# T1135 Foreign Income Verification



## Scotty74 (Apr 11, 2016)

Hi

Myself and my wife have filed our taxes this year and have to complete the T1135 foreign investments form.

Our background is we bought an apartment in Ireland in 2006 which was worth EUR296,000 at the time, and it was our principal residence. Ireland suffered a massive property crash in 2008 and our apartment, since then, is worth anywhere between EUR150,000 to EUR190,000 from what I have seen online.

Since we moved to Canada in 2013, it has been rented out and the rental income covers our mortgage payments, realtor fees, home & life insurance and that's about it. We cover the condo fees of $3000 per year ourselves so in real terms we are making a $3000 per year loss.

I think I am right in saying we can only right expenses on the property off against the interest portion of our mortgage and not the capital portion, so in CRA eyes we make a 'profit' 
With the capital of our property having depreciated so much I am wondering if this comes into play at all when I read about the adjusted cost base of the property:

The adjusted cost base of a principal residence or a second property such as a cottage would include the original purchase price as well as any capital improvements made since the property was purchased.

Since they can collect more tax on capital improvements does captial depreciation also come into play? I'm probably clutching at straws but it's really really going to sting having to pay thousands of dollars in tax when we are making a loss each year on it.

I did file the form last year and mailed it to the tax centre in Sudbury. I heard nothing from CRA regarding it so thought all was fine. but I'm concerned now this wasn't done correctly

Thanks


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## Spudd (Oct 11, 2011)

Scotty74 said:


> Our background is we bought an apartment in Ireland in 2006 which was worth EUR296,000 at the time, and it was our principal residence. Ireland suffered a massive property crash in 2008 and our apartment, since then, is worth anywhere between EUR150,000 to EUR190,000 from what I have seen online.
> 
> Since we moved to Canada in 2013, it has been rented out and the rental income covers our mortgage payments, realtor fees, home & life insurance and that's about it. We cover the condo fees of $3000 per year ourselves so in real terms we are making a $3000 per year loss.
> 
> I think I am right in saying we can only right expenses on the property off against the interest portion of our mortgage and not the capital portion, so in CRA eyes we make a 'profit'


I would agree the part that goes toward capital is not an expense. But the condo fees are an expense. Life insurance is not an expense (why do you list this as part of the property? Unless you mean liability insurance in case someone dies on your property? If it's liability insurance it's OK as an expense). Are you paying some kind of ongoing realtor fees? Like property management? This should also be a valid expense. When you add it all up including the condo fees, interest, other fees, what does that add up to?



Scotty74 said:


> With the capital of our property having depreciated so much I am wondering if this comes into play at all when I read about the adjusted cost base of the property:
> 
> The adjusted cost base of a principal residence or a second property such as a cottage would include the original purchase price as well as any capital improvements made since the property was purchased.
> 
> Since they can collect more tax on capital improvements does captial depreciation also come into play? I'm probably clutching at straws but it's really really going to sting having to pay thousands of dollars in tax when we are making a loss each year on it.


I believe this actually is only referring to how you will calculate capital gains/losses when you sell it. So as a very simplified example, you spent 100k on the property, spent 50k fixing it up, and sold it for 200k. Your capital gain would be 50k (200-100-50). 

However, I don't believe there's any tax on the value of the property. You should only be taxed on your income (the rent you receive minus your expenses). Once you decide to sell the property, at that time you would pay tax on any capital gains. But for now, they just want to know how much it's worth, but they won't be taxing you on it.


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## Numbersman61 (Jan 26, 2015)

It appears you became a Canadian resident in 2013. The ACB of the property is its fair market value in Canadian dollars when you became a Canadian resident. You can expense interest expense, condo fees, property taxes, repairs plus capital cost allowance (depreciation). Note you are required to allocate a portion of the ACB to land, building and appliances for the purpose of calculating depreciation. I cannot comment on taxes in Ireland but the net revenue may have to reported in Ireland. Any tax payable to Ireland should be available as a foreign tax credit


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## Scotty74 (Apr 11, 2016)

Thanks for the replies! If it's the fair market value for the property when we emigrated to Canada in 2013 I think it's under the reporting threshold then.

