# Foreign Property



## slacker (Mar 8, 2010)

Hi,

I'm filling out my 2011 tax return now, and it's asking if I hold property with total cost more than $100,000.

I have in aggregate from my RRSP and taxable trading account more than $100,000 is USD Vanguard ETF's. Does that mean I have to click "yes" ? What are the tax consequences?

Thanks,
Slacker


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## GoldStone (Mar 6, 2011)

You don't have to report funds held inside RRSP.

http://www.cra-arc.gc.ca/E/pbg/tf/t1135/t1135-07e.pdf



> Do you have to file this statement?
> 
> ...
> 
> ...


RRSPs fall under section 204.4

http://laws-lois.justice.gc.ca/eng/acts/I-3.3/page-322.html#h-123


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## avrex (Nov 14, 2010)

What would the answer be if the more than $100,000 USD Vanguard ETF's were held in a non-registered account.
Are stocks/ETFs considered foreign property?


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## GoldStone (Mar 6, 2011)

Yes. See the first two Q&A in the Examples section:

http://www.cra-arc.gc.ca/E/pbg/tf/t1135/t1135-07e.pdf

Also see this long-playing thread at FWF:

http://www.financialwebring.org/forum/viewtopic.php?f=32&t=110637


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## CanadianCapitalist (Mar 31, 2009)

avrex said:


> What would the answer be if the more than $100,000 USD Vanguard ETF's were held in a non-registered account.
> Are stocks/ETFs considered foreign property?


Yes. And the penalties for not filing are severe. IIRC, it is $25 for every day the declaration is late for an annual maximum of $2,500. 

IMO, it is ridiculous that CRA requires Canadians to report foreign stocks held in Canadian brokerage accounts separately in Form T1135. Transactions made in Canadian brokerage accounts are already reported to the CRA every year. I wonder how many taxpayers inadvertently miss this form under the impression that Canadian brokerage account holdings are not foreign property.


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## avrex (Nov 14, 2010)

@CC, Goldstone, thanks for the replies.

In 2011, I opened an Interactive Brokers Canada non-registered account and deposited CDN funds. I made three separate deposits and each time converted them to USD (via Norton's Gambit). This gave me a maximum of $120,000 US.
At any point over the year 2011, I held anywhere between $60,000 - $80,000 in various US Stocks and US Options (for swing trading). That means my remainder, the US Cash component, varied between say $40,000 - $60,000, during the year.

If I'm reading their form correctly, this means that I held at a maximum *$80,000 USD in foreign property.*
It is my belief that the remaining $40,000 USD that I held in *US Cash, would not be considered foreign property* (because it is held within the Canadian Interactive Brokers entity.)

My situation looks close to their Example 1. In that example, the individual had $75,000 in shares in a non-resident corporation.
They also had $35,000 on deposit with an American bank. That puts the individual in the example, over the $100,000 threshold and they had to fill in Form T1135.

So, if I've read this correctly, *I do not need to fill in the T1135 form*. 

Wow, that is complicated. 
The possibility of a $2,500 penalty almost makes me consider filing out the form anyway (just in case my interpretation was incorrect).

Yes, CC, I agree. That form is ridiculous. If I don't need to file US taxes, I wonder why Canada Revenue Agency needs to collect that info. (for our big brother, the US Government, perhaps. Probably both jurisdiction are looking for illegal activity..... or something.)


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## GoldStone (Mar 6, 2011)

avrex said:


> It is my belief that the remaining $40,000 USD that I held in *US Cash, would not be considered foreign property* (because it is held within the Canadian Interactive Brokers entity.)


I agree with your interpretation, but I'm not a tax lawyer.



avrex said:


> The possibility of a $2,500 penalty almost makes me consider filing out the form anyway (just in case my interpretation was incorrect).


T1135 doesn't have an appropriate place to report your USD cash. They listed 6 types of property on page 1. None of these types cover USD cash held in Canada.


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## CanadianCapitalist (Mar 31, 2009)

avrex said:


> If I'm reading their form correctly, this means that I held at a maximum *$80,000 USD in foreign property.*
> It is my belief that the remaining $40,000 USD that I held in *US Cash, would not be considered foreign property* (because it is held within the Canadian Interactive Brokers entity.)


Assuming my understanding of the CRA documentation is correct, I agree with your conclusion. I don't think currency matters. So, the cash portion of a USD investment account is not foreign property but stocks, ETFs etc. are.

I got sufficiently worked up about T1135 that I wrote a post today. I find the penalties to be extreme considering that in the case of an investor holding US stocks in a Canadian brokerage account, it seems that a taxpayer simply missed some paperwork and had no intention to circumvent tax laws.

http://www.canadiancapitalist.com/own-foreign-stocks-or-etfs-you-may-have-to-file-form-t1135/


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## avrex (Nov 14, 2010)

CanadianCapitalist said:


> http://www.canadiancapitalist.com/own-foreign-stocks-or-etfs-you-may-have-to-file-form-t1135/


Great post!


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## kcowan (Jul 1, 2010)

CanadianCapitalist said:


> I find the penalties to be extreme considering that in the case of an investor holding US stocks in a Canadian brokerage account, it seems that a taxpayer simply missed some paperwork and had no intention to circumvent tax laws.
> 
> http://www.canadiancapitalist.com/own-foreign-stocks-or-etfs-you-may-have-to-file-form-t1135/


So it is the costs of acquisition and not the market value for US stocks?


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## Homerhomer (Oct 18, 2010)

kcowan said:


> So it is the costs of acquisition and not the market value for US stocks?


That's correct, the 1135 form states at the top it's the cost not MV.


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## Homerhomer (Oct 18, 2010)

CanadianCapitalist said:


> Assuming my understanding of the CRA documentation is correct, I agree with your conclusion. I don't think currency matters. So, the cash portion of a USD investment account is not foreign property but stocks, ETFs etc. are.
> 
> I got sufficiently worked up about T1135 that I wrote a post today. I find the penalties to be extreme considering that in the case of an investor holding US stocks in a Canadian brokerage account, it seems that a taxpayer simply missed some paperwork and had no intention to circumvent tax laws.
> 
> http://www.canadiancapitalist.com/own-foreign-stocks-or-etfs-you-may-have-to-file-form-t1135/


Yes, the currency of the cash doesn't matter, it matters where it's held, as long as it's held in Canada it doesn't go on 1135, if it's held outside, even in Canadian currency, it goes on the form.

Foreign tocks, etf, mutual funds, bonds and so on have to be reported regardless of the currency and where held (except sheltered accounts ofcourse).

I agree with the penalties, it's just nuts especially given the fact that this particular form doesn't actually affect the taxable income at all, do the form or not and the tax liability stays the same, and you can get dinged with penalties when all foreign income was properly reported.


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## shanti (Dec 3, 2011)

Homerhomer said:


> Yes, the currency of the cash doesn't matter, it matters where it's held, as long as it's held in Canada it doesn't go on 1135, if it's held outside, even in Canadian currency, it goes on the form.


I have some cash with the forex broker, OANDA (CANADA). Their account (to my deposit was made) is with JP Morgan in UK. Does it mean that I have to include it on T1135?


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