My name is Mark Goodfield. Welcome to The Blunt Bean Counter ™, a blog that shares my thoughts on income taxes, finance and the psychology of money. I am a Chartered Professional Accountant and a partner with a National Accounting Firm in Toronto. This blog is meant for everyone, but in particular for high net worth individuals and owners of private corporations. The views and opinions expressed in this blog are written solely in my personal capacity and cannot be attributed to the accounting firm with which I am affiliated. My posts are blunt, opinionated and even have a twist of humor/sarcasm. You've been warned.

Thursday, February 27, 2014

T1135 Foreign Reporting – This is Relief?

I have previously written about the onerous new reporting requirements the revised T1135 Foreign Income Reporting form imposes upon Canadian taxpayers who have over $100,000 (cost) of foreign holdings. While most accountants understand and can live with the additional detail required for foreign assets located outside of Canada, most of us could not understand why the CRA persisted on detailed reporting for foreign stocks and bonds held at Canadian institutions. The CRA’s position is/was that if a foreign security held at a Canadian Institution did not pay a dividend and thus was not reported on a T3 or T5, you had to separately detail that security. For many taxpayers, that could mean detailing 15-25 securities for stocks from Berkshire Hathaway to Netflix.

Despite protestations from various accounting bodies, the CRA held firm in its position. Over the last couple months, the financial institutions began to wake up to the reality that providing this information to its clients and/or accountants was a massive project which its systems were not designed for.

Well yesterday, for 2013 only, the CRA provided some mild transitional relief.

Foreign Property and Unit Trusts held with Canadian Registered Securities Dealer

 

Taxpayers who held foreign property in 2013 in an account with a Canadian registered securities dealer may now report the combined value of this property, rather than reporting the details of each property. A taxpayer that chooses this reporting method must use it for all accounts with Canadian registered securities dealers.

Why is this Relief Problematic?


The CRA says that if you want to file using a combined value of all your foreign property, they want you to file using Category 6 of the T1135 Form. However, Category 6 requires you to report the maximum cost amount of your foreign holdings during the year and the cost of all those foreign holdings at the end of the year.

Thus, unless the revised form changes these requirements for Category 6, you or your investment advisor will need to somehow determine what was your maximum cost of your foreign holdings during 2013, not an easy chore by any means.

Unless the form changes, you need to pick your poison. Your choice is:

1. Provide a listing of any specific stocks that did not pay dividends and the maximum cost for those specific stocks and the cost at the end of the year, or

2. Search your daily records to determine what were the maximum cost of all foreign holdings during the year and the cost at the end of the year of any foreign holdings.

Bloggers Note: Of course after I wrote the above, the CRA has just released an updated T1135 Form. The instructions for Category 6 have been revised for transitional reporting. For the maximum cost amount, you do not need to determine any value, just enter "0". For the cost amount at the end of the year, enter the market value of your foreign property at the end of 2013.

Thus, in summary, if you do not wish to report specific securities not paying dividends, you can use the transitional reporting method and all you need is the fair market value at the end of 2013. Why could the CRA not say that in their initial press release?


Filing Extension


The CRA is also extending the filing deadline for Form T1135 for 2013 to July 31, 2014. Yippee, tax season gets further extended.

My Sentiments Exactly


Moodys Gartner Tax Law summed up this whole issue very well in their excellent tax blog: “While the transitioning rules are certainly welcome, it appears that the CRA is still not wholly listening to tax accountants in Canada. Today’s announcement does not provide a permanent solution for the large amount of criticism with respect to the “T3/T5” exception. Many tax accountants were hopeful that all specified foreign property held by Canadian registered securities dealers would be excluded given the low risk for tax evasion involved with these accounts.”

The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.

125 comments:

  1. What a mess...

    You wonder if the IRS has a bigger plan in the future when it comes to investors who invest in the U.S.?

    "The CRA’s position is/was that if a foreign security held at a Canadian Institution did not pay a dividend and thus was not reported on a T3 or T5..."

    Another good reason to own a dividend stock, even from the U.S.

    Just odd really....
    Mark

    ReplyDelete
    Replies
    1. Hey Mark,

      The CRA's position here is really hard to comprehend. I think you may be correct about the IRS/US Gov. They seem to be exerting more and more influence both internally and externally these days.

      Delete
    2. I don't know how much more the IRS would want. Everyone who owns over $60,000 of US stocks when they die (eg: Apple, or an ETF) must file a US tax return and may be subject to US estate tax.

      This is something I definitely keep in mind when doing investment allocation.

      Delete
  2. Hi Mark,

    I love your blog, specially now with all this new T1135 form.