It was worth EUR150,000(but based on the fact that other apartments in the same area of the city have been listed for sale for 18 months I'm not sure we could even sell it) and the exchange rate at the time was approx CAD1.25 to EUR1.00 which would mean the value was approx CAD188,000 split between 2 of us.

I have no idea if the exchange rate fluctuations since then come into play here?

I called CRA yesterday to see if my 2014 return, included the T1135 form I had mailed to them was all ok and no-one could even tell me if they have the 2014 T1135 form on file.


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## Numbersman61 (Jan 26, 2015)

Scotty74 said:


> Thanks for the replies! If it's the fair market value for the property when we emigrated to Canada in 2013 I think it's under the reporting threshold then.
> 
> It was worth EUR150,000(but based on the fact that other apartments in the same area of the city have been listed for sale for 18 months I'm not sure we could even sell it) and the exchange rate at the time was approx CAD1.25 to EUR1.00 which would mean the value was approx CAD188,000 split between 2 of us.
> 
> ...


Be very careful about form T1135. My feeling is when in doubt file the form because there are nasty penalties for non filing. You are splitting the property value and income with your wife. This may be challenged by CRA with the result you'd be over the limit.


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## Scotty74 (Apr 11, 2016)

Numbersman61 said:


> Be very careful about form T1135. My feeling is when in doubt file the form because there are nasty penalties for non filing. You are splitting the property value and income with your wife. This may be challenged by CRA with the result you'd be over the limit.


How could CRA challenge splitting the property value with my wife when we own it together? I'm no expert on tax(you can probably tell from my posts lol) but am I doing something wrong splitting the value with my wife?

The realtor who manages the apartment for us valued it at EUR150,000 when we moved, which she would put in writing for us and it's not worth much more than that now. Another apartment, the exact same as ours in the building sold in Jan 2015 for EUR150,000, it's on a property website.

Do I have enough here, in your opinion, to cover my *** if they come sniffing? I do not want to fall foul of the tax man!


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## AltaRed (Jun 8, 2009)

Scotty74 said:


> Thanks for the replies! If it's the fair market value for the property when we emigrated to Canada in 2013 I think it's under the reporting threshold then.
> 
> It was worth EUR150,000(but based on the fact that other apartments in the same area of the city have been listed for sale for 18 months I'm not sure we could even sell it) and the exchange rate at the time was approx CAD1.25 to EUR1.00 which would mean the value was approx CAD188,000 split between 2 of us.
> 
> ...


I don't think you have to worry about CRA challenging the 50/50 split on ownership, especially IF the apartment was in joint title, it was your principal place of residence pre-Canada and since coming to Canada, you have been splitting the rental income/expenses 50/50. At the minimum, it is a 'good assumption' in good faith. 

The T1135 form is based on the cost of the property in CAD at any time during the year. The cost to you would be the FMV of the property (150000 Euro) when you entered Canada. But since that date, the CAD has flucuated and to answer your question, you have to take the fluctuating exchange rate into account. From http://www.taxtips.ca/filing/foreign-asset-reporting.htm


> When foreign investment property (specified foreign property) or properties with a total cost amount (usually the adjusted cost base, not fair market value, but see below re depreciable property) of more than $100,000 Canadian is owned at any time in the year, form T1135, Foreign Income Verification Statement, must be filed. This form must be filed by Canadian resident individuals, corporations and trusts, as well as many partnerships.


So if the apartment cost of 150,000 Euro (split 50/50 - 75,000 Euro each) exceeded $100k CAD at any time during 2014, you would have had to file a T1135. Same thing in 2015. So if the Euro/CAD forex rate ever exceeded 1.3333, you would be at the $100k CAD threshold. I have read elsewhere that one does not have to look at daily forex rates, just the month end rates. So it is easy enough to check Euro/CAD exchange rates at the Bank of Canada site.


