Subsection 233.3(1) - Definitions
Reporting Entity
Administrative Policy
24 February 2017 External T.I. 2016-0669081E5 - T1135 reporting
In 2015-0610641C6, two spouses jointly acquired a specified foreign property with a cost amount of $150,000, with Mr. A contributing $75,000 cash and gifting $75,000 cash to Mrs. A towards the purchase of the specified foreign property. CRA opined that as joint owners, there would be a comparison of each spouse’s share of the property to the $100,000 threshold and that each spouse’s share of the specified foreign property would generally be based on the respective amount contributed. How is this answer changed by the attribution rules? CRA responded:
[T]he reporting requirements under section 233.3… are independent of any determination and related income reporting requirements with respect to the attribution rules…..
Accordingly…each reporting entity would report their ownership interest in specified foreign property (i.e., if the total cost amount of specified foreign property to the entity exceeds $100,000). Furthermore, the reporting entity would report their share of income and/or gains/losses with respect to specified foreign property on Form T1135, based on their ownership interest in the underlying property and without consideration given to the attribution rules.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 233.3 - Subsection 233.3(3) | attribution rules ignored | 67 |
7 October 2011 Roundtable, 2011-0399441C6 F - T1135 - coût indiqué d'une assurance-vie
Is the cost amount of an interest in a life insurance policy the adjusted cost basis ("ACB”) as defined in s. 148(9), or the premiums paid? After noting that para. (f) of the s. 248(1) “cost amount” definition referenced “cost”, CRA stated:
[T]he "adjusted cost basis" of a holder's interest in a life insurance policy, as defined in subsection 148(9), can generally be considered a reasonable estimate of the cost of the property for the purposes of the application of the rules of section 233.3.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Cost Amount - Paragraph (f) | adjusted cost basis of policy is generally its “cost” under para. (f) | 121 |
31 July 2002 Internal T.I. 2002-0136937 F - Placement Français "Assurance-salaire-vie
The holder in France of an "assurance-salaire-vie," which is similar to a registered retirement savings plan except that a withdrawal from it is taxable only if made within the first eight years of the contribution, immigrates to Canada. The Directorate noted that such investment could be “specified foreign property” (intangible property situated outside Canada) and that its cost amount could have been stepped up under s. 128.1(1).
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Treaties - Income Tax Conventions - Article 18 | withdrawal from French employee-contribution plan (assurance-salaire-vie) was not a “pension” | 99 |
Specified Canadian Entity
Administrative Policy
27 June 2016 External T.I. 2014-0532601E5 - Paragraph 94(3)(f) electing trust and form T1135
S. 94(3)(f) provides for an election which effectively permits a (s. 94) deemed non-resident trust to elect to bifurcate itself into a “non-resident portion” trust (in broad-brush terms, holding property that has not been contributed by current or former residents of Canada) and the “particular trust” (holding the tainted property). CRA considered that neither of these two deemed subtrusts is required to report foreign property on T1135s provided that all the foreign property is held in the non-resident portion trust rather than the particular trust, stating:
A specified Canadian entity is defined by subsection 233.3(1) as a taxpayer resident in Canada with certain exceptions which are not applicable.. . Since the non-resident portion trust is not a deemed resident trust, it is not resident in Canada and is not a specified Canadian entity.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 94 - Subsection 94(3) - Paragraph 94(3)(f) | no T1135 filing required by non-resident portion trust (or by particular trust if it has no foreign property) | 164 |
13 March 2015 External T.I. 2014-0547721E5 - T1135 reporting for a trust
A trust whose sole beneficiaries are exempt under 149(1)(c) does not have to file a T1135 as per s. (a)(viii) of the definition of "specified Canadian entity."