    I have an important question:
    with this transitional reporting you can report the whole US stock account holding in Category 6, but how do you determine cost at the end of the year for someone who traded stocks during the year.
    Let's say you had 200K worth of stocks that you bought and sold 3 times during the year and on December 31 you have about 130K worth of stocks and 70K cash. Would you just report 130K? Or 600K because this is how much cost of equity went through your portfolio.
    Thanks.
    Anon

    ReplyDelete
    Replies
    1. HI Anon

      For 2013, all you need to report is the market value at Dec 31, 2013, essentially the fair market value reported on your investment statement

      Delete
    2. Does it mean 130K in the example above? As this is what market value of US equity portfolio was as of December 31?

      Really appreciate your help.

      Anon

      Delete
    3. Yes, if the mkt value was $130k on Dec 31, 2013, that is what u report in box 6

      Delete
    4. Thank you.

      Another question (might be very simple one): there is nowhere on the form a box to tick for transitional reporting, there is a box for t3/t5 though, which is not for me as my stocks din't have any dividents… would they just know I used it if I simply report my account in box 6?
      Thank you.

      Delete
    5. yes, but follow the instructions. Especially note the 0 you input for Maximum cost amount during the year

      Delete
    6. In this example, if you report $130K in US stocks, you still have $70K in US cash. Do you need to report foreign cash?

      Delete
  3. I don't understand how Form T1135 can be effective in finding unreported income. Are there tax filers who forget to report foreign source income on their tax returns but remember to report their foreign holdings on Form T 1135?
    Your thoughts would be appreciated.

    ReplyDelete
    Replies
    1. Anon, there are a multitude of accountants including me who dont understand the complications of this form and I totally agree; those who report on the T1135 are typically reporting their foreign income.

      However, being fair to the CRA, I think the true intent of this form (although the form has taken a misguided tangent) is to try to coddle or force those with assets overseas to report and I suspect many people do not report these assets. The problem is that they probably still continue to not report these assets, yet the CRA has created a time wasting mess for taxpayers, institutions and accountants for those taxpayers who do honestly report. In the end, the form should only need to report anything not held at a Cdn institution, than I could live with the form.

      Delete
  4. Mark,

    I have an interesting question about joint investment account splitting when reporting foreign property, income and gains (losses).

    If there is a joint account CAD and US, $300K worth of Canadian stocks and $300 worth of US stocks, both spouses equally contributed so technically it is 50/50 split.
    One spouse reports Canadian investments income and gains on Schedule 3 and 4 and another spouse US investments income and gain on Schedule 3 and 4.
    Would this mean only one spouse has to file T1135 and show account with income and gains, or both spouses should file T1135, but one shows 1/2 cost and income and gains and another only shows 1/2 the cost and nothing in income and gains?

    Your help is much appreciated.

    Thank you for this blog.

    ReplyDelete
    Replies
    1. Hi Anon

      I would file a T1135 for each spouse and each has to report 1/2 the foreign assets and half of the income and gains

      Delete
  5. I agree, but technically speaking other way would not be wrong.. imagine the case where husband gets paid in $US and wife in $CAD… or simply $600k in joint account divided in 1/2, why not 1/2 US and !/2 CAD… there is no really a rule which forbids it, is there?

    ReplyDelete
    Replies
    1. Anon, not sure I am following. If either spouse has over $100k in joint and other personal accounts they must file the T1135.

      Delete
  6. Hi Mark,

    I'm quite confused with respect to T1135, regarding what qualifies as foreign asset with ETFs and mutual funds.

    For example, Vangard's VDU, Power's QQC, TD's US money market fund, etc. Do each or any of them count towards the 100K threshold? And where would one find the information to make that determination? I've tried all the respective ETF and mutual fund web sites and could not find any clue.

    Thanks for any help and clarifications.

    Love your blog.

    ReplyDelete
    Replies
    1. Check out this link http://howtoinvestonline.blogspot.ca/2013/04/foreign-income-assets-avoid-nasty-t1135.html -it has a good summary

      Delete
  7. I this this filing requirement is ridiculous. Does the CRA have any idea of how the taxpayer is going to get all this information. What about valuation of real estate? More so when it is inherited and no real value exists.

    Have been filing the old T 1135 which was fine. But this new requirement takes the cake. Bureaucrats and their fancy ideas!!!!

    ReplyDelete
    Replies
    1. Anon, the cost of inherited real estate is the value on the date of death of the person who passed it on to you. That value would have been reflected on their final tax return if it was a taxable property. If not, you need a valuation of the property at their death, since that is your cost going forward

      Delete
  8. Please could you explain how to determine maximum cost amount during the year and cost amount at year end for category 5. I have a cabin that I rent out . . . do I have to have it appraised every year, or can I use comps. from a real estate site like zillow.com? Thanks for your help.

