A taxpayer has a significant amount of money invested in the stock market with the majority in a US company’s stock.
The taxpayer has provided their Foreign income verification report (T1135) from their Canadian financial institution.
However, when I look at the summary in the report both the cost and the Year-end fair market value are below $100,000.00 (not by much but less than the $100,000 threshold).
According to the below CRA article the taxpayer is below the threshold and there is no requirement for the T1135.
I would like to check with others if this is correct?
This is true as long as you have all his accounts. Be very careful he isn’t missing any other sources of US funds - bank accounts or US cash in the brokerage account or even whole other brokerage accounts he hasn’t told you about etc. If you are wrong the penalties are nasty but there is no problem if you file the form with under $100,000 on time and you need to amend it later because you discovered he was in fact over the limit.
Very good point, I read in the CRA link above in one example that “a bank account in the U.S. with $35,000 on deposit.” can count towards the threshold.
You’re saying we can file the T1135 even when amounts are under $100,000.00?
He is a sole proprietor so his filing due date is June 15. I will do all the digging to ensure he is below the threshold and if not file the T1135.
That statement alone has me thinking it might not hurt to file just in case.
You can file if under $100,000. Also as jyliupa says make sure the T1135 summary is in Canadian dollars as if the account is in US dollars some brokerages provide the summaries in US dollars. If it’s just under in USD it will be well over in Canadian dollars. I would also double check that the deadline for the T1135 form is the tax return’s filing deadline and not April 30th for all taxpayers regardless of when the tax return itself is due. $25/day for 6 weeks between May 1st and June 15th would be expensive.
Tome is right. It is also per person so for example a joint 50:50 brokerage account with say $130,000 in ACB would not require a T1135 for either party as each person only has $65,000 and thus is under the limit.
How I understand it is only US cash in a US bank or brokerage is considered specified foreign property. US cash with a Canadian bank is not. Do I understand this correctly?
I don’t know how CRA would look at it, but our local RBC has told me that their USD accounts are connected to a New York Bank. Is it in Canada with RBC or the New York bank? I don’t know.
I looked at the Foreign Income verification report (T1135) from the Canadian Financial Institution again and I see it says “Converted into CDN$”
The CRA link above contains the following:
"Form T1135 must be filed on or before the due date of the taxpayer’s income tax return"
Side note:
The taxpayer actually phoned the CRA directly to double-check and the CRA representative he spoke to said there was no need to complete the T1135 form because his Canadian Bank T1135 report shows a cost of below $100k.
I am going to double-check that the taxpayer doesn’t have any other specified foreign property in addition to what was already mentioned.
I’m about a month late to the show, but an important detail I remember reading is that the 100K threshold includes AT ANY POINT IN TIME.
So, you can’t just look at the starting cost of the securities, or what the year ended with them at. If at any time, the total value of the securities crossed over the 100K marker is what needs to be looked at.
Otherwise, you could always just sell-off stocks near the end of the year to get under.
It may say anytime but the $100,00CAD is the cost base, not the market value.
One of my clients sold US oil rights for over a mill USD with a $10USD cost base. NO T1135 ever filed. Proceeds were deposited into a Canadian accoun, mome required.