I have a client who had his 2017 return reassessed based on a T5 Box 17 (Royalties) not showing up on S4/Line 121 (Investment income).
According to CRA Help, Royalties are to be handled in one of the following ways:
Completing your tax return
Report on line 104 your royalties from a work or invention with no associated expenses.
Report on line 135 your royalties that have expenses associated with them.
Report on line 121 all other royalties.
In my case, there were expenses involved, so I assigned the amount to a T2125, which then reports them on Line 135.
My client was reassessed because CRA claims the amount should have been reported on S4/Line 121.
Are others experiencing these reassessments? How are others handling this situation? Perhaps the simplest answer is to always report as investment income, but the the taxpayer’s earned income is less, resulting in lower RRSP contribution room calculation and lower CPP contributions.
From a software/efile integration, how are these different reporting options communicated to CRA?