19 July 2000 External T.I. 1999-0009695 - Foreign reporting requirements
In a situation where a Canadian partnership held 99.99% of a US partnership which, in turn, held 99% of a second US partnership, the second US partnership would be the reporting entity because it is a partnership referred to in (b) of the definition of "specified Canadian entity", and the first US partnership would not be a reporting entity as it would not own any specified foreign property by virtue of the exception in (o) of the definition thereof.
Specified Foreign Property
Administrative Policy
Foreign Income Verification Statement April 14, 2021
Specified foreign property is defined in subsection 233.3(1) of the Income Tax Act and includes:
- funds or intangible property (patents, copyrights, etc.) situated, deposited or held outside Canada
- tangible property situated outside Canada
- a share of the capital stock of a non-resident corporation
- shares of corporations resident in Canada held outside Canada
- an interest in a non-resident trust that was acquired for consideration
- an interest in a partnership that holds a specified foreign property unless the partnership is required to file Form T1135
- a property that is convertible into, exchangeable for, or confers a right to acquire a property that is specified foreign property
- a debt owed by a non-resident, including government and corporate bonds, debentures, mortgages, and notes receivable
- an interest in a foreign insurance policy
- precious metals, gold certificates, and futures contracts held outside Canada
Specified foreign property does not include:
- a property used or held exclusively in carrying on an active business
- a share of the capital stock or indebtedness of a foreign affiliate
- an interest in a trust described in paragraph (a) or (b) of the definition of exempt trust in subsection 233.2(1)
- a personal-use property as defined in section 54
- an interest in, or a right to acquire, any of the above-noted excluded foreign property
9 December 2016 External T.I. 2016-0639481E5 - Specified foreign property-jointly held property
Does a taxpayer with a joint interest in specified foreign property but who did not contribute to its acquisition, e.g., a child who was added as joint owner for estate planning purposes, have a reporting obligation? In the joint ownership case, must the taxpayer be the beneficial owner or would strictly legal ownership require reporting? Are the attribution rules germane? CRA responded:
The term “specified foreign property” as defined in subsection 233.3(1)… refers to property of a person or partnership, which…means property owned by the person or the partnership. …
Legal owners are generally entitled to enforce their ownership rights against all other persons. By contrast, the term “beneficial ownership” is used to describe the type of ownership of a property by a person who is entitled to the use and benefit of the property whether or not that person has concurrent legal ownership. … In most cases, the same person has both legal and beneficial ownership of a property. …[See] S1-F3-C2….
[A] reporting entity would typically be the owner (including a beneficial owner) of the property whether such ownership is jointly with another person or otherwise and irrespective of the financial contribution made by the reporting entity towards the acquisition. In the case of joint ownership, each reporting entity would report their ownership interest in the specified foreign property (i.e., if the total cost amount of specified foreign property to the entity exceeds $100,000). …
[T]he application of the attribution rules… would have no bearing on whether that property represents “specified foreign property”….
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Ownership | "property of" a taxpayer applies to a beneficial (or legal?) co-owner who made no financial contribution | 187 |
1 March 2016 Internal T.I. 2016-0631181I7 - Specified foreign property - mineral rights
After noting that 2014-0522241I7 indicated that a right to mine for minerals in a mineral resource outside Canada falls within s. (b)(ii) of “foreign resource property” in s. 248(1), that “for such mineral right to be considered specified foreign property, the right would have to be tangible property, which is understood to include real property such as land and rights issuing out of, annexed to and exercisable within or about land,” and that the mineral right would be considered a tangible property coming within s. (b) of 233.3(1) – “specified foreign property,” CRA stated:
We wish to clarify that a specified foreign property can include inter alia tangible or intangible property…., real property can include… intangible property…[and] a mineral right would likely be considered an intangible property. Therefore…a mineral right situated outside Canada would be considered a specified foreign property pursuant to paragraph (a)… .
