Questions and Answers about Form T1135

If an individual owns shares in a non-resident corporation with a cost amount of $75,000 and also has a bank account in the U.S. that has $35,000 on deposit, is the person exempt from filing Form T1135 since neither of the foreign properties has a cost amount greater than $100,000?

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

A joint venture has property outside Canada with a cost amount in excess of $100,000, and the property is not used in an active business. Should the joint venture file Form T1135 or should each party to the joint-venture agreement file the information return, based on the cost amount of the property owned by each of them?

Do non-residents who have employment income in Canada (section 115 of the Income Tax Act) have to report foreign assets?

Who would report the foreign property for a Canadian partnership that holds a portfolio investment in Canadian and non-Canadian stocks that are managed by an arm's-length investment manager? Would the partnership entity, the individual partners, or both have to report the part of their partnership interest that's foreign property?

Does Form T1135 have to be filed for a trust governed by a registered retirement savings plan (RRSP) that has more than $100,000 in foreign investments?

Under the new reporting requirements, Canadian residents must file Form T1135 when the cost amount of their foreign property exceeds $100,000 at any time during the year. Does this mean that a person does not have to report income from foreign property whose cost amount is below $100,000?

Does foreign property have to be reported if the cumulative cost has been either:

Does foreign property include non-Canadian stocks held in a managed account that's administered and managed by an arm's-length investment manager?

Does foreign property include only income-producing property or does it also include property that doesn't produce income (for example, vacant land)?

Does foreign property include Canadian-issued term or equity products denominated in non-Canadian dollars (for example, a Government of Canada treasury bill denominated in American dollars)?

Is a taxpayer who holds U.S. stocks through Canadian brokerage houses required to file Form T1135 if the cost of such securities is more than $100,000?

Foreign investment property doesn't include personal-use property such as vacation property. What if an individual rents out the vacation property for a few months during the year and it's obvious that the intention is to recover some costs associated with ownership? Bearing in mind the CRA's no-expectation-of-profit criteria, does it now become a foreign investment property?

Is the $100,000 threshold as of the filing due date, or is there a base year with indexed dollar values?

Does Form T1135 have to be filed if the cost amount of the units in a mutual-fund trust is $150,000 and if the mutual-fund trust invests entirely in foreign securities?

If a Canadian corporation has a warehouse in England whose cost amount is $900,000 and that's used to store its products for distribution, should the property be reported on Form T1135?

How is the cost amount determined for income tax purposes when a recent immigrant to Canada owns foreign property at the time of immigration?

Can a resident have two or more personal-use properties outside Canada?

If a taxpayer enters into a purchase contract to buy a foreign property for $500,000 but contributes just $50,000 as a down payment, with the balance financed through a mortgage, is the taxpayer required to report it if it's his or her only foreign asset?

If a taxpayer enters into a purchase contract to buy a $500,000 property that will be built and completed in two years, but has to put down $50,000 as down payment, is the taxpayer required to report it if it's his or her only foreign asset?

If an individual owns shares in a non-resident corporation with a cost amount of $75,000 and also has a bank account in the U.S. that has $35,000 on deposit, is the person exempt from filing Form T1135 since neither of the foreign properties has a cost amount greater than $100,000?

To determine whether or not Form T1135 must be filed, take the cost amount of each foreign property owned in the year and determine if at any time in the year the total of those cost amounts was more than $100,000 (in Canadian dollars).

• If the $100,000 threshold is crossed at any time in the year, the person must file the T1135 information return.

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

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

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

A joint venture has property outside Canada with a cost amount in excess of $100,000, and the property is not used in an active business. Should the joint venture file Form T1135 or should each party to the joint-venture agreement file the information return, based on the cost amount of the property owned by each of them?

Each party should file Form T1135 separately, based on the cost amount of that party's individual property.

Do non-residents who have employment income in Canada (section 115 of the Income Tax Act) have to report foreign assets?

If an individual is a non-resident of Canada but has taxable income earned in Canada, that individual is subject to tax only on the income earned in Canada.

That individual's world income is not subject to tax in Canada, and he or she would not be a Canadian resident for purposes of the Income Tax Act or for the reporting requirements.

Who would report the foreign property for a Canadian partnership that holds a portfolio investment in Canadian and non-Canadian stocks that are managed by an arm's-length investment manager? Would the partnership entity, the individual partners, or both have to report the part of their partnership interest that's foreign property?

If the non-Canadian stocks are held in the name of the partnership, the partnership is the reporting entity for purposes of filing Form T1135.

If the stocks are not partnership property, the individual partners would have to report the stocks owned by them on Form T1135.

Does Form T1135 have to be filed for a trust governed by a registered retirement savings plan (RRSP) that has more than $100,000 in foreign investments?

A trust governed by an RRSP does not have to file Form T1135. A trust governed by an RRSP is a trust described in paragraph (a) of the definition of a trust in subsection 108(1) of the Income Tax Act and is therefore excluded from the reporting requirements.

Under the new reporting requirements, Canadian residents must file Form T1135 when the cost amount of their foreign property exceeds $100,000 at any time during the year. Does this mean that a person does not have to report income from foreign property whose cost amount is below $100,000?