    ReplyDelete
    Replies
    1. Hi Anon:

      You do not need an appraisal. Cost amount is your adjusted cost base, not the fair market value. So it is what you paid for the cabin and the only change to that would be if you made additions during the year

      Delete
  9. hi.. we trade stocks & options daily. we also do lots of short selling, and our US account actually has a negative value due to large SHORT positions we hold & NAKED CALL OPTIONS we have sold. So for form T-1135 how would we report COST of our holdings, do SHORT positions offset LONG positions? many thanks for your help.

    ReplyDelete
    Replies
    1. Hi Anon

      Unfortunately you have asked a question I will not comment on. We have had trouble determining the correct treatment ourselves after various discussions with the CRA. We think we know the correct treatment, but are still not 100% sure. Sorry.

      Delete
  10. What about a combination of joint and individual accounts? Account in my name has $120,000 in US ETFs and Stocks, and our joint account has $40,000 in Us ETFs, making $160,000 US total cost basis, split between two taxpayers with roughly equal income. Up until I read this blog, I thought we were ok since $80,000 each is under the threshold, since we are married and consider it all joint property regardless of whose name is on which account. Is this not the case?

    ReplyDelete
    Replies
    1. Hi Anon

      If you are over $100k in total between individual and joint accounts you must file. If you have $120k in your name you automatically must file, you would then include $20k from the joint account.

      If both accounts were joint and you had $160k in total, you each would only have $80k and not have to file.

      Delete
  11. Thanks for the quick and definitive answer. Looks like I have some repair work to do since this may have been the case for several years. I consulted with CRA at the time this first came up and got a very different answer, but that was years ago, and their focus seems to be clearer suddenly. There does seem to be a mechanism to go back and fix it, though, even for past years.

    I now intend to file a Voluntary Disclosure, rc199-fill-14e.pdf, along with T1135 forms for 2013 and same current T1135 form for any past years where the reporting requirement may have existed, and either of us was either close to, or over the threshold. It will be a ton of work to dig all this out of our past records, but I guess I have to do it.

    I have a combination of income producing and non-income producing assets in several accounts, so it looks like I have to list them all to be safe, even for accounts held in Canadian institutions. The "transitional 2013" option to report in aggregate, and in less detail per account only seems to be allowable if all the assets in the account contribute something to the T3 or T5.

    I really wish I could spend my time contributing to the economy rather than going through these score-keeping gyrations, especially given that I've paid all the taxes already. This sort of thing is what makes Canada less competitive and reduces our standard of living. The law abiding people who keep their assets in Canadian institutions seem to be the only ones who will be tripped up by this. Those with Swiss or Cayman accounts will probably continue to just hide and deny, as always.

    Another night of sleep lost. Another over-tired driver on the road, or maybe taking a sick day. Does the CRA care? Apparently not.

    Thanks again for your help. At least I think I now understand the CRA's most recent interpretation.

    ReplyDelete
    Replies
    1. Hi Anon

      I think this line in your post above sums up many people's feelings about the T1135--"I really wish I could spend my time contributing to the economy rather than going through these score-keeping gyrations,"

      I suggest you may just want to pay an accountant for a 1hour consultant to make sure you have to file each year and whether they agree the best route is a VDP

      Delete
  12. Hi Bean Counter,
    When you filed your tax return, and you did not select "yes" for the question "Did you own foreign property with total cost of over $100,000?", can you still paper mail the T1135 before July 1, 2013?

    ReplyDelete
    Replies
    1. Hi Anon

      Not 100% sure if the CRA expects you to inform them of the mistake. However, I would file, because whether you ticked the box or not, you had an obligation to file and you are fulfilling that obligation.

      Delete
  13. Hi Bean Counter,

    If we choose to use box 2 on the T1135, what should be the "maximum cost amount during the year" and "cost amount at year end"?

    Suppose we buy and sell the same stock a few times during the year, the max cost amount would be the highest price that we paid for the stock, is that right?

    The "cost amount at year end" would be the price at which we bought the stock for the last time during the year? So "cost amount at year end" is not the market value at year end?

    Even for stocks that we have sold and do not hold at year end, we still have to report the income/dividends and capital gain/loss on the T1135? Aren't the income/dividend and capital gain/loss already reported on schedule 3 of the tax return already?

    Thank you.

