I was going over the T1135 rules again, and realized something. Even if you hold CAN dollars in an American bank, you still must report this on your T1135.
This year I my total Canadian Securities inside an Interactive Brokers Canada account is above the 100K amount. I am going to assume the same rules may apply here.
Since Interactive Brokers Canada is a subsidy (I think) of Interactive Brokers which is based in the US, I am wondering if I burned myself here.
I tried checking with other Canadians who opened an account with this brokerage, and was surprised that so far no one seems to really care or take notice of what the ruling is here.
Interactive Brokers Canada is a registered Canadian Securities Broker with an office in Montreal. They issue Canadian tax slips and report to the Canada Revenue Agency. My feeling is that Canadian securities held with IAB Canada would not be considered foreign property.
Schwab, TD Ameritrade, Robin Hood, Etrade are US brokers that are not available to Canadians.
Most businesses that operate in Canada are US subsidiaries… Walmart, Home Depot, Lowes, Rona, Staples, Costco, Ford General Motors…
A client couple invest through RBC and are given the details required any year their investments meet the T1135 criteria in their annual tax package - it goes by where the money is invested, not where the broker is located.
This is interesting. I have a client that has numerous slips with RBC and is doing day trading through Interactive Brokers. There are no slips for Interactive Brokers.
All the trades are done in US $ - so they would be foreign property for T1135 .
Would the property be included in section 7 of T1135 - Property held in an account with a Canadian registered securities dealer?
Yes, T1135 reporting foreign property rules are tricky, nuances, and seem poorly documented on the CRA website. The resource that has the easiest to understand is from TaxTips.
CRA Resource - T4037 Capital Gains 2023
CRA Resource - Foreign Asset Reporting
TaxTips Resources - Foreign Asset Reporting
–start quote–
" Foreign Amounts on the T5008 and Brokerage Statements
Your US$ brokerage statements will show you the US$ ACB of your investments, but will not show you the Cdn$ ACB.
The T5008 and Trading Summary provided by your brokerage will show the US$ proceeds and cost, but you must convert these amounts to Cdn$ using the exchange rate from the sale and purchase dates. Note that the T5008 proceeds may not be net of commission (commission may be shown separately), but the Trading Summary shows the net proceeds after commission is deducted.
Deemed Dispositions Might Not be on the T5008
Note that in kind transfers from your non-registered account may not be on the T5008 or Trading Summary, because they are not required to be reported, but they must be reported as a disposal on your Schedule 3 if the transfer was to your registered account, or to someone else’s account. If you use a professional tax preparer, you must provide this information to them. Also, note that the T5008 proceeds are before commission and US SEC fees are deducted. Your trading summary will show the proceeds net of both of these.
T5008 Exchange Rates and Accuracy
The T5008 produced by TD Direct Investing:
Shows the currency used (USD or CAD) in the top right-hand corner. Prior to 2020, showed US$ account trades in US$, and did not show in kind transfers Shows the proceeds of disposition before deducting commission and US SEC fees, but the trading summary shows the proceeds after deducting both of these. In 2020 reported US$ account trades in Cdn$ - but this was only for in kind transfers that went through the US$ account, and they were shown on the T5008 for the Cdn$ account.
using the exchange rate for the date of the sale (which is what we also use) for the proceeds of disposition.
using the same exchange rate for the adjusted cost basis as for the sale - this is not the correct Cdn$ ACB, so you’ll have to calculate the ACB in Canadian$ yourself, using the transaction date of the purchase of the investment. In 2021 reported US$ account trades in US$, even in kind transfers, but did not include all US$ in kind dispositions. 2 of the US$ in kind dispositions were reported on the Cdn$ T5008, in Cdn$, with an incorrect Cdn$ ACB. Note that your T5008 states that box 20 “may or may not reflect your adjusted cost base (ACB) for the purpose of determining the gain or loss from the disposition of the security.”
It is quite likely that your T5008 for trades in a US$ account will be in US$. The point of this is that you must check your T5008, make sure you know the currency it is using, and make sure it includes all dispositions. You will have to do the calculation to convert US$ ACBs to Cdn$ yourself.
Tax Tips:
A T5008 which shows US$ amounts in Cdn$ will probably not have the correct Cdn$ ACB for US$ investments.
Always check the T5008 proceeds and ACB to your own records!!" – end quote–
My Comments
Usually the bigger brokerage firms have solid documentation and proper reporting. In my experience many of the smaller firms have very spotty compliance and reporting ability or accuracy.
However, even the very largest firms depend upon the Investment Advisor the set up the foreign dollar accounts properly. I have seen one egregious example of 300+ foreign dollar trades plus over 700 Canadian trades held in a Canadian dollar account. Every single US dollar trade was converted to Canadian funds and mixed with the Canadian traded securities in the reporting ledger. The annual capital gains report showed the gains/losses in Canadian dollars and the difference as an FX gain loss. On top of that they had Irish Securities.
Of course the CRA annual trading slips were three -
Canadian proceeds without the ACB,
US proceeds without the ACB, and
Irish proceeds without the ACB.
The Investment Advisors required four requests to obtain the correct transaction ledger in native funds and a complete refusal to generate a correct ACB report or a correct T1135. This they did with a great deal of attitude. So, even the big firms are not exempt for funny accounting. Only PDF prints were provided. I was left with an eye crossing, mind numbing exercise of documenting the ACB in native funds and converted to Canadian funds accurately for funds for large five and six figure trades in order to provide accurate and CRA reviewable documentation for a very significant dollar value.This was by far the worst example I have experience in 22 years of tax prep. I now charge am uplift for the ACB continuity report and bookkeeping reconciliation in the event of a large number of transactions with incomplete or misleading documentation.
Shows the currency used (USD or CAD) in the top right-hand corner.
using the exchange rate for the date of the sale (which is what we also use) for the proceeds of disposition.