5 October 2015 Internal T.I. 2014-0522241I7 - T1135: Mineral rights situated outside of Canada
Is the right to mine minerals situated outside of Canada considered “real property” for T1135 reporting purposes, and if so how is the “cost amount” for such property determined? CRA responded:
The expression “tangible property… is understood to include real property, which generally refers to land and rights issuing out of, annexed to and exercisable within or about land (for example, a fee simple in land and a profit-à-prendre in respect of minerals). As such…the right… would be considered tangible property that is specified foreign property for purposes of section 233.3… .
…[T]he CRA has a longstanding position that the cost amount of foreign resource property is nil. Therefore, in determining whether a taxpayer is a reporting entity for T1135 purposes, the mineral rights have a cost amount of nil. However, in our view, if a taxpayer has sufficient other specified foreign property to exceed the $100,000 threshold, the CRA could require that a more useful amount be reported (for example, acquisition cost).
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Cost Amount | nil cost amount for foreign resource property | 39 |
16 April 2015 External T.I. 2014-0561061E5 - Specified Foreign Property
A Canadian corporation invests in a foreign partnership which, in turn, invests in digital currency (e.g. Bitcoins) and uses currency arbitrage/exchange and other trading methods to increase the net asset value of the fund in a foreign currency. Is the foreign partnership interest "specified foreign property"? CRA responded:
[D]igital currency would be funds or intangible property and would be specified foreign property of a person or partnership to the extent that it is situated, deposited or held outside of Canada and not used or held exclusively in the course of carrying on an active business. …
Based on the limited description…the digital currency would be held outside of Canada and would not be considered to be used or held exclusively in the course of carrying on an active business. As such, the digital currency would be specified foreign property… and the interest in the foreign partnership (to the extent the partnership is not a specified Canadian entity [under para. (o)]) would be specified foreign property of the Canadian corporation.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 122.1 - Subsection 122.1(1) - Non-portfolio Property | digital currency holdings of a foreign partnership not used in active business | 77 |
12 May 2014 External T.I. 2014-0517021E5 - 233.3 - Definition of Specified Foreign Property
An individual ("Mr. X"), resident in Canada owns all the shares of Canco, having a cost amount higher than $100,000. Canco owns all the shares of Forco having a cost amount higher than $100,000. CRA stated:
[T]he shares of Forco would not be specified foreign properties of Mr. X, as Mr. X does not have an interest in, or a right in Forco. …[T]his expression does not apply to indirect shareholding. … However, the shares of Forco would be specified properties [sic] of Canco pursuant to paragraph (c) of the definition of specified property [in] subsection 233.3(1)… .
24 February 2014 Internal T.I. 2013-0484461I7 - specified foreign property
A Canadian resident makes a loan to a general partnership of which he is member and non-residents also are members. CRA stated that "the rule in paragraph 96(1)(a) of the Act deeming the partnership to be a person does not apply for the purpose of section 233.3. " However, under the foreign law under which the Partnership was formed and the provisions of the partnership agreement "the partners of the Partnership are jointly and severally liable for the debts incurred by the Partnership." Accordingly:
the Loan represents indebtedness owed to the (Canadian resident) by a non-resident person(s) and therefore constitutes "specified foreign property"…because… for the purposes of paragraph (g) of that definition, each of the partners would be considered to owe the full amount of the indebtedness incurred by the Partnership.
12 September 2007 External T.I. 2006-0211121E5 F - Fiducie non-résidente
Regarding the reporting obligations of a Canadian resident beneficiary of a non-resident trust that was not itself deemed resident in Canada, CRA stated:
[W]e have assumed that the only property held by the Canadian beneficiary is an interest in a non-resident trust that would not be deemed to be resident in Canada for tax purposes. Subject to certain exceptions, specified foreign property would include such an interest. The exceptions are as follows:
- an interest in a non-resident trust that was not acquired for consideration by either the person or partnership or a person related to the person or partnership; and
- an interest in a trust described in paragraphs (a) and (b) of the definition "exempt trust" in subsection 233.2(1).