    ReplyDelete
    Replies
    1. Hi Anon

      The maximum cost amount is the highest cost base during the year, not the highest price you paid. So if you owned 100 shares that cost $8 and your cost base was $800 and you bought another 100 shares at $9, your highest cost base would be $1700.

      The cost amount at the end of the year is the cost base of that stock, not the last time you bought it or the FMV. ie: in the example above if your cost was $1,700 for 200 shares (or $8.50 per share) and say you sold 150 share so you held 50 at year end, your cost amount at the end of the year is $425 (50 x $8.50 avg cost per share)

      Delete
    2. HI.. just a small clarification please. what about if you bought stock ABC 100 shares @ $8.00 (cost basis = $800) and then sold ABC a few days later, and then bought ABC again for $7.00 (cost basis = $700) and then bought & sold again for $10.00, the end result is that you never held more than 100 shares at any one time.. so is the highest COST BASIS $1,000 or is it a cumulative value of all the cost basis during the year. thank you for your help

      Delete
    3. The highest value of stock actually owned at one time,not the cumulative value

      Delete
  14. Hi Bean Counter,

    Near the top part of the T1135, there is this question, "If this is an amended return check this box.". What is the amended return?

    Thank you.

    ReplyDelete
    Replies
    1. if you filed a T1135 already and you are not adjusting it

      Delete
    2. Suppose I was filing the T1135 for the first time, should I check this box "If this is an amended return check this box."?

      Thanks.

      Delete
  15. HI Bean Counter,

    In box 6, why do they require us to enter the market value at year end as the "cost amount at year end", instead of the purchase cost base of the stock?

    The term "cost amount at year end" is confusing to begin with. Why don't they just call it "adjusted cost base amount"?

    Thank you.

    ReplyDelete
    Replies
    1. The fair market value is just a transitional rule as the CRA had a huge backlash because of this form

      Delete
  16. Hi Bean Counter,

    For box 2, my interpretation is that all stocks that we have bought and sold during the year need to be reported on the T1135, included those that we do not hold anymore in the account at year end, is that correct?

    Thank you.

    ReplyDelete
    Replies
    1. Yes, but if the shares are held by a Cdn institution I would never file using box 2, I always use the transitional box 6

      Delete
    2. Hi,

      The income/dividend and capital gain/loss are already reported on schedule 3 of the tax return already. Using box 2 method is really repeating the information on T5008 and on schedule 3.

      Thanks.

      Delete
    3. Yup, just one of the ridiculous aspects of the form

      Delete
  17. Hi,

    When doing currency translation for the maximum cost amount of a stock, which exchange rate should we use, the average exchange rate for 2013, or the average exchange rate for the year in which the stock was bought?

    Thanks.

    ReplyDelete
    Replies
    1. Hi Anon

      You should be tracking your cost base anyways so it is accurate, thus, the cost amount should be from the year of purchase. If u r using the transitional method, than u r using the FMV and you would use the current years F/X rate

      Delete
  18. Hi,

    If you simply have $US cash account in Canadian bank with 120K cash in it - do you need to do T1135? Basically is $US account with Canadian bank considered to be a foreign property?

    Thank you..

    ReplyDelete
    Replies
    1. Hi Anon

      The CRA says you must report amounts in foreign bank accounts, a Cdn account is not foreign and thus not reportable

      Delete
  19. Hi,
    'cost amount at year end' .. if you sold all your stocks this year - what would it be?
    Thx

    ReplyDelete
  20. What if I only held commodity futures (no stocks)? How do I calculate the cost of the futures positions?

    Say one futures contract has a value of 100K but the cash that is posted towards it (performance bond) is only 2K (1:50 leverage) - do I report 100K or 2K?

    Thanks

    ReplyDelete
    Replies
    1. Hi anon

      Sorry but I am not commenting on the treatment of commodity futures , puts and calls etc

      Delete
    2. Fair enough (I can only guess as to the reason you can't comment) but here is another question (no derivatives, only cash):

      What if the total max value of the account was 200K CAD but it had 150K CAD (not foreign) and the rest was a mix of other currencies (long and short) like:

      Short AUD 200K
      Long NZD 250K
      CAD 150K
      Total: ~200K CAD

      Does it need to be reported or not (foreign cash total is less than 100K in CAD equivalent)?

      Delete
    3. Same non answer. We have not been able to get clear guidance on these issues and thus I will not publicaly provide an answer. sorry

      Delete
    4. If/when you get the clarity on this issue - it would be nice if you could mention it in one of your blog posts!

      Thank you for an excellent blog!!

