen for that.... :lol:
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Re: 2014 - T1135 Form

Post by Peculiar_Investor » 09 Mar 2015 21:35

AltaRed wrote:Actually, the recommended average annual rate is 1.10446640 rather than your 1.10474713 but who is quibbling about the 4th decimal place?
It depends on how you calculate the average rate :wink: AFAIK, your average annual rate is from Annual Average Exchange Rates - Bank of Canada, specifically 2014 (PDF). I followed CRA's link for exchange rates and I used the first "average" that I saw, which averages the monthly averages, and thus gives a slightly different result. The Average Rates header appears much further down the page (actually off-screen).

One is left to wonder why CRA doesn't just directly link to the numbers they recommend be used?
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Re: 2014 - T1135 Form

Post by adrian2 » 09 Mar 2015 21:56

Peculiar_Investor wrote:
AltaRed wrote:Actually, the recommended average annual rate is 1.10446640 rather than your 1.10474713 but who is quibbling about the 4th decimal place?
It depends on how you calculate the average rate :wink:
It all makes sense, it you're nerdy enough! :ugeek:

The average for all trading days of the year is not necessarily equal to the average of all the monthly averages.
Some months are longer than others, so each month must be weighted appropriately.

In my case, I've used 1.1045 (rounded to 4 decimal places).
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Re: 2014 - T1135 Form

Post by MALDI_ToF » 10 Mar 2015 02:26

A shame we can't just say we own x shares of Company ABC and let CRA figure out the value themselves.

Blah...
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Re: 2014 - T1135 Form

Post by kcowan » 10 Mar 2015 09:41

MALDI_ToF wrote:A shame we can't just say we own x shares of Company ABC and let CRA figure out the value themselves.

Blah...
They will do that if they think your are worthy of the extra effort. Better still let's get them to drop the 1135 requirement....
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Re: 2014 - T1135 Form

Post by AltaRed » 10 Mar 2015 12:00

I didn't find filling out the form that onerous but it may be because all my USD domiciled investments sit in one USD sub-account and I am only dealing with Category 7, and I had no buy/sells in 2014. Just a matter of finding the month with the highest value and applying the forex factor. And the income was simply off that single T5.
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Re: 2014 - T1135 Form

Post by kcowan » 10 Mar 2015 13:29

I suppose the US trading becomes moot now that we know the requirement. We need records anyway now just keep the accurate USD exchange info...
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Re: 2014 - T1135 Form

Post by Arby » 19 Mar 2015 16:42

I just finished filling out the T1135, and it wasn't as difficult as I initially expected. I thought I would have to go through 12 months of broker statements to find the highest month end value for each US stock. A simpler method was to look at the 2014 stock chart to find the month with the highest stock price. It turned out the highest stock price was in Dec 2014 for all my US stocks, so I just had to take the month end values from the Dec 2014 broker statement.

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Re: 2014 - T1135 Form

Post by thegov » 22 Mar 2015 13:18

Do TSX listed stocks that may be US based have to be declared here?

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Re: 2014 - T1135 Form

Post by kcowan » 22 Mar 2015 15:15

Arby wrote:so I just had to take the month end values from the Dec 2014 broker statement.
moi aussi!
thegov wrote:Do TSX listed stocks that may be US based have to be declared here?
I would say no unless they are also listed on a US exchange.
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Re: 2014 - T1135 Form

Post by rich » 22 Mar 2015 17:44

When calculating income on foreign securities held with a Canadian securities dealer, the CRA Q and A says to use gross income rather than net income. Would this be construed to mean using income before deduction of witholding tax?

Rich

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Re: 2014 - T1135 Form

Post by adrian2 » 22 Mar 2015 20:21

rich wrote:When calculating income on foreign securities held with a Canadian securities dealer, the CRA Q and A says to use gross income rather than net income. Would this be construed to mean using income before deduction of witholding tax?
Yes.
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Re: 2014 - T1135 Form

Post by optionable68 » 04 Apr 2015 12:07

My taxable account holds mostly $CAD but I regularly receive $US option premium from naked options sold on US securities resulting in a regularly rising $US cash balance.