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## Numbersman61 (Jan 26, 2015)

I am not sure how CRA deals with situations where the property was jointly owned before coming to Canada but if your wife did not contribute her own funds for the purchase, I would expect that CRA would invoke the income attribution rules and deem the income entirely to you.
http://www.taxtips.ca/personaltax/attributionrules.htm


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## AltaRed (Jun 8, 2009)

Numbersman61 said:


> I am not sure how CRA deals with situations where the property was jointly owned before coming to Canada but if your wife did not contribute her own funds for the purchase, I would expect that CRA would invoke the income attribution rules and deem the income entirely to you.
> http://www.taxtips.ca/personaltax/attributionrules.htm


It may also depend on community property (or lack thereof of) legislation in Ireland. This has caught a number of ex-pats in the USA. Some states are community property states and others are not. The issue, tested in tax court, was of interest to me when I was an ex-pat in the USA. Could I, for example, while I was in the USA, split all my investments (savings) that I earned while outside Canada 50/50 with my spouse, even if I was the sole income earner...when I returned to Canada. Some tried, but if not in a community state, no way Jose. The major Int'l accounting firm that was on retainer for me did all the homework on this one. FWIW, where I was, it was not a community property state. so I could not split assets acquired out of country 50/50.

The point being, if Ireland is a community property country, then it would not likely matter who contributed what to the purchase of the condo, or to the mortgage payments while a resident of Ireland. The OP should chime in here with how the Ireland condo was funded before we comment more.


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## Scotty74 (Apr 11, 2016)

Thanks Numbersman



> I don't think you have to worry about CRA challenging the 50/50 split on ownership, especially IF the apartment was in joint title, it was your principal place of residence pre-Canada and since coming to Canada, you have been splitting the rental income/expenses 50/50. At the minimum, it is a 'good assumption' in good faith. /QUOTE]
> 
> Yes, the apartment was/is in joint title, it was our principal place of residence pre-Canada and the "income" is in our joint back a/c, so we're all good with that.
> 
> ...


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## Scotty74 (Apr 11, 2016)

AltaRed said:


> It may also depend on community property (or lack thereof of) legislation in Ireland. This has caught a number of ex-pats in the USA. Some states are community property states and others are not. The issue, tested in tax court, was of interest to me when I was an ex-pat in the USA. Could I, for example, while I was in the USA, split all my investments (savings) that I earned while outside Canada 50/50 with my spouse, even if I was the sole income earner...when I returned to Canada. Some tried, but if not in a community state, no way Jose. The major Int'l accounting firm that was on retainer for me did all the homework on this one. FWIW, where I was, it was not a community property state. so I could not split assets acquired out of country 50/50.
> 
> The point being, if Ireland is a community property country, then it would not likely matter who contributed what to the purchase of the condo, or to the mortgage payments while a resident of Ireland. * The OP should chime in here with how the Ireland condo was funded before we comment more*.


Joint mortgage in both our names


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## AltaRed (Jun 8, 2009)

Scotty74 said:


> Ah, so I think this is where the weak CAD screws us then, as the CAD only got weaker against the EUR after we moved here, so it looks like we'll need to file a T1135 for 2015. I assume we file one each?
> 
> I'm confused then that after filing the T1135 form in 2014 that CRA didn't come after me for tax on my "profits"? We ticked yes to owning property on our 2013 tax return and the CRA were all over us with letters reminding us to file the T1135. Only after talking to them did they say as we have only arrived in Canada in 2013 that we didn't need to file it for that year.


You would each file a T1135, and yes, you did not have to file a T1135 in 2013 (year of arrival). CRA does not necessarily catch everything all the time, so it is understandable they did not come after you after filing the T1135 for 2014. Still, you should have declared your rental income and expenses on your 2014 tax returns and if you failed to do so, you need to file T1-ADJ on those returns. 

Spudd had a good post on what is deductible* from rental income. I had a rental investment property at one time. I did NOT bother to play with the CCA calculation and take the annual deduction because I knew I was going to sell it in a mere 5-10 years and it was not worth it to me to take the annual CCA deduction, and then effectively have it clawed back through Cap Gain taxes at time of sale. Just remember that your ACB of the Ireland property is its value at the time of entering Canada. If that is at a loss to what you paid for it, nothing you can do about it from a Canadian tax perspective.

* basically costs of ownership including interest on the mortgage, condo fees, property insurance, property management fees, repairs and maintenance, but not major capital improvements (capital improvements merely add to your ACB).

Added: Just saw your last posts.... Joint title is likely good enough to justify 50/50 ownership. It is at least arguably a correct assumption in 'good faith'.