      Delete
    5. I will I am going to probably request a ruling on these issues in the summer when I have time

      Delete
  21. Hi Blunt Bean Counter - Has anyone noticed a problem with transitional reporting in Box 6. We have to list our institutions, the account number and how much money is in there and how much we made from those investments. THEN we have to send it all in the mail. Not that sending it online is anymore secure but I have huge problems putting this personal and vulnerable information out there. Does no one else have a problem with reporting this information.
    I think I will tick the T3/T5 exception box and literally pull out the stocks that did not pay dividends. At least that way, I am just itemizing stocks and not personal info. if I did it this way, what box would I list the separate shares in?

    ReplyDelete
    Replies
    1. Hi Anon

      The CRA is working on having this form available for electronic file in the future.

      You would use box 2 for the exception rule.

      Delete
    2. Hi Bean Counter,

      The tax reporting software that I was using also included the T1135 form. But as I understand the T1135 cannot be filed electronically. That means when I filed, the T1135 was not included?

      Can I just print out the T1135 from my tax reporting software and then mail it, instead of using the form provided by the cra?

      Thanks.

      Delete
  22. Hello Mark,
    My elderly mom immigrated to Canada in 2009. Her investment in Indian Shares, Mutual Funds & Fixed Deposit needs to be declared on T1135 for tax year 2013. My dilemma is:
    What is the 'Max cost amount during the year' - Is this the market value when she immigrated in 2009?
    What is the 'Cost amount at year end' - If she has not bought / sold any Shares; Is this also the market value when she immigrated in Aug 2009 or Is this the market value available on Dec 2013?
    If she has different Shares held in 'Demat' investment broker account in bank, do I report all as one row? or do I individually report all 20 shares separately?
    Are Mutual Funds bought in India exempt or is this reportable on T1135?
    Many Thanks. I look forward to your advice.

    ReplyDelete
    Replies
    1. Hi Anon

      When you immigrate to Canada the FMV of the shares on the day you immigrate becomes your cost and FMV. Thus, your moms 2009 cost would appear to be her max and cost amount based on the facts you present. My understanding is she must report each Demat share separately. My understanding is Indian mutual funds are reportable

      Delete
  23. Hello Mark,

    I had immigrated to Canada in 2006 and during that time I had term deposits with Indian Banks. These term deposits in INR/USD/CAD are growing every year. For 2013, should maximum cost amount be the value of deposits when I immigrated in 2006?
    Further should these term deposits be entered under box 3?

    Does Box-1 include cash in bank accounts which are not placed in term deposits?

    I would appreciate your answers to above questions.

    ReplyDelete
    Replies
    1. Hi Anon

      Term deposits are not capital property and therefore are based on 2013 numbers,not the date you immigrated

      These amounts are funds held outside Cda and go inbox 1

      Delete
  24. I have US securities in my TD accounts and I have question regarding the 100k threshold. I am unemployed and have been day trading... If I have bought and sold the same stock which cost 10k 10 times in 2013, does this mean i have to file that bloody 1135? thanks,

    ReplyDelete
    Replies
    1. Hi Anon

      Only if you had a cost of over $100k in US stocks at any time during the year (not a cumulative number). If you bought and sold each time, you likely did not exceed the $100k in cost at a point in time.

      Delete
  25. Hello Mark,

    If term deposits have to go in box-1 then what kind of "term deposit" go to box-3. Instructions on form T-1135 for box-3 includes marketable securities such as GICs, Treasury bills and term deposits". Please clarify.

    ReplyDelete
    Replies
    1. You are correct, based on the instructions, GIC's go in box 3

      Delete
    2. Hello Mark,

      If GICs and Term deposits go to box 3 then should cost amount be indicated for deposits rather than actual fund value?.
      If term deposit is not liquidated during the tax year then should the "max. cost amount" and "cost amount at the year end" be same?
      Last question is that when a term deposit is renewed for another similar term, what should be the cost amount? the original cost when deposit was first made or the reinvested cost amount?

      Thanks Mark for your great site.

      Delete
    3. Hi Anon

      I dont understand your first question. Do you have a term deposit or a fund? If you have an individual TD, then it is the cost of the TD, if you have some sort of GIC fund, then it is the fund.

      If a TD has not been liquidated,I would show the max cost and cost as the same number.

      If it is reinvested, it is the reinvested amount.

      Please do not ask any follow up questions, I will not answer any more questions.

      Delete
  26. Hi Mark

    If a person has had US securities over the past several years and did not sent in the T1135 form, do you think it a viable option to file a voluntary for all of the years and tick the appropriate box without going and finding all the detail. So for example, if they actually had less than $100K of securities but ticked the $100K and over box would there be any downside to that

    ReplyDelete
    Replies
    1. Hi Anon

      I would never file a T1135 or ask for a VDP if you are not 100% sure you had to file. Don't be lazy, find out if you have to file or not, the consequences are significantly different.