Whenever my $US cash balance reaches US$25,000, I convert the balance to $CAD. Since this is well below US$100,000 am I safe from the T1135 ?
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Re: 2014 - T1135 Form

Post by Norbert Schlenker » 04 Apr 2015 19:32

Funds held by a Canadian broker are not foreign property that needs to be reported on a T1135.
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Re: 2014 - T1135 Form

Post by optionable68 » 04 Apr 2015 20:28

Norbert Schlenker wrote:Funds held by a Canadian broker are not foreign property that needs to be reported on a T1135.
Thanks NS :thumbsup:
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Re: 2014 - T1135 Form

Post by IdOp » 05 Apr 2015 16:24

Many of us filling in this form appear to live in Canada. On the first page of the form, there's an area for "Reporting taxpayer's address" which contains a field for 3-letter "Country code." The instructions say the country codes are found at CRA's website. The list of country codes there has no entry for Canada.

:roll: :rofl: :roll:

An Internet search turns up CAN.

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Re: 2014 - T1135 Form

Post by Germack » 05 Apr 2015 19:16

Must ROTH IRA, 401a or 403b accounts be reported on the T1135 form?

On my spouse last year tax returns the tax preparer only listed her non-registered accounts on the T1135 form. For the ROTH IRA he filled an election and the 401a and 403b accounts are not listed at all. Is this OK?

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Re: 2014 - T1135 Form

Post by OsbourneCox » 06 Apr 2015 23:22

Germack, based on a CPA Canada Q&A I found (and painfully read through), you do not have to report US retirement accounts.
118. Are foreign pension arrangements, such as US individual retirement accounts (IRA), 401K plans and foreign pension plans, exempt from Form T1135 filing?

ANSWER: Interests in certain trusts that are exempt from the trust disclosure requirements in section 233.2 are also excluded from the definition of specified foreign property. Such trusts include:
• Trusts governed by a foreign retirement arrangement (which includes US IRAs)
• Trusts resident in a country that imposes income taxes, where the trust is exempt from tax under that country’s laws and established with the principal purpose of providing pension, retirement or employment benefits.
This definition is believed to cover most foreign retirement plans, including the common US plans noted above.
The link is here: https://www.cpacanada.ca/~/media/Site/c ... .pdf?la=en

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Re: 2014 - T1135 Form

Post by OsbourneCox » 07 Apr 2015 00:05

Assuming the need to use Category 2 for detailed items, if one trades a given US stock twice in a year (no overlap and both trades opened and closed within 2014), is that 2 lines or 1? If 1, do I just include the trade that had the highest cost?

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Re: 2014 - T1135 Form

Post by OsbourneCox » 07 Apr 2015 10:45

I sort of found the answer to "trading stock twice in a year." More specifically, twice in one month:
If a security is bought and sold in the same month and is the only security held in a specific country, what amount is reported for the maximum fair market value?

ANSWER (CRA COMMENTS REQUESTED): Reports that may be available from Canadian registered securities dealers do not report on securities bought and sold in the same month, and so the transactions are not captured on a statement at month-end. As there was no value at any month-end, the highest value should be reported as nil.

CRA Comments: Although the maximum amount held at any time in the year is required to be reported, as stated in the Form T1135 instructions, the maximum cost during the year can be based on the maximum month end cost amount during the year. As a result, where a security is bought and sold in the same month, the property should still be identified but the CRA will accept a nil amount to be reported for the maximum and year-end cost amounts.
The bottom line seems to be that the CRA has been very explicit that totals found on the month-end statements are sufficient for filling out the T1135, at least for brokerage accounts. They don't expect you to dig deeper.

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Re: 2014 - T1135 Form

Post by Laika » 08 Apr 2015 22:16

AltaRed wrote:Thus it is a simple matter of looking at one's monthly statements especially on the USD side of things and pick the month of highest USD market value. At least this is the way it will be for me as I do not have any US domiciled assets on the CAD side of my accounts.
Unfortunately, things aren't always that straightforward. I hold one ADR stock (RDS) in my USD account. Because the company is incorporated in the UK, I think it needs to be separated out in Category 7. So, while most of my US holdings had a maximum FMV in Dec, RDS peaked last summer. This form is a headache.

The CRA's documentation re:T1135 appears to be inadequate. Even the CRA doesn't seem to know how to properly deal with their own form. Last year, I spoke with a phone rep who was unable to answer a question, and she directed me to the Income Tax Rulings Directorate. The CPA there was unsure and forwarded my queries to the CRA's Compliance Programs Branch. That was over a year ago, and I still haven't heard back... (Does anyone know if mineral rights count as "real property" and how to value them?) Apologies for the rant.

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