ARCHIVED - Line 121 - Interest and other investment income

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Report at this line your interest from Canadian sources, and your interest and dividend income from foreign sources.

The interest you report depends on the type of investment and on when you made the investment. This includes the interest on any income tax refund you received in 1995 and shown on your Notice of Assessment or Notice of Reassessment.

How to report

• Use Part II of Schedule 4.
• List each investment separately and attach copies of any information slips.

To determine the amount that you have to report, read the parts of this section that correspond to the type of investment that you have. This section is divided as follows:

• Bank accounts
• Term deposits, guaranteed income certificates (GICs), and other similar investments
• Treasury bills
• Earnings on life insurance policies
• Foreign interest and dividend income
• Canada Savings Bonds (CSBs)

Ba nk accounts

Report interest that was paid or credited to you in 1995, even if you did not receive an information slip. You may not receive a T5 slip for amounts under $50.

Report your share of interest from a joint account, based on how much you contributed to the account.

Example

Karen and Wes received a T5 slip from their joint bank account showing the $400 interest they earned in 1995. Karen had deposited $4,000 and Wes had deposited $1,000 into the account.

Karen reports $320 interest, calculated as follows:

$4,000 (her share) $400 (total interest) = $320
$5,000 (total)

Wes reports $80 interest, calculated as follows:

$1,000 (his share) $400 (total interest) = $80
$5,000 (total)

In most cases, you have to report all the interest from a joint bank account in which:

• you deposited all of the money; or
• the interest is from money you gave or loaned to certain related people. For more details, see "Loans and transfers of property" at line 130.

If you deposited Child Tax Benefit payments into a bank account in your child's name or a trust in your child's name, the interest earned on those payments is your child's income.

Term deposits, guaranteed income certificates (GICs), and other similar investments

On these investments, interest builds up over a period of time usually longer than one year, and you do not receive the interest until the investment matures, or you cash it in. For more information on CSBs, see the heading "Canada Savings Bonds (CSBs)" on page 13.

You have to report annually the interest you earned on all investments you made after 1989.

The amount of income you report is based on the interest you earned during each complete investment year. For example, if you made a long-term investment on July 1, 1994, the first year's interest is calculated to the end of June 1995. You may or may not receive a T5 slip showing the amount of interest you earned. In either case, you have to report the interest on your 1995 tax return. Report the interest earned from July 1995 to June 1996 on your 1996 return.

You can report interest you earned on investments you made before 1990, including CSBs, in one of the three following methods:

• cash method;
• receivable method; or
• annual accrual method.

Cash method - Report interest either in the year it is paid to you, or at least every third complete year after you make the investment. If you dispose of an investment within the three-year period, you have to report all interest (except the amount you have already reported) in the year you receive it.

Receivable method - Report interest in the year you are entitled to receive it, rather than when you actually receive it. For example, you will report the interest when a bond interest coupon matures, rather than when you actually receive the payment. Under this method, you have to report interest at least every third complete year after you make the investment.

Annual accrual method - Report interest annually, regardless of when you are entitled to receive it or when it is actually paid. For example, you report the interest from a compound-interest bond yearly as it accumulates, even though you will not receive the interest until you cash the bond.

If you want to report interest on an investment using the annual accrual method, say so on your return. Include a note identifying the investments that you have chosen to report annually. From then on, you have to report interest from those investments using the annual accrual method.

Changing your method - You can change from the cash or receivable methods to the annual accrual method. However, once you start using the annual accrual method for an investment, you cannot change to any other method for that investment. To change your method, include a note in your return stating which investments you have chosen to report annually, and report all interest to the end of the year in which you are changing your method (except the amount you have already reported).

If you have been reporting interest using the cash or receivable method, you cannot go back and change your method to the annual accrual method on returns from previous years.

Trea sury bills

If you disposed of a treasury bill (T-Bill) in 1995, you will receive either a T5008 slip, Statement of Securities Transactions, or an account statement.

If you disposed of a T-Bill at maturity, you have to report as interest the difference between the price you paid for it and the proceeds of disposition shown on the T5008 slip or account statement.

If you disposed of a T-Bill before maturity, you may also have to report a capital gain or loss. For details, get the income tax guide called Capital Gains.

Earn ings on life insurance policies

Report the earnings which have accumulated on certain life insurance policies in the same way as you do for other investments. In all cases, your insurance company will send you a T5 slip.

For policies bought before 1990, you can choose to report accumulated earnings annually by telling your insurer in writing that you choose to do so.

Fo reign interest and dividend income

Report gross foreign interest and dividend income in Canadian dollars. Do not deduct from your foreign income the amount of tax the foreign country withheld. For more information on how to convert your foreign income into Canadian dollars, see the section called "How do you report foreign income and other amounts?" on page 7.

Tax Tip

If you paid foreign taxes on foreign investment income that you received, you may be able to claim a foreign tax credit. See lines 507 and 508 for details.

Canada Savings Bonds (CSBs)

Interest on CSBs designated by the letter "R," for regular-interest, is paid annually. Interest on bonds designated by the letter "C," for compound-interest, is not paid until the bond matures, or you cash it in.

Tax Tip

If you bought bonds through your payroll savings plan, you can deduct the interest charges you paid to buy the bonds. See line 221 for details.

How to report

"R" bonds - Report the amount shown on the T5 slip.

"C" bonds, Series 45 and subsequent - Report the amount shown on the T5 slip.

"C" bonds, Series 42 to 44 - Use Chart 1 if you want to report your bond interest using the annual accrual method. We explain the methods on page 12).

If you want to change to the annual accrual method, use Chart 2 to calculate the amount you should report.

If you use the cash or receivable method, you have to report the interest at least every three years. Using this method, you should have reported the following amounts for each $100 of bonds:

• for Series 42 bonds, $33.19 interest on your 1990 return and $34.90 on your 1993 return;
• for Series 43 bonds, $35.33 interest on your 1991 return and $26.78 on your 1994 return; and
• for Series 44 bonds, $32.05 interest on your 1992 return and $24.48 on your 1995 return.

If you have not reported any interest on your Series 42, 43, or 44 "C" bonds, you should write and ask us to adjust your return. For more details on how to do this, see the section called "After you file" on page 7 of this guide.

If you cashed Series 42, 43, or 44 "C" bonds in 1995, report the amount shown on the T600 slip minus any part of that amount that you have already reported in previous years. Use Chart 3 below to calculate the amount you should have reported for each $100 of bonds:

Date modified:

2002-02-04