      Delete
    2. Hi,

      The issue is that many people's foreign assets amount has been fluctuating just over and below the $100,000 amount. Is it better to play safe by filing it anyway?

      Thanks.

      Delete
  27. Mark,

    Your blog is so helpful but I need clear instructions on how to complete Cat 5. We own a condo in Florida that we rent, but we are at a loss for 2013 so no income to report. Please guide me on Country Code, Max Cost, Cost at year end. The market value is about $207K.

    ReplyDelete
    Replies
    1. Hi Dianna

      Country code would be the USA; cost amount would be what you initially paid for the condo and any capital improvements over the years. Thus, unless you made capital improvements this year, your maximum cost is the same as your cost amount. Market value does not matter

      Delete
  28. Thank so much. Our income/expenses for 2013 balance each other out and we filed taxes in the US with no payout. Do we still need to report on the T776? There is really no income/loss to report.

    ReplyDelete
    Replies
    1. yes, you must complete the form reflecting income and expenses

      Delete
  29. Hi,

    What is the difference between foreign cash deposited in a Canadian bank account and foreign cash in a Canadian broker account? Why is it that foreign cash in Canadian broker account needs to be reported?

    Thanks.

    ReplyDelete
    Replies
    1. the CRA says you must report amounts in foreign bank accounts, a Cdn account is not foreign and thus not reportable

      Delete
    2. HI,

      How about foreign cash in Canadian broker account? A Canadian broker account is in Canada.

      Thanks.

      Delete
    3. i answered that above, the CRA says you must report only foreign bank accounts, a Cdn acct is not foreign

      Delete
    4. Hi Bean Counter,

      Now I understand, I just got confused. Foreign cash in a Canadian broker account is not reportable. But foreign stocks in a Canadian broker account is reportable.

      Thank you.

      Delete
  30. Hi,

    I have a question about country code for a stock. Which country code should we use for a stock, its headquarter location, the location of the stock exchange on which the stock is listed or the legal domicile of the company?

    Thank you.

    ReplyDelete
    Replies
    1. Hi Anon

      The CRA's website says this

      5. If I hold shares of a U.S. corporation in a United Kingdom brokerage account, should the country code of the shares be USA or GBR?

      For the purposes of Form T1135, the country code for shares of a non-resident corporation is the country of residence of the corporation. Therefore, code these shares as USA.

      Delete
  31. Hi,

    I have two questions as follows:

    1) In 2013, I have inherited fixed deposits from my Dad after his death-- which was transferred to a new joint a/c opened in India with my spouse.
    ---After 2-3 days ---I transferred some fund to Canada & some fund to fixed deposits(which are in my name only) left with 10 lakh INR in saving a/c. The question is ----Am I suppose to report on T1135 or it will be split between me and my spouse?

    Can I report Saving A/C and fixed deposits together on box 1 (fund held outside Canada with foreign bank) on form 1135 , because that is the only place where CRA asking for bank information.

    What will be max cost (Total fund inherited -fund transferred to Canada)? what FX conversion rate should I use --- If max balance stay for couple of days ---- Can I use Monthly Average FX rate?

    2) I also inherited Bonds from my dad ---Bonds was transferred to my name on March 15, 2013 --- Will the max cost and y/e cost will be same?

    what FX rate should I use for Max cost - FX rate on March 15 or Monthly Average rate for March or Annual average rate for 2013?

    Thanks a lot

    ReplyDelete
    Replies
    1. Hi Anon:

      Sorry, way too complicated and way too much personal tax advice to answer on this blog.

      Delete
  32. Hi,

    What FX rate should be used for maximum fund held in foreign bank?

    Thanks

    ReplyDelete
    Replies
    1. Hi Anon

      I have not seen a pronouncement from the CRA. If u have that days rate, I would use that. If not that months closing rate and if not then I guess the yearly avg published by the CRA.

      Delete
    2. If Max fund in foreign bank was same for 9-10 days, you think it will be better to use monthly average rate instead of using the FX rate on very first day of maximum balance.

      thanks

      Delete
    3. Hi,

      Maximum fund held in foreign bank - you have to review your foreign bank statement and look for highest balance in 2013 and after that convert into CAN$ ---Am I right?

      Delete
    4. Hi,

      If you invest in foreign bonds in 2013 ----Max cost and Y/E cost will be same in CAN $ (after conversion in to CAN $)?

