Specific reporting costs in T1135

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skoper
Posts: 38
Joined: Wed Aug 26, 2009 9:15 pm

Specific reporting costs in T1135

Post by skoper »

1) For foreign assets such as real estate, how are you guys interpreting "Maximum cost amt in 2016"? Should it always be the cost of acquisition? Should it be adjusted every year for CCA? Should FX be taken into account throughout the year to reflect maximum cost in CAD?

2) For shares of non-resident corporations, if they are disposed of during the year is the Cost at end of year 0, or the same cost as acquisition, or the cost of acquisition adjusted for FX at end of year?
skoper
Posts: 38
Joined: Wed Aug 26, 2009 9:15 pm

Post by skoper »

any thoughts on this?
SM
Posts: 94
Joined: Fri Mar 20, 2015 3:43 pm

Post by SM »

My understanding is as follows, but I'm not 100% sure on some of the details regarding the real estate:

1) If you are not depreciating the property the maximum USD cost amount and USD year end cost amount will be the same. They will be the ACB of the property (original acquisition price). For the maximum cost amount in CDN $ I suppose you would use the peak exchange rate during the year and for the year end cost amount in CDN $ you for sure would use the Dec 31st exchange rate.

If you are depreciating the property, the maximum cost amount will likely be the STARTING Undepreciated Capital Cost Allowance amount on Jan 1st (before CCA for the year). The year-end cost amount will for sure be the ENDING Undepreciated Capital Cost at the end of the year after CCA has been taken (I'm 100% sure about this part).

If you are renting it, you would report the GROSS rent received as income on the T1135 not the NET amount after expenses.

2) you would report zero for the year-end cost amount
SM
Posts: 94
Joined: Fri Mar 20, 2015 3:43 pm

Post by SM »

Here's the issue with figuring out the maximum cost amount on the rental if it's being depreciated.

The Underappreciated Capital Cost Allowance will be the highest in US $ at the start of the year. But then of course we are depreciating it, so this amount will decrease proportionately throughout the year. It's not like depreciation just happens at year end.

Then the other complicating factor is the exchange rate throughout the year. So it's entirely possible that the maximum value in CDN $ could be at anytime during the year, not simply the start of the year when the UCC is the highest. I haven't had time to research this enough to see what CRA wants to see. I always just use the starting UCC as the maximum amount.

I try not to get too bogged down in the details on the T1135 anymore. I once spent 10 hours for a US citizen with non-registered investments in the year of their departure from Canada. The requirements on this form are ludicrous. I was very happy to see them change the rules and allow the Simplified Method of reporting in certain circumstances.
SM
Posts: 94
Joined: Fri Mar 20, 2015 3:43 pm

Post by SM »

I found this:

For the cost amount reported for a foreign rental property, the T1135 Return instructions indicate that the cost amount is generally the acquisition cost of the property (as defined in subsection 248(1) of the Income Tax Act). The CRA's questions and answers on the T1135 Return indicate that the cost amount is generally the adjusted cost base and not the fair market value. For a depreciable property, the cost amount is the proportionate undepreciated capital cost, as defined in subsection 248(1) of the Act. The CRA confirms that, for the building portion of the foreign rental property, the ending undepreciated capital cost is the correct amount to use for the year-end cost.

The maximum cost amount during the year can be based on the maximum month-end cost amount during the year.

So I suppose the proper way to do this is to take the starting UCC in US $, determine the UCC for the year, divide the UCC by 12 and calculate a DECLINING UCC for EACH MONTH END. Then convert from US $ on EACH month end day to CDN $ and take the highest amount in CDN $ out of all 12 months. This is my best guess.
SM
Posts: 94
Joined: Fri Mar 20, 2015 3:43 pm

Post by SM »

And to my point above "if you were renting it", this was a bad choice of language. You must be renting it, otherwise it would be considered a personal use property and would not need to be reported on the T1135 at all.
SM
Posts: 94
Joined: Fri Mar 20, 2015 3:43 pm

Post by SM »

I noticed one of your other recent posts from the other day about arriving to Canada. If this relates to that situation, keep in mind that the T1135 is NOT required in the first year of your arrival to Canada.
skoper
Posts: 38
Joined: Wed Aug 26, 2009 9:15 pm

Post by skoper »

[quote="SM"]I noticed one of your other recent posts from the other day about arriving to Canada. If this relates to that situation, keep in mind that the T1135 is NOT required in the first year of your arrival to Canada.[/quote]

Yes this is a concern of mine right now. I actually arrived back in Canada in 2015, but did not file the T1135. Where is the source of this? I just called CRA and they said T1135 is required even for a partial year of residency in Canada.
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

skoper, which is it? On your other thread you said you moved to Canada in July 2016. Now you are saying you moved in 2015.

As to filing. CRA has clarified that T1135 is not required only in a year when someone moves to Canada. RETURNING taxpayers must still file.
https://www.cpacanada.ca/-/media/site/o ... .pdf?la=en.


There is no exception for property owned when an individual becomes a Canadian resident. Section 233.7 exempts individuals (other than trusts) from filing Form T1135, among other disclosures, for the year in which they first become resident in Canada. However, former residents returning to Canada are required to file Form T1135 in the year of their return.

http://jltax.ca/2017/03/t1135-part-year-resident/

In CRA technical interpretation 2015-0611141E5 (July 11, 2016), the CRA stated that a T1135 filed for a part-year resident should report property and transactions relating to the property for the person’s entire year that includes the time when the person became a resident. The analysis of whether the person must file a T1135, however, does not take into account property owned only while the person was a non-resident.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

also form the CPA webinar cited above:

CRA Comments: For Form T1135 reporting purposes, taxpayers who emigrate during the year can complete the form as if the year ended on the date of emigration. There is a deemed disposition of certain property immediately prior to emigration. Where this applies, the cost amount at year-end (i.e. date of emigration) would be nil. The associated gain or loss on this deemed disposition should be reported on Form T1135.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
SM
Posts: 94
Joined: Fri Mar 20, 2015 3:43 pm

Post by SM »

Good catch Nelsona. I knew this document existed, but did not bother to read all 48 pages until now. I assumed the same rules applied for brand new Canadian's AND returning Canadian's, but CRA has definitely distinguished between the two.
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