As you can see, a number of situations will be exempt from filing prescribed Form T1135 because the Canadian resident will not have specified foreign property due to the fact that neither the Canadian resident nor a person related to the Canadian resident acquired the interest for consideration. On the other hand, in determining whether a Canadian resident beneficiary must complete a prescribed Form T1135 in respect of specified foreign property in a situation where the interest in the non-resident trust would be specified foreign property, it is not the value of that property that is important but rather its cost amount.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 94 - Subsection 94(1) - Resident Contributor | must generally consider whether the mooted resident contributor was resident in Canada at the trust’s year end and had made a contribution thereto then or prior thereto | 210 |
Paragraph (a)
See Also
Chan v. The Queen, 2022 TCC 87 (Informal Procedure)
The taxpayer was assessed a penalty under s. 162(7)(a) for failure to file T1135 forms regarding a bank account with the Bank of China (BofC), which he had assisted his father (Joseph) to open up in his name, as well as a gross negligence penalty under s. 162(10)(a). In finding that the taxpayer was not required to file T1135s, Russell J stated (at para. 45):
[A]s Joseph sourced the funding of the account at all times and he alone exercised control and usage of the account, it appears reasonably clear that he alone utilized and thus enjoyed the benefit of the account. Thus I conclude that Joseph was the beneficial owner of the account, while his son the appellant merely held legal title, as his father’s nominee.
Russell J found that the penalties should be vacated for this reason, and also because, in any event, the taxpayer “had reasonable cause to believe that his father, and not he himself, held the beneficial interest in the account assets” (para. 49). Accordingly, even in the case of the lower threshold for a penalty under s. 162(7)(a), “the defence of due diligence has been established – that is, the appellant reasonably believed in a mistaken set of facts that if true would have made his act or omission to act innocent.”
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 162 - Subsection 162(7) | due diligence defence where taxpayer reasonably believed that he was not the beneficial owner of a Bank account in China | 305 |
| Tax Topics - General Concepts - Ownership | taxpayer did not have the beneficial ownership of a bank account which he did not use | 121 |
Administrative Policy
7 October 2022 APFF Financial Strategies and Instruments Roundtable Q. 1, 2022-0936241C6 F - T1135 and situs of cryptocurrencies
Prior to the October 10, 2022 release by the OECD of its Crypto-Asset Reporting Framework and Amendments to the Common Reporting Standard, CRA stated:
Given the decentralized nature of cryptocurrency, the question of where a cryptocurrency is located, deposited or held within the meaning of section 233.3 is complex. This issue is still under active consideration by the CRA.
… [C]rypto-assets, by their very nature, are more difficult to track than traditional assets. Consequently, they carry a material risk of tax evasion or non-compliance, regardless of their situs. The CRA believes that, in general, reporting of crypto-assets would facilitate tax compliance in this growing sector. The CRA is currently considering several options, including changes to certain forms, schedules and guides that would increase disclosure for this type of asset and promote tax compliance.
17 May 2022 IFA Roundtable Q. 7, 2022-0926451C6 - Cryptocurrency reporting
At the 2021 APFF Financial Strategies and Instruments Roundtable, Q.11, CRA stated:
The question of where a cryptocurrency is located, deposited or held within the meaning of section 233.3 is currently under review by the CRA.
After indicating that this question “is still under review by the CRA,” it stated:
In parallel, work is underway at the …OECD … to develop the Crypto-Asset Reporting Framework (the “CARF”), a standardized package that will include reporting requirements to tax administrations and exchange of information procedures related to taxpayers’ transactions with crypto-asset service providers. … A public consultation meeting will be held at the end of May 2022.
7 October 2021 APFF Financial Strategies and Instruments Roundtable Q. 11, 2021-0896021C6 - APFF Q.11 - T1135 and situs of cryptocurrencies
In the U.K., HMRC's guidance states that for as long as persons are resident in the U.K., the exchange tokens they hold as beneficial owner will be located in the U.K. Could CRA adopt a principle like that of the U.K. and treat the situs of cryptocurrencies as following that of the holder's residence? CRA responded:
The question of where a cryptocurrency is located, deposited or held within the meaning of section 233.3 is currently under review by the CRA.