      Thanks a lot and your blog is very informative

      Delete
    5. #1- yes just use monthly avg
      #2- yes
      #3- yes, if you buy and dont sell or add, the two costs are the same

      Delete
  33. Hi,

    I invest in foreign bond on Feb 18, 2013 ---I checked Bank of Canada website----Feb 18 was bank holiday----No FX rate available for Feb 18------- Can I use Feb 19 FX rate or Monthly Avg rate for Feb?

    Thanks a lot

    ReplyDelete
    Replies
    1. Hi Anon

      This is the last question I am answering for you on this series of questions. Yes, you can use the 19 F/X (best option) 0r monthly average if u cannot find it

      Delete
  34. What does mean amended return check box ?
    If I already filed T1135(2013 yr) but
    I found errors ( incomes or other mathmatic errors,) before this year's due date(31/july) ..
    If I amended this errors and mailed this before due date ,,,,,
    Is there possible penalties or reassessment extensions for this ?
    And what about after due date ?


    ReplyDelete
    Replies
    1. Hi Anon

      Amended simply means you have filed the form and are changing it.

      I have not seen any comments from the CRA about amending the T1135. Generally, there is no penalty if a return was filed on a timely basis and is amended to provide updated or corrected info. However, if u have the info now, file the amended return before July 31

      Delete
  35. Hi Mark,

    I have a few questions

    My mother lived in the U.S. and passed away in the United States in early 2013. I inherited stocks in U.S. corporations which were held for 2 months in a U.S. based investment company then transferred to a Canadian based account. I am assuming that I can't use either the transitional reporting method or the T3/T5 reporting exception for the stocks, is this correct? Do I still just fill in one line for each stock in part 2, or do I have to do separate lines for when the stock was in U.S. and Canada? I did receive a T5 for the stock once it was in Canada.

    Also, I inherited some U.S. mutual funds, ETF's-CEF's and Unit Investment (Equity) Trusts which were held for 2 months in the same U.S. based investment company, then all were sold and the cash was transferred to the same Canadian based account as the stocks were transferred to. Which categories for specified foreign property do I use for the U.S. based mutual funds, ETF-CEF's and equity trusts?

    Thanks and awaiting your reply with baited breath!

    ReplyDelete
    Replies
    1. Hi Anon

      I would do Part 2 for when in US and transitional or exception for when in Cda, so twice for the same security.

      Probably part 6 for the others, but not 100% certain.

      Delete
  36. Any updates on reporting commodity trades, puts & calls?

    ReplyDelete
    Replies
    1. Hi Anon

      I will let you know via a blog post when I have an update. Not #1 on our importance list, but is on my tax managers summer to do list to write to the CRA and get their response on various scenarios.

      Delete
  37. Hi,

    After printing out the T1135 form, there are five pages. The first 3 pages are the form itself, with the other 2 pages the instructions. Should we mail just the first 3 pages or all 5 pages?

    Thanks.

    ReplyDelete
  38. Hello, how do we know if they have received the mailed T1135 form?

    ReplyDelete
    Replies
    1. No way to really know, except I guess to call and it may not be in the system for weeks. Best for forms such as this is to send by some sort of tracking mail like registered etc.so you have proof sent in case of dispute.

      Delete
  39. Hi,

    Very useful blog, thank you for the information so far. I have some scenarios I was hoping you could help with.

    1.
    Term deposit savings account in Ireland opened in March 2013, maturing in March 2014

    Cost at end of year: Opening balance x ?what FX rate?

    I assume that the cost at the end of year is only the opening balance as interest only accrued in March 2014.
    Is this the rate at the end of December 2013 or the average rate for 2013

    2.
    Savings Account in Ireland opened prior to Jan 2013.

    Balance was highest in January at c. 15000e.
    Balance at the end was c. 7000e.

    I assume the original cost is the cost as at January 1 2013 rather than the original opening balance.
    Maximum funds: What exchange rate do I apply to the 15000?
    Cost at end year: What exchange rate do I apply to the 7000?

    3.
    Do you need to track FX rate fluctuations within the year?

    For example, The EUR to CAD rate might mean that a 1000e investment was worth 1500cad in July but only 1300cad in December.
    What value should you report on the Maximum cost during the year?

    Thank you

    ReplyDelete
    Replies
    1. Hi Anon:

      We tried to apply the actual rate of that day where we had the info. The CRA's July amendments say this going forward--•

      When reporting the highest value during the year and the income (loss) for the year, the average exchange rate for the year can be used.

      Delete
  40. Hi Mark,

    Wow they have changed T1135 again I assume because of numerous complains of the public, ay least now it makes more sense for people who hold US securities through Canadian brokerage.

