- Comments (15)
- Text Size: Down Up
moneysense.ca, 20/04/09
Beware of CRA’s definition of “foreign property”
Current issue:
Over the weekend, I completed our tax returns and printed out our T1 General to double check our returns. On the top of Page 2 there is a box that says “Please answer the following question:” followed by “Did you own or hold foreign property at any time in 2008 with a total cost of more than CAN$100,000?”. I’ve always answered “No” for this question because I assumed it meant Swiss bank accounts or a foreign rental property but out of curiosity decided to investigate further. Imagine my surprise when I found that CRA considers foreign stocks held in Canadian brokerage accounts as “foreign property”. Here’s the relevant portion from FAQs about Form T1135:
Is a taxpayer who holds U.S. stocks through Canadian brokerage houses required to file Form T1135 if the cost of such securities is more than $100,000?
Shares of non-resident corporations should be reported, regardless of whether the shares are physically held inside Canada or outside Canada and regardless of whether the shares are held by the person or through a brokerage house.
If you own foreign stocks in a taxable account and your portion of the account exceeded $100,000 in cost (not fair market value) at any point during the year, you’ll have to answer ‘Yes’ in box 266 and attach Form T1135. RRSPs are excluded from these reporting requirements as are Canadian mutual funds that hold foreign stocks. Fortunately, we are many years away from answering this question in the affirmative but I wonder how many are unaware of CRA’s definition of “foreign property” and are answering ‘No’ to this question.
moneysense.ca, 20/04/09
Also that once you answer YES, it’ll be hard to say NO in the following years without possibly triggering an audit
Sucks there is no native USD holdings in RRSP
I was surprised the first time I saw this. I’d like to know what CRA’s motivation is here. I get that they would want to know about assets held outside of Canada, but why do they want to know about US stocks held at a Canadian brokerage?
If you answer ‘yes’ – what happens?
You would almost need a law degree to follow all the tax laws in Canada legally….good thing you checked though…I bet there are thousands of unsuspecting law-breakers who have no idea….
I too always assumed this box was for the super wealthy international financier….
What about a Canadian ETF, does it fall into the same category as a mutual fund?
But then isn’t it more tax efficient for canadians to hold US dividend stocks in tax deferred accounts? So this little box helps you save money in the long run
Tax avoidance at its best..
Required knowledge for those of us that have studied for the CFP exam!
Daniel: I don’t think answering ‘yes’ changes things one way or another for investments held in Canadian brokerage accounts. After all, Canadian brokerages report transactions to the CRA and issue T-slips, which should be reported in the tax return.
mjw2005: I was really surprised to read this but Michael’s comments suggests that at least some know about this regulation.
Jordan: Yes, Canadian domiciled ETFs (even when they hold foreign stocks) won’t fall under the definition of “foreign property”.
DGI: True, but those of us who max out and have started building a taxable portfolio should be aware of these rules.
“Did you own or hold foreign property at any time in 2008 with a total cost of more than CAN$100,000?”
“If you own foreign stocks in a taxable account and your portion of the account exceeded $100,000 in value at any point during the year”
I think this just refers to the adjusted cost base of property, not the value, market or otherwise, as you pointed to.
piggybank: You’re right. I’ll edit the wording to make it accurate. Here’s the explanation from the FAQ:
“The $100,000 threshold is cost-based, that is, it’s the “cost amount” as defined under subsection 248(1) of the Income Tax Act. It is not based on the fair market value or an indexed amount.”
CC,
That sucks, but hey having maxed out retirement contributions and having more than 100K in foreign assets is a pretty cool thing. I guess it’s not only americans who have to get cold calls from the tax man on international assets
[...] tax tip from the Canadian Capitalist Beware of CRA’s defintion of Foreign Property, since it isn’t just foreign land holdings they [...]
[...] – Canadian Capitalist clarifies the CRA’s definition of foreign ownership rules. Now he’s got me worried [...]
[...] Canadian Capitalist alerts us to a little-known fact with beware of CRA’s defiinition of foreign property. [...]
[...] the final numbers matched then next year I would do it all myself. However a recent article over at Canadian Capitalist has got me wondering if the average person (aka Me) can do their own [...]