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## AltaRed (Jun 8, 2009)

Per http://www.cra-arc.gc.ca/tx/nnrsdnts/cmmn/frgn/1135_fq-eng.html the Q&A suggests how to calculate cost, although it can be interpreted more than one way.

It could also be argued from the form instructions itself (bolded comment)


> Cost amount is defined in subsection 248(1) of the Act and generally would
> be the acquisition cost of the property. If you immigrate to Canada, the cost
> amount is the fair market value of the property at the time of immigration.
> Similarly, if you received specified foreign property as a gift, or inheritance,
> ...


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## Scotty74 (Apr 11, 2016)

AltaRed said:


> You would each file a T1135, and yes, you did not have to file a T1135 in 2013 (year of arrival). CRA does not necessarily catch everything all the time, so it is understandable they did not come after you after filing the T1135 for 2014. Still, you should have declared your rental income and expenses on your 2014 tax returns and if you failed to do so, you need to file T1-ADJ on those returns.
> 
> Spudd had a good post on what is deductible* from rental income. I had a rental investment property at one time. I did NOT bother to play with the CCA calculation and take the annual deduction because I knew I was going to sell it in a mere 5-10 years and it was not worth it to me to take the annual CCA deduction, and then effectively have it clawed back through Cap Gain taxes at time of sale. Just remember that your ACB of the Ireland property is its value at the time of entering Canada. If that is at a loss to what you paid for it, nothing you can do about it from a Canadian tax perspective.
> 
> ...


Thanks for the info. It looks like from all this we'll owe the CRA approx $4000(coverted from EUR) in taxes on the "profit" I made in 2015, despite in real terms making a $3000 loss. This is not sustainable for us year on year going forward.
I would have no problem paying CRA tax if there actually was a profit sitting in my account but there isn't. We don't have the option to sell either as we would make a loss of approx EUR40,000-50,000 at the moment due to the massive depreciation after the property crash. and it'll be at least another 5 years before our mortgage is paid down enough for us to break even if we sold it. Feels like I'm paying a tax for the privilege just to live in Canada - totally sucks


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## AltaRed (Jun 8, 2009)

Is it a $3k loss because you had $7000 CAD equivalent ($4000 + $3000) in mortgage principal repayments? Otherwise, I don't know how you get from a taxable profit from a 'real' loss. Perhaps you can explain that better.

Added: Income taxes you may have paid Ireland on that rental income should be a foreign tax credit on your Canadian tax return.


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## Scotty74 (Apr 11, 2016)

AltaRed said:


> Is it a $3k loss because you had $7000 CAD equivalent ($4000 + $3000) in mortgage principal repayments? Otherwise, I don't know how you get from a taxable profit from a 'real' loss. Perhaps you can explain that better.
> 
> Added: Income taxes you may have paid Ireland on that rental income should be a foreign tax credit on your Canadian tax return.


Mortgage re-payments approx Eur 880 p/m, of that mortgage interest is approx Eur 290 p/m, x 12 = Eur 3480. Rental Income for year 2015 - Eur 12,575.

Rental Income Eur 12,575
Minus Mortgage Interest Eur 3480
Minus other expenses approx Eur 4500
Total 'Profit' Eur 4595 covert to CAD = $6800 - taxed at 50% $3400 CAD owed to them

So yes it's the mortgage principal repayments that screw us and turn it into a loss.

We became accidental landlords due to the property crash, we would of sold it when we emigrated if we had the choice. We want no part in owing a property we don't live in - it's one big hassle

Sorry, I'm using approx a lot as I don't have the exact figures to hand right now


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## AltaRed (Jun 8, 2009)

Don't need exact data. Was just trying to understand the 'discrepany' and it is the portion that is principal. 

I feel for your predicament. I suppose though while your principal payments seem a 'loss' now, they do serve to bring down your debt....which would be repayable anyway upon a sale of a property. I've never had a property 'underwater' from a mortgage balance perspective when I have had to sell it (as a result of corporate transfers) but I have taken 'losses' where sales price was below purchase price. Best look at it as a glass 'half full' with your newfound opportunities in Canada.