Income earned from foreign property must be included in income for Canadian tax purposes, regardless of the cost amount of assets held outside Canada.

• This distinction applies only for the purpose of the reporting requirements, that is, for the disclosure of details relative to the nature and cost amount of foreign property.

This distinction is made for practical reasons: it spares many Canadians who don't own much foreign property (for example, a bank account to support the expenses of staying a few weeks in another country) the need to comply with the reporting requirements.

Canadians who are exempt from such requirements still have to pay tax on any income earned on such property.

Does foreign property have to be reported if the cumulative cost has been either:

• more than $100,000 at any time during the fiscal period and is still held at period-end, even though at that time it may be more or less than $100,000
• more than $100,000 at any time during the fiscal period, whether or not it's held at period-end.

Foreign property must be reported on Form T1135 if at any time in the year or period the total cost amount of foreign property owned by the person was more than $100,000.

Even if the property isn't owned at the end of the year, it must still be reported if it was owned by the person at any time in the year.

As a result, the property would have to be reported on Form T1135 in both situations described above.

Does foreign property include non-Canadian stocks held in a managed account that's administered and managed by an arm's-length investment manager?

Foreign property that must be reported on Form T1135 includes all shares of non-resident corporations, whether they're held by the taxpayer or by another person for the taxpayer and also whether they're held inside Canada or outside Canada.

Does foreign property include only income-producing property or does it also include property that doesn't produce income (for example, vacant land)?

The fact that a foreign property doesn't produce income does not exclude it from the reporting requirements.

However, a property that doesn't produce income may be excluded if it's a personal-use property.

Does foreign property include Canadian-issued term or equity products denominated in non-Canadian dollars (for example, a Government of Canada treasury bill denominated in American dollars)?

Foreign property that must be reported on Form T1135 does not include term or equity products denominated in a foreign currency if the issuer is a resident of Canada.

Is a taxpayer who holds U.S. stocks through Canadian brokerage houses required to file Form T1135 if the cost of such securities is more than $100,000?

Shares of non-resident corporations should be reported, regardless of whether the shares are physically held inside Canada or outside Canada and regardless of whether the shares are held by the person or through a brokerage house.

Foreign investment property doesn't include personal-use property such as vacation property. What if an individual rents out the vacation property for a few months during the year and it's obvious that the intention is to recover some costs associated with ownership? Bearing in mind the CRA's no-expectation-of-profit criteria, does it now become a foreign investment property?

If the individual is using the property mainly for personal use and enjoyment, it's considered personal-use property and does not have to be reported.

Whether a particular property is used mainly for personal use and enjoyment or whether it's being held as an investment property, is a question of fact that's determined on a case-by-case basis. The tax treatment of the property on the person's income tax return is generally the basis for determining whether or not it should be reported under the reporting rules.

For example, if the individual is renting the property with a reasonable expectation of profit, it should be reported as an investment property on the individual's income tax return.

However, if there's no reasonable expectation of profit and the individual is merely recovering part of personal expenses, the CRA will consider it a personal-use property, and it will be excluded from the reporting requirements.

Is the $100,000 threshold as of the filing due date, or is there a base year with indexed dollar values?

The $100,000 threshold is cost-based, that is, it's the "cost amount" as defined under subsection 248(1) of the Income Tax Act. It is not based on the fair market value or an indexed amount.

Does Form T1135 have to be filed if the cost amount of the units in a mutual-fund trust is $150,000 and if the mutual-fund trust invests entirely in foreign securities?

If the mutual-fund trust is resident in Canada, you do not have to file Form T1135. Residency status is not determined by the type of investments held by a mutual fund trust or mutual fund corporation.

If a Canadian corporation has a warehouse in England whose cost amount is $900,000 and that's used to store its products for distribution, should the property be reported on Form T1135?

The corporation would not have to report property that's used or held exclusively in an active business. Since the warehouse is used only for storing inventory used in the corporation's business, it does not have to be reported on Form T1135.

How is the cost amount determined for income tax purposes when a recent immigrant to Canada owns foreign property at the time of immigration?

For new residents, the cost amount of foreign property owned at the time of entry into Canada is its fair market value at that time.

Reporting is not required by an individual (other than a trust) for the year in which he or she immigrated to Canada.

Can a resident have two or more personal-use properties outside Canada?

Yes, as long as they're not used to earn rental or investment income. The resident doesn't have to report the personal-use properties on Form T1135.

If a taxpayer enters into a purchase contract to buy a foreign property for $500,000 but contributes just $50,000 as a down payment, with the balance financed through a mortgage, is the taxpayer required to report it if it's his or her only foreign asset?

Yes. Although the capital contribution is less than $100,000, the cost amount of the asset the taxpayer bought is more than the threshold of $100,000.

If a taxpayer enters into a purchase contract to buy a $500,000 property that will be built and completed in two years, but has to put down $50,000 as down payment, is the taxpayer required to report it if it's his or her only foreign asset?

The purchase contract should be reviewed carefully to see whether there's any indication that the taxpayer has acquired the asset at the point of signing the contract.

If the title of the property hasn't yet passed to the taxpayer, the taxpayer does not have to report this foreign asset.