14 January 2004 External T.I. 2003-0026011E5 F - Contrat à terme sur indice boursier
Regarding foreign currency "variable margin" accounts held by registered plans with dealers, CCRA stated:
With respect to variable margin accounts, you have indicated to us that these are monies held for the registered plan at a broker who manages the account like a bank account. This broker may be in Canada or abroad. It is our view that money belonging to the registered plan and deposited with a dealer outside Canada is foreign property within the meaning of the definition of "foreign property" in subsection 206(1). If the money is deposited in Canada, it will not be foreign property.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 54 - Adjusted Cost Base | unrealized gains or losses on stock index futures contracts not included in the ACB of such property | 100 |
Articles
William Musani, Ashvin Singh, "Foreign Property Reporting: Where Is Your Crypto?", Tax for the Owner-Manager, Vol. 21, No. 4, October 2021, p. 6
Test of situs of private key (p. 6)
- What is stored in a digital wallet is not the actual cryptocurrency but rather one or both of the owner’s public keys (akin to a bank account number) and private keys (akin to the PIN associated with that account). The situs of a private key is arguably what is most relevant to determining the cryptocurrency’s situs.
- The situs of a cold wallet (i.e., a physical storage drive or computer) is generally the location of such device. For a hot wallet (i.e., a digital wallet connected to the internet), the primary server location used by the wallet provider “should be strongly determinative of situs.”
Uncertainties re where the relevant servers are (p.7)
- Reporting requirements are unclear if the taxpayer stores a private key in multiple locations at once, for example, where a document containing a private key is saved on a computer in Canada, and also in cloud storage in circumstance where it is difficult for the wallet owner to retrieve information on the host server’s geographic location(s), e.g., for large providers whose server locations are often numerous or highly confidential. Similar uncertainty may exist where the owner uses multiple wallets, e.g., with one wallet stored in Canada and another abroad.
Paragraph (c)
Articles
David H. Sohmer, "Do Shares of an American Company Credited to an Account with a Canadian Broker constitute ‘Specified Foreign Property’?", The Canadian Taxpayer, August 10, 2018. Vol. xl, No 16, p. 121
Adoption in Canada of UCC securities account and securities entitlement concepts (p. 123)
The Official Comment to Section 8-503 of the Uniform Commercial Code indicates…:
A security entitlement is not a claim to a specific identifiable thing; it is a package of rights and interest that a person has against the person’s securities intermediary and the property held by the intermediary. …
In 2006 Ontario became the first Canadian province to enact a securities transfers act based on Revised UCC Article 8. Since then all provinces have enacted similar legislation.
Securities entitlement legislation does not establish beneficial ownership of the securities (p. 123)
A convincing case can be made for the argument that section 233.3 requires that a share be beneficially owned as that term is understood in the context of the common law of property and that this is not the case where securities entitlement legislation establishes the legal relationship.
Securities entitlement is not situate outside Canada
While the concept of a security entitlement "includes a package of in personam rights against the intermediary", a securities entitlement "is itself a form of property interest not merely an in personam claim against the intermediary" [f.n. 7: Prefatory Note to Revised UCC Article 8, p. 670.] Assuming that a security entitlement is intangible property or for civil law incorporeal property, it would only constitute specified foreign property if it is situated, deposited or held outside Canada. A securities entitlement is not held by or deposited with a broker. Unlike patents and trademarks, a securities entitlement is not intellectual property which is protected by statute. It is a creation of American and Canadian statutes and only has meaning in the context of such statutes, and so is not susceptible of being situate anywhere.