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## Scotty74 (Apr 11, 2016)

AltaRed said:


> Don't need exact data. Was just trying to understand the 'discrepany' and it is the portion that is principal.
> 
> I feel for your predicament. I suppose though while your principal payments seem a 'loss' now, they do serve to bring down your debt....which would be repayable anyway upon a sale of a property. I've never had a property 'underwater' from a mortgage balance perspective when I have had to sell it (as a result of corporate transfers) but I have taken 'losses' where sales price was below purchase price. Best look at it as a glass 'half full' with your newfound opportunities in Canada.


Thanks Altared, yeah we've no choice but to suck it up for the next few years until we at least can break even on the sale.


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## Numbersman61 (Jan 26, 2015)

Don't forget to claim capital cost allowance. Assume building value was $150,000 - at 4% that's a $6,000 expense for first year


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## AltaRed (Jun 8, 2009)

Numbersman61 said:


> Don't forget to claim capital cost allowance. Assume building value was $150,000 - at 4% that's a $6,000 expense for first year


Not sure that is in his best interest...particularly if he sells sooner rather than later. May depend on how Ireland treats that sale too. He'll have to account for CCA in his ultimate cap gains situation.


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## Scotty74 (Apr 11, 2016)

Thanks again!

This probably sounds dumb, but when we file a T1135 each, I assume we just divide everything by 2 for each form?


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## Numbersman61 (Jan 26, 2015)

AltaRed said:


> Not sure that is in his best interest...particularly if he sells sooner rather than later. May depend on how Ireland treats that sale too. He'll have to account for CCA in his ultimate cap gains situation.


Based on his comments, it doesn't seem like he'll have a gain. I always claim all the expenses I can.


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## Numbersman61 (Jan 26, 2015)

Scotty74 said:


> Thanks again!
> 
> This probably sounds dumb, but when we file a T1135 each, I assume we just divide everything by 2 for each form?


Yes but provide full details. My feeling is that cost originally reported when you became a resident never changes regardless of exchange change. Of course improvements could increase your cost. I assume you realize that it is your interest to have a higher value because that is what you use in calculating your Canadian income.


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## AltaRed (Jun 8, 2009)

Numbersman61 said:


> Based on his comments, it doesn't seem like he'll have a gain. I always claim all the expenses I can.


Yeah, was thinking about that too, but hard to know (since he is working off the ACB on date of immigration to Canada).


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## Scotty74 (Apr 11, 2016)

Thanks!

I'm kinda lost now about claiming CCA depreciation against the property. I won't be claiming any sort of gain against the property anytime soon. It was purchased for Eur 296,000 in 2006, by 2009 it was worth Eur 150,000, and with property price crash houses in the city became affordable so people stopped buying apartments, hence the value has stagnated.
With the loan against it still owing at Eur 240,000 you can see there is still a big gap between the 2 that will take at least 5-7 years to bridge based on paying down the mortgage.

I spoke to an accountant who wasn't that interested as I hadn't filed my tax return with them but they advised to adjust my tax return to say no to owing foreign property as it was below the reporting amount when we emigrated. If the CRA asked why we said yes in our 2014 return just to say we were confused about the value and made a mistake.
This makes me nervous though as I don't want to attract undue attention and have the CRA start contesting the value of the property etc.


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## Scotty74 (Apr 11, 2016)

Numbersman61 said:


> My feeling is that cost originally reported when you became a resident never changes regardless of exchange change.


If this is the case then we are in clear, I just can't seem to find anything firm on this. Calling CRA is a waste of time, you get different people telling you different things


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## AltaRed (Jun 8, 2009)

Numbersman61 said:


> Yes but provide full details. My feeling is that cost originally reported when you became a resident never changes regardless of exchange change. Of course improvements could increase your cost. I assume you realize that it is your interest to have a higher value because that is what you use in calculating your Canadian income.


I know we differ on this aspect. I don't see the difference between real property (RE) and capital property (securities) when it comes to ACB calculations. With my USD brokerage account, I look at my ACB of that account every year and the value that goes into the T1135 is that ACB converted to that year's forex rate. IOW, the cost amount on my T1135 is different each year (CAD equivalent). Thus why I believe the 150,000 Euro must be converted to CAD equivalent each year for the T1135. BUT I am not a tax expert so getting clarity on this would help everyone.


