Tax Tips and Pits – Form T1135: Owning up to the taxman

Changes have been to the Foreign Income Verification Statement. How does this apply to you?

Introducing little known form T1135: the Foreign Income Verification Statement. You may recall in the past when you filed your tax return you answered the question, “Did you own foreign assets of $100,000 or more this year?”  This question has been on the T1 tax return for years and until recently, didn’t appear too terribly important.

No longer.

Last year’s Federal Government’s budget has placed this form front and center as it tries to identify, track and tax Canadian’s foreign assets worth $100,000 or more.

This reporting should not be confused with the necessity for Canadian’s to report worldwide income on their tax return.  Rather, form T1135 requires the disclosure of foreign owned assets that may or may not be earning income.

It includes amounts deposited in foreign bank accounts, shares in foreign companies, interests in foreign trusts, foreign bonds, units in offshore mutual funds and, of course, real estate – even vacant land.

However, exempted are assets to operate a foreign business and also personal use property – things like vehicles, artwork, jewellery and vacation property.

But in the case of vacation real estate that is rented, CRA clearly states that the Canadian taxpayer/owner must not have an expectation of profit.  In other words, any rental revenue generated must be incidental to owning the property and act only to offset expenses associated with that property.

By extension, this means foreign real estate worth $100,000 functioning mainly as a rental property must be reported as an asset on form T1135.

As an aside, rental revenue and expense in either case must be reported on schedule T776.

For the purposes of form T1135, the value of a capital asset is its original purchase cost plus the cost of improvements made to it over time.  The current market value is not the determining factor regarding the use of this form.

The amount of a down payment used to purchase an asset is irrelevant.  An asset costing $100,000 or more, whether involving a down payment with a mortgage or loan, has to be reported at the full purchase cost.

In the case of joint ownership of an asset, the value is divided proportionately to each party’s investment.  So if an asset is $150,000 and one person had invested $110,000 that person has to report their portion on form T1135 but the other doesn’t.  The $150,000 cannot simply be split 50/50 and neither person report.  This makes for an interesting calculation when it comes to a couple.

If several lower valued assets aggregate to $100,000 then the group of assets has to be reported.

Form T1135 has to be filed by April 30 for individuals, and for corporations it must be filed by that corp’s regular tax filing due date.  And while on the topic of filing, despite the electronic world we live in that makes tracking and taxing things like foreign assets possible, form T1135 cannot be e-filed.  It has to be signed and mailed to CRA.

Ron Clarke has his MBA and is a business owner in Trail, providing accounting and tax services. Email him at ron.clarke@JBSbiz.ca. To read previous Tax Tips & Pits columns visit www.JBSbiz.net.

Just Posted

B.C. MP’s climate-change alarmism challenged

Letter to the Editor from Thorpe Watson, PhD, Warfield

$900,000 grant paves way for affordable housing in Trail

Lower Columbia Affordable Housing Society receives funding by BC Housing for new build in Trail

Trail police release image of liquor store robber

The video surveillance image shows the robber aiming a black gun at the store’s clerk

More snow called for the Kootenays

Environment Canada issued the bulletin Tuesday under its “BC Traveller’s Routes forecast”

Castlegar daycare selected for universal childcare pilot program

MLA Katrine Conroy presents letter of acceptance to the program to the Children’s Centre at Selkirk College

Calgarians vote ‘no’ to bidding for 2026 Winter Games, in plebiscite

Out of 767,734 eligible voters, 304,774 voted and 171,750 said ”no.”

Vancouver Island man survived for ‘days’ trapped in smashed truck

Duncan Moffat, 23, found by hunter by the side of the road near Sayward

Fundraising firefighters complete quest for B.C. Paralympian

The four Penticton residents raising money for Victoria Paralympian complete journey

PHOTOS: Hockey history in B.C. as Team India comes to play

Squad played its very first game in Canada on Tuesday against Surrey Falcons

B.C. man wanted in connection to domestic assault in Edmonton

Sterling Miles Booker has ‘ROCK’ and ‘ROLL’ tattooed on his hands

Canada wants free trade deal with southeast Asian nations, Trudeau says

ASEAN nations combined have nearly 650 million people, an economy of US$2.8 trillion, and are already Canada’s sixth-biggest trading partner.

Olympic and Paralympic committees disappointed, but respectful of Calgary’s vote

The majority of voters said ‘no’ to a potential Calgary bid for the 2026 Winter Olympics and Paralympic Games.

Wildfire death toll rises in California as search for missing continues

Authorities reported six more fatalities from the Northern California blaze, bringing the total number of dead so far to 48.

B.C. MLAs urge Trudeau to call byelection immediately in Burnaby-South

Four NDP provincial politicians from British Columbia are urging Prime Minister Justin Trudeau to immediately call a byelection in the federal riding of Burnaby-South.

Most Read