Paragraph (k)
Administrative Policy
3 November 2021 CTF Roundtable Q. 14, 2021-0911951C6 - Failure to properly file a T1135
The shares of NRco are held by Cansub, a wholly-owned subsidiary of (Canadian) Parent. Although Form T1135 states that taxpayers are not to include shares and indebtedness of a “foreign affiliate,” the definition of a foreign affiliate by virtue of s. 233.4 is narrower than in s. 95(1), so that (by virtue of s. 233.4(2)(a) as it applies pursuant to para. (k) of the “specified foreign property” definition in s. 233.3(1)) NRco is not a foreign affiliate of Parent for T1135 reporting purposes. Would CRA pursue Parent for penalties if it did not report a loan owing to it by NRco?
After referring to the Ministerial discretion accorded by s. 220(3.1), CRA indicated that applications for cancellation of interest or penalties for taxpayers that were misled by the T1135 wording would be entertained by CRA and that it also encouraged taxpayers to voluntarily correct past filing errors through submitting adjustments or applying under the voluntary disclosure program.
In the final version of its response, CRA added the statement:
At this time, the CRA is in the process of consulting internal stakeholders to evaluate and potentially develop a position on this issue, while giving consideration to the impacts on other foreign reporting forms
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Foreign Affiliate | s. 95(1) FA definition is broader than under s. 233.4 | 167 |
Paragraph (n)
Administrative Policy
4 June 2020 External T.I. 2018-0753611E5 - Form T1135 and US pension plan
There was no adverse impact on the exclusion in para. (n) for a Canadian beneficiary where, following an asset insufficiency in a US qualified pension plan, the Pension Benefit Guaranty Corporation, as replacement trustee, commenced paying the plan benefits to the members (the majority of whom resided in the US).
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 233.2 - Subsection 233.2(1) - Exempt Trust - Paragraph (b) | assumption of US pension payments by Pension Benefit Guaranty Corp. did not affect exempt trust status | 179 |
12 April 2016 External T.I. 2015-0595461E5 - Australian Super Fund & T1135
An Australian Superannuation Fund is a trust that has been registered and approved by the Australian Government, is funded by compulsory and voluntary contributions from employers and individuals over their working lives, and provides retirement income to them. All investment earnings within the Super Fund are taxed at 15%, except for capital gains, which are given a 33% discount. The individual taxpayer has made no contributions to the Super Fund since moving to Canada. The Super Fund was assumed by CRA to be an employee benefit plan and a superannuation or pension plan or fund, and to not deemed to be resident in Canada by s. 94(3). Is the fund considered “specified foreign property,” or is it an “exempt trust”? CRA responded:
The relevant exclusions are:
…Paragraph (m) – if the interest in the non-resident trust was not acquired for consideration by the taxpayer, or certain other persons. The employee’s interest in the Super Fund does not meet this exception because the employee’s contributions to the Super Fund constitute “consideration” for the acquisition of the interest in the trust.
Paragraph (n) – if the trust is described in paragraph (a) or (b) of the definition of “exempt trust” in subsection 233.2(1)… .
Paragraph (a)… includes only certain U.S. individual retirement accounts (IRAs)… .
Paragraph (b) of the definition of “exempt trust” refers to, inter alia, trusts that are exempt from the payment of income tax in the country in which they are resident.
Since Super Funds are subject to income tax in Australia, they do not meet this exception.
