Canadian provincial tax for non-residents

[andyyan]

Hello,

I have a question about provincial tax for non-residents.

Facts:
1) I was a resident of British Columbia until March 21, 2005 (80 Days in Canada)
2) I have Canadian income earned between January 1 – March 21, 2005
3) After March 21, I became a non-resident of Canada and worked in the US.

I’ve computed my tax return (with the same data) through two tax preparation software (guess which ones... ) and through an accountant. To my surprise, the numbers from all 3 sources are different! The discrepancy lies in form BC 428, Lines 52-59.

On line 52 – Basic reduction
- My tax accountant prorated the $360 claim because of my non-residency status (360*80/365 => $78.90).
- One of the tax software did not.
- The other tax software also prorated my claim to 78.90

On line 54 – Base amount
- My tax accountant prorated the $16000 claim to $3506.85 (16000*80/365)
- Both of the tax software did not.

Instructions forms T4056 and 5010-N, however, states federal and certain provincial credits need to be prorated. They clearly state that lines 300-306 of the federal return and 5804-5820 of the BC428 tax form needs to be prorated for non-residents. Nowhere, does it explicitly state that lines 52-59 needs to be prorated. My question is thus, does lines 52 and/or 59 need prorating for non-residents?

Thanks,
Andy

[nelsona]

While it may seem logical to pro-rate these other amounts, there is no basis in any of the published instructions to do so.

The BC guide expicitly states what lines are to be pro-rated for part-year residents, and to do so only if the corresponding federal line has been pro-rated. I would stick with these instructions.

[worryfreeinvestor]

Please don't keep me guessing: which software did you use and which did you prefer?

[andyyan]

I used ufile and quicktax. Ufile offered the best deductions.

[worryfreeinvestor]

I just did Ufile and it does not appear possible to enter deemed disposition of property in the year of departure. This requires T1234 and the Ufile help index does not list that form as one supported by the software. Whether or not it used my date of departure to accurately calculate provincial tax credits I don't know, and I don't really care because that is trivial compared to this issue.

Yes, I was able to state that I emigrated in 2005 and enter a date of departure, but it then asked me about my foreign income, which is irrelevent because I file a U.S. tax return for that.

Also, it seemed unhappy that I live in the U.S. but want to submit a tax return for a BC resident. Having entered my date of departure, how can it not understand that my current address is different than the province in which I claimed residence for 2005?

I have now tried both Quicktaxweb and Ufile and both are not up to the job. Is there anything more I can do with either program? I haven't done it on paper for years.

[nelsona]

There is nothing stopping you from printing out your return, and filing it on paper, including all the departure forms.

C'mon. If you were able to log on to this iste, and Ufile, I think your up to figuring this out.

[nelsona]

.. and why would you state that foreign income is irrelevant if you are a departing resident?

Many people have foreign income whether they are leaving Canada or not, and even more have foreign income received the year they leave, but before their departure date.

Form T1243 (not T1234) and Form T1161 (this is the one that failure to file can cost you $2500), are easily filled out by hand. The cap gain and losses are reported on your Sched 3 anyways, this is merely added information.

By the way, you do realize that because your are a not living in Canada you can't e-file your Cdn return, and so will have to send it on paper, at which time you add any form you like.

[worryfreeinvestor]

I suppose I am being a big baby. Actually I despise all software: I just enjoy the dialogue on this forum!

Yes, I understand I'll have to print out and mail the return anyway, but I don't see why I'd want to if the software doesn't do the arithmetic for me. What I was hoping for was software that can present me with an electronic T1234 into which I can enter data that automaticaly rolls into the electronic T3. It looks like you're saying that I should just enter the deemed disposition as an actual sale when prompted by Ufile for sales of stocks. Ufile will do the correct arithmetic and I can just staple the T1234 on the printed version. I suppose I thought there was a special line on the T3 for carrying over the T1234 but it looks like that is not the case.

I misspoke about the foreign income. What I meant was that Ufile asks about foreign income in the normal sense, e.g. on the T4s that Canadian brokers mail out, and then asks again when I state that I emigrated in 2005, which just got me a little nervous. I have always owned US blue chip stocks and understood how to report from the T4 boxes 15 and 16. Ufile had already prompted me for all this, and then again AFTER I stated I emigrated, which is at the end of the interview. It sort of looked like it wanted me to report my US salary from after I emigrated, in a vague sort of way.

Anyway, no biggie on that front, but I suppose I should not be so lazy with the deemed disposition of property question.

[nelsona]

It looks like you're saying that I should just enter the deemed disposition as an actual sale when prompted by Ufile for sales of stocks

That is what CRA asks, it is written right on form T1243.
The purpose of T1243 is to separate out your deemed dispositions, as these have special status should you ever return to canada with these items unsold. Also, remember that you are not required to actually pay the cap gains tax (your still must report) on your deemed dispositions until you actually sell. This form is the first step in choosing this option.

The more crucial document that you want to send may 1st is T1161. Thatis the one where they ding you $25/day for not sending.

[worryfreeinvestor]

Yes, but because I sold most of my stocks, my property was cash when I moved it into the U.S. and I had less that $25,000 of stocks (the losers). Even if I then bought millions of dollars of stocks a day after I arrived in US, no T1161 for me, correct?

[nelsona]

You mUST report everything you had on the day you left on T1611, unless it is specifically exempt on the form: stocks are not exempt, even for a dollar.

[worryfreeinvestor]

RU sure.? I suppose it rests on grammatical interpretation. T1234 states:

"Complete this form if you ceased to be a resident of Canada at any time in the year and the fair market value of all the properties you owned when you left Canada was more than $25,000, not including the following properties:
i) cash (including bank deposits);
...etc.,..."

So it depends whether the subordinate clause ("..., not including...") modifies the verb "complete" or "was" in the first clause.

If the sentence said:"If the fair market value of all the properties you owned when you left Canada was more than $25,000, then complete this form but do not include the following properties:
i) cash (not including bank deposits);
...etc.,..."

then I'd agree with you. On the other hand, I think it just as likely means: "If the fair market value of all the properties you owned when you left Canada, minus the fair market value of the following properties:
i) cash (not including bank deposits);
...etc.,..."
is $25,000 or more, you must complete...."

I must respectfully disagree with your claim that even one dollar of stock must be reported, because the $25,000 is unequivocal.

The first of the two interpretations seems to violate common sense, because if I had $24,999 in stock and zero other assets, I would not file T1161, but if I had $1 million in cash, and $1 in stock, I'd file the $1 stock but not the cash. It doesn't seem to be valuable information for CRA.

Sorry about the verbosity but it's Sunday and I couldn't get up to Lake Tahoe to ski this weekend so am engrossed in taxation, to my wife's displeasure.

[worryfreeinvestor]

I just noticed I referred to T1234, when I mean T1161, of course! Regret the error.

[nelsona]

You have always been using the term T1234 incorrectly, so I've learned to ignore the reference: The forms you have been talking abourt are T1243 and T1161.