    I have one question for part 7: the maximum fair market value during the year may be based on the maximum month-end fair market value - so does it mean out of 12 month ends the highest one should be entered or do they want to add all months ends and enter total (sum) of all of them?

    Thanks for the help.

    ReplyDelete
    Replies
    1. Hi Anon

      I will update this topic when I start writing again in Sept. It is the maximum value during the year, not the cumulative total.

      Delete
  41. Hi Mark, great blog.

    I have a question. If I own units of an international TD mutual fund (invests in companies worldwide) with a cost over $100,000, do I need to report this on the T1135? The mutual fund is managed at TD's head office in Toronto.

    Thanks!

    ReplyDelete
  42. Hi Anon

    I don't provide specific advice on individual funds.You should speak to TD, sorry.

    ReplyDelete
  43. I want to make sure I understand this right. What exchange rate would you use each month to determine your fair market value in order to determine which month I had the highest fair market value. Also If I understand correctly, cash sitting in a US account at a canadian branch is not included on form T1135.

    ReplyDelete
  44. If I own shares of Atlantic Power trading on the TSX(ATP-T) in my Canadian non registered account, Do I have to include those on form T1135 as I believe Atlantic Power is an american company. I also own shares of atlantic power preferred shares again same question, does it have to be included.

    ReplyDelete
  45. One more question, If I buy a security june 28, but only settles in July, For form T1135, am i considered to hold the transaction at end of June or only in July

    ReplyDelete
  46. If your form is sent but there are some mistakes, example let's say you do have to to include Atlantic Power and you didn't, can you be penalized or is the penalty only for the late filing. Sorry for all the questions, but I have been assessed a penalty for 2 years with my wife (joint account, total penalty of 10k plus interest) which I am currently fighting as I taught it was sent automatically with my tax return online and it wasn't. When I noticed the problem, I sent the forms for the 3 years (2 were past due), but not specifically to the Volunteer Disclosure program and they assessed the penalty despite the fact that I am the one that sent it to them before they asked. I am trying to avoid receiving another penalty and hopefully help others on this site. This is a great service you are offering. Thanks

    ReplyDelete
    Replies
    1. Hi Ron

      I dont provide personal tax planning on this blog, especially when I am asked 4 questions. You should seek tax advice as you have many questions. In particular, I would seek an accountants advice or consider whether you should be applying to Fairness in respect of your penalty. There is no guarantee they would accept your submission, but I would consider it given the facts, I dont see much downside in applying to Fairness if you have not already done so.

      Delete
  47. Mark, thanks for the timely comments. I am quite clear on the rules surrounding Mutual Funds (trust) that are held in Canada, through Canadian Corporations. I believe that they are viewed as Units. However, what about Separately Managed accounts or ETF's (US or International) held with my broker. Do I need to fill out all this information for the underlying holdings in each. I took this from investopedia "The SMA investor's statement, however, will list each of the equity positions and values separately, and the total value of the account will simply be the aggregate value of each of the positions." Any help would be gretaly appreciated Thanks and Happy New Year

    ReplyDelete
    Replies
    1. Hi Anon

      Just the total fund or ETF value, not each underlying asset in the ETF or mutual fund.

      Delete
  48. Hi Mark
    I found errors in T1135 of 2013. The errrr was I incorrectly used 'fair market value' for Box 2 - Max and Year End cost amount). The mistake is simply caused by my careless and misunderstanding
    1. Should I directly mail the amend t1135 - 2013 before filling the one of 2014 ?
    2. For the amended T1135, where it will be mailed to ? Ottawa or my local Tax center ?
    3. As it was a minor mistake but over the due date ( July, 2013) , do you think it will cause the penalties and reassessment extension ?

    ReplyDelete
    Replies
    1. Hi Anon

      I would amend it as soon as possible

      I think you mail it here, but call the CRA to confirm as I have not checked.

      Ottawa Technology Centre
      Data Assessment and Evaluations Program
      Verification and Validation
      Other Programs Unit
      875 Heron Road
      Ottawa ON K1A 1A2

      As you filed on time and are correcting a mistake, I dont think you will be penalized, but I cannot guarantee such

      Delete
  49. Anon
    Thank you for helping the 2013 T1135 comments from last year.
    I remain confounded that all of this effort on behalf of CRA for simple folks with ETF and US securities in non-registered Canadian security accounts; just confirming this craziness and helping was a great relief.
    So - I know there is a new & different 2014 electronic form available now; I am wondering if you might consider a blog update for the current tax season.
    Thank you in advance
    Neal

    ReplyDelete
    Replies
    1. Hi Neal

      Hoping to have one first week of April

      Delete