…[T]he taxpayer must report the “cost amount” of the interest in the Super Fund on the T1135 if the total of all cost amounts of all specified foreign property exceeds $100,000. …
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Cost Amount - Paragraph (e) | cost amount of pension rights includes future amounts to which legal entitlement | 184 |
| Tax Topics - Income Tax Act - Section 162 - Subsection 162(7) | no penalty for reasonably estimating an unknown amount, e.g., the “cost amount” of a pension interest | 172 |
| Tax Topics - Income Tax Act - Section 233.2 - Subsection 233.2(1) - Exempt Trust | Australian Superannuation Fund not an exempt trust due to taxability | 107 |
12 August 2010 External T.I. 2010-0360171E5 F - Déclaration T-1135 et biens étrangers
A Canadian resident, who had lived in Switzerland for a number of years before returning, now holds a pension account in Switzerland known as a "Vested Benefits Account" (exceeding $100,000) that is a pension mechanism provided for under Swiss law from which retirement benefits will be paid when the individual has reached the required age and meets the other conditions set out in the Swiss Federal Law on the Occupational Old-Age, Survivors' and Disability Benefit Plans (LOB). Without providing detailed analysis, CRA indicated that this asset was not excluded under s. 233.3(1) – specified foreign property – para. (n) as an interest in an exempt trust and, thus, was subject to the s. 233.3 reporting requirement.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 233.2 - Subsection 233.2(1) - Exempt Trust | exempt foreign trust definition contains strict conditions | 155 |
Subsection 233.3(3) - Returns respecting foreign property
Administrative Policy
S5-F3-C1 - Taxation of a Roth IRA
No T1135, T1141, T1142 or T1134 reporting re Roth IRA if no contribution while Cdn resident]
1.22 If an Election has been filed and no Canadian Contribution has been made to a Roth IRA, the CRA does not require information relating to the Roth IRA to be reported in the following forms:
- Form T1135, Foreign Income Verification Statement
- Form T1141, Information Return in Respect of Contributions to Non-Resident Trusts, Arrangements or Entities
- Form T1142, Information Return in Respect of Distributions from and Indebtedness to a Non-Resident Trust
- Form T1134, Information Return Relating to Controlled and Not-Controlled Foreign Affiliates
24 February 2017 External T.I. 2016-0669081E5 - T1135 reporting
CRA considers that the attribution rules should be ignored for T1135 purposes so that, for example, an individual who received a spousal gift of the cash used to purchase her share of a specified foreign property would compute whether she was over the $100,000 cost amount threshold and report her share of the income on the form without regard to the application of the attribution rules.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 233.3 - Subsection 233.3(1) - Reporting Entity | attribution rules disregarded | 196 |
17 March 2015 External T.I. 2014-0529371E5 - T1135 reporting for emigrant
An individual emigrates July 1, 2013 owning shares of non-resident corporations (that are not foreign affiliates) with a total cost amount of $500,000. Is the maximum cost amount during the year on the Form T1135 determined by looking at the cost amount to the emigrant from January 1, 2013 to July 1, 2013, even though the taxation year of the emigrant is the 2013 calendar year? Can the cost amount at year end be shown as zero? Must the individual report specified foreign property that was acquired after emigration but before the end of the taxation year on Form T1135? CRA responded:
While the Act technically allows for the CRA to require information on specified foreign property for the entire calendar year…the CRA will only require information relating to the period during which an individual was resident in Canada. Therefore, …the individual can complete the Form T1135 as if the taxation year ended on the date of emigration.
[T]he deemed disposition rules in subsection 128.1(4)…may apply upon emigration. In that case, the individual would report an end of year cost amount of nil… .
[S]ince the taxpayer will be completing the Form T1135 on the basis that the taxation year ended on the date of emigration, [post-emigration] transactions and properties will not be reportable.
The transitional method still applies to an individual who emigrates in 2013.
21 August 2014 External T.I. 2014-0527611E5 - T1135 for Deceased Individual
An individual died on July 1, 2013, owning shares of non-resident corporations (that were not foreign affiliates) with a cost amount of $500,000. Should the cost amount at year-end be reported as nil? Should the maximum cost amount for the year be determined based on the period from January 1, 2013, to July 1, 2013, even though the taxation year of the deceased is the 2013 calendar year? CRA responded:
[Although] the reporting period is the calendar year…since the taxpayer is deemed to have disposed of the property immediately before death, the relevant period for determining the maximum cost amount for the year will be from January 1 until the date of death.
…Since the taxpayer disposed of the property on the date of death, the cost amount of the property held at year-end would be nil.