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## AltaRed (Jun 8, 2009)

A reason why I had suggested skipping CCA was how to establish the basis for the calculation. CCA is only calculated on building value (not land component) and thus not market value. But does the OP start with building value back in 2008? Or building value at time of immigration? The numbers being thrown about here so far are market value of the entire property. Figuring this out is way beyond my pay grade/expertise.


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## Scotty74 (Apr 11, 2016)

AltaRed said:


> I know we differ on this aspect. I don't see the difference between real property (RE) and capital property (securities) when it comes to ACB calculations. With my USD brokerage account, I look at my ACB of that account every year and the value that goes into the T1135 is that ACB converted to that year's forex rate. IOW, the cost amount on my T1135 is different each year (CAD equivalent). Thus why I believe the 150,000 Euro must be converted to CAD equivalent each year for the T1135. BUT I am not a tax expert so getting clarity on this would help everyone.


The currency fluctuation aspect is confusing. As per their rules we don't report it as it's under $100,000 CAD each but then the CAD weakens against the EUR and the next year we are over the threshold and we report it. Then the following year the EUR weakens again and we are back under the threshold, and so on and so on. Very confusing


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## Scotty74 (Apr 11, 2016)

AltaRed said:


> A reason why I had suggested skipping CCA was how to establish the basis for the calculation. CCA is only calculated on building value (not land component) and thus not market value. But does the OP start with building value back in 2008? Or building value at time of immigration? The numbers being thrown about here so far are market value of the entire property. Figuring this out is way beyond my pay grade/expertise.


I think I will skip CCA as I just don't understand it. There is no land value as it's on the 3rd floor in an apartment building


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## AltaRed (Jun 8, 2009)

Scotty74 said:


> The currency fluctuation aspect is confusing. As per their rules we don't report it as it's under $100,000 CAD each but then the CAD weakens against the EUR and the next year we are over the threshold and we report it. Then the following year the EUR weakens again and we are back under the threshold, and so on and so on. Very confusing


It is confusing. Not to say I am right and Numbersman61 is not... Just saying how it applies to capital property, e.g. a brokerage account containing foreign securities, and in those cases, it works the way I describe it.

Bottom line is it might be best to report it every year despite it sometimes droppiing below the threshold. Not difficult to fill out the form and you have to report rental income annually anyway.


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## Scotty74 (Apr 11, 2016)

AltaRed said:


> It is confusing. Not to say I am right and Numbersman61 is not... Just saying how it applies to capital property, e.g. a brokerage account containing foreign securities, and in those cases, it works the way I describe it.
> 
> Bottom line is it might be best to report it every year despite it sometimes droppiing below the threshold. Not difficult to fill out the form and you have to report rental income annually anyway.


Yes, I think to be honest, this is what I'm leaning towards doing, if CRA come after me for tax so be it and if I don't hear from them even better!


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## Numbersman61 (Jan 26, 2015)

Scotty74 said:


> Yes, I think to be honest, this is what I'm leaning towards doing, if CRA come after me for tax so be it and if I don't hear from them even better!


You may not have caught the importance of my point that it is better to use a higher value of the property when you became a Canadian resident. When you eventually sell the property, your gain or loss will be determined based on your ACB - the higher the ACB, the lower the gain on which you will be taxed in Canada. By placing the higher number on the T1135, it lends credence to your valuation at time of sale


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## Scotty74 (Apr 11, 2016)

Numbersman61 said:


> You may not have caught the importance of my point that it is better to use a higher value of the property when you became a Canadian resident. When you eventually sell the property, your gain or loss will be determined based on your ACB - the higher the ACB, the lower the gain on which you will be taxed in Canada. By placing the higher number on the T1135, it lends credence to your valuation at time of sale


Thanks, I see what your saying, would future currency fluctuations not affect this going forward as well regarding value? If the dollar is super weak at the time of sale I'd pay more in CAD tax or if the dollar is 1 for 1 with the EUR at time of sale I would probably pay less? As mentioned previously I don't think they'll be any significant gains on the property value within the next 5 years


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## Numbersman61 (Jan 26, 2015)

Scotty74 said:


> Thanks, I see what your saying, would future currency fluctuations not affect this going forward as well regarding value? If the dollar is super weak at the time of sale I'd pay more in CAD tax or if the dollar is 1 for 1 with the EUR at time of sale I would probably pay less? As mentioned previously I don't think they'll be any significant gains on the property value within the next 5 years


When you sell, the proceeds are reported in Canadian dollars based at the exchange rate at the date of sale.