CRA, Revised Form T1135, Foreign Income Verification Statement 26 February 2014 [2013 transitional reporting method]:
[F]or the 2013 tax year only, the CRA will assist taxpayers to transition to the new requirements [for expanded reporting in the revised T1135] by permitting streamlined reporting for certain specified foreign property on Form T1135.
Specifically, a taxpayer who held specified foreign property in an account with a Canadian registered securities dealer (as defined in subsection 248(1)...) may now report the combined value of all such property at the end of the tax year, rather than reporting the details of each property. This combined value should be included in Category 6 of Form T1135, "Other property outside of Canada." If a taxpayer chooses to use the 2013 transitional reporting method, the taxpayer must use this reporting method for all accounts with Canadian registered securities dealers.
In addition, unit trusts (as defined in subsection 108(2)...) now have the option to report the combined value of all of their specified foreign property in the same manner for their 2013 tax year.
The CRA is also extending the filing deadline for Form T1135 for the 2013 tax year to July 31, 2014, for all taxpayers... .
See revised Form T1135.
10 June 2013 STEP Roundtable, 2013-0485761C6 - 2013 STEP CRA Roundtable Question 3
The extension of the normal reassessment period under draft s. 152(4)(b.2) - where (a) there has been a failure to file the T1135 as and when required or to provide therein the required information in respect of a specified foreign property, and (b) to to report an amount, in respect of a specified foreign property, that is required to be included in the taxpayer's income - applies for all purposes and not just to income derived from the unreported foreign assets.
U.S. shares or U.S. bonds held in a U.K. brokerage account should be coded as U.S. as "it is the residence of the corporation that issued the shares or the residence of the bond issuer that is relevant… ." Where there are gains and Canadian losses, only the foreign gains are reported on the T1135.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) - Paragraph 152(4)(b.2) | 83 |
Articles
Maureen Vance, "T1135 – The Saga Continues", Tax Topics, Wolters Kluwer, Number 2248, April 9, 2015, p. 1.
Difficulties in preparing T1135s with brokerage-provided information (p. 2)
Investment dealers have made considerable efforts to put systems in place to provide the information needed to complete the T1135, which was particularly challenging considering that the requirement to segregate investments on a country-by-country basis only became known when the revised form was issued last summer. However, tax preparers may find that the availability and quality of this information will vary greatly from one dealer to another, as well as between types of accounts. For example, very little (if any) information appears to have been provided for taxpayers using many of the popular discount brokerage accounts. Even where there is information available, you may have to double-check to ensure that the properties have been properly classified. For example, brokerage statements often classify Canadian mutual funds with foreign investments as "Foreign Property" for purposes of asset allocation. However, Canadian mutual funds are not specified foreign property and are not to be reported on the T1135. Similarly, the brokerage statement may classify a property such as a foreign mutual fund or an exchange-traded fund ("ETF"] according to the location of the investments rather than the location of the issuer of the mutual fund or ETF.
Forms
T1135, Foreign Income Verification Statement: As indicated in a news release on the CRA website dated 26 June 2013, the CRA is instituting stronger reporting requirements in T1135 "to crack down on those who attempt to cheat the system." CRA stated:
Starting with the 2013 taxation year, Canadians who hold foreign property with a cost of over $100,000 will be required to provide additional information to the Canada Revenue Agency (CRA). The criteria for those who must file a Foreign Income Verification Statement (Form T1135) has not changed; however, the new form has been revised to include more detailed information on foreign property.
Increased reporting requirements include:
- the name of the specific foreign institution or other entity holding funds outside Canada;
- the specific country to which the foreign property relates; and
- the income generated from the foreign property.
The CRA will use the additional information to ensure all taxpayers comply with Canadian tax laws, through activities including education and audit.
(CRA has indicated, however, that it will accept old T1135 forms filed for taxation years ending no later than 30 June 2013.)