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## AltaRed (Jun 8, 2009)

AltaRed said:


> It is confusing. Not to say I am right and Numbersman61 is not... Just saying how it applies to capital property, e.g. a brokerage account containing foreign securities, and in those cases, it works the way I describe it.
> 
> Bottom line is it might be best to report it every year despite it sometimes droppiing below the threshold. Not difficult to fill out the form and you have to report rental income annually anyway.


For the OP. In another forum, there was discussion about how to convert Cost Amount. It is pretty clear the Cost Amount for the purpose of the T1135 threshold can only be one number, and from the T1135 form instructions, for immigrants, it is the Fair Markt Value of the property on the date of entry to Canada AND the forex conversion rate would be the forex in effect on the day of entry as well. That Cost Amount number never changes no matter what happens to forex rate after that date. So I stand corrected. If the FMV of the OP's Irish property was below $100k CAD equivalent on the day of entry to Canada, that value never changes....and the T1135 never has to be submitted.

OTOH, per Numbersman61's comments in post #33, if there is a legitimate way to optimize your ACB value (higher amount) based on day of entry to Canada, that will ultimately serve you well when you do sell the property (less cap gains taxes). But it has to be a supported number that can pass a CRA smell test. I do not know if you had the property formerly appraised when you left Ireland, but FMV needed to be estabilshed in some way when you left the country.


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## Jaberwock (Aug 22, 2012)

Even if the property value is less than $100k, and you don't fill in the T1135, you still have to report the income from the rental of the property on your tax return. Failure to do so could result in future penalties and interest.

Given that fact, I do not see why you are objecting to spending a couple of minutes filling out the T1135. 

It is in your interest to have the Adjusted Cost Base (ACB) as high as possible. Then you will have lower capital gains (or generate more capital loss) when you eventually sell the property.

Repayments of mortgage principal are not expenses. Like many landlords you have income from the property but negative cash flow. Taking depreciation will help your cash flow situation. You can write off up to 4% of the un-depreciated building value each year. If the apartment is furnished, you may be able to write off the furniture value at a higher rate. However, when you sell the property, you have to bring that depreciation back into income (known as recapture of depreciation). That recapture becomes income, taxed at the full rate, not capital gain which is taxed at half rate. It is not always advantageous to take depreciation, you have to look at your own personal circumstances.


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## AltaRed (Jun 8, 2009)

I agree it may well be in the OP's interest to file the T1135, particularly since CRA already asked once when rental income was disclosed (as it must be). Just wanted to point out that the Cost Amount is set on entry to Canada, and it would only be the CCA that would reduce the ACB....should the OP decide to do so. I just don't know how the OP would actually calculate the CCA*.

* Would need to know the split between building and land components because CCA is only taken on the building. In Canada, property tax notices split the difference (from a municipal perspective which may, or may not, reflect true property values). And would it start on date of entry to Canada? I am no expert in these matters.


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## VideoTaxJoe (Jun 24, 2015)

Just a couple comments:

1) Altared's most recent comment is correct when stating that the FX rate on the date of entry is the only one that matters when determining whether the T1135 is required. The original cost in Canadian dollars is the one that counts. 
2) The Undepreciated Capital Cost of the building drops as CCA is claimed. But the cost for the purpose of determining whether the 100k ownership test is met is not affected by CCA claims. 
3) This may not be applicable, but there is a little known rule in the Income Tax Act which notes that there is no deemed disposition on that property if you emigrate from Canada within 5 years of becoming resident (128.1(4)(b)(iv)).
4) A really useful and complete list of FAQs on the T1135 that I've seen can be found at (143 answers from CRA!): https://www.cpacanada.ca/~/media/si...binar-questions-nov-2015-update-eng.pdf?la=en 
5) LIFE IN THE TAX LANE- March 2016 (Episode 10...need to scroll down a little) (http://www.taxtips.ca/personaltax/life-in-the-tax-lane.htm) included a piece on joint ownership of foreign property for T1135 purposes.

Cheers


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