# Declaring foreign property



## jazzman (Dec 15, 2014)

Hi everyone, 

I have a question about declaring foreign real estate

My parents have just immigrated to Canada. They have a home back in their home country. They have rented this home which is generating monthly income for them. Of course they will declare this rental income. Let us assume that value of this home is greater than $100,000. My question is regarding the following CRA tax return question.

"Did you own or hold foreign property at any time in the year with a total cost of more than CAN$100,000?”

I have read in multiple places that you DO NOT have to declare personal-use property. Now the question is, is that home considered my parents personal property? That is the home they lived in for many many years before immigrating to Canada and when they return to their home country, they will go bck to this home. 

So my question is:

Are my parents required to declare this home (new rented) in their home country or does it fall under "personal-use property" and can be excluded?

Thank you


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## Davis (Nov 11, 2014)

I mistakenly thought I didn't have to file the declaration form for 2014 because I held my foreign assets with a Canadian broker. I don't know where I got that idea, but the point is that when CRA found my error in October 2016, I had to pay penalties and interest of thousands of dollars. I have asked for this to be forgiven, but I probably won't get a response for a year or more. I had checked the box indicating that I owned foreign property over the limit, so I want trying to hide anything. My approach would be, "when in doubt, file a declaration."

On your specific question, the foreign property is generating income that your parents must report and that CRA wants to know about, so yes, I expect that you have to file a decision. But I haven't researched this.


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## kcowan (Jul 1, 2010)

The exception for personal use property specifically does not apply if it is rented out.


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## james4beach (Nov 15, 2012)

Do you think "foreign property" includes an American 401(k) tax shelter such as a brokerage account that holds stocks?

I presume this means that if the total cost of what I put in my 401(k) exceeds 100k CAD, then I should declare it. Is that right?


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## Spudd (Oct 11, 2011)

james4beach said:


> Do you think "foreign property" includes an American 401(k) tax shelter such as a brokerage account that holds stocks?
> 
> I presume this means that if the total cost of what I put in my 401(k) exceeds 100k CAD, then I should declare it. Is that right?


According to this, you don't have to:
http://www.advisor.ca/tax/tax-news/understanding-the-new-t1135-151683


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## james4beach (Nov 15, 2012)

Spudd, wow thanks for the link. Perhaps this is new in 2015... I will inquire with my accountant at tax time.


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## scorpion_ca (Nov 3, 2014)

I have ETFs (VUN, XEF and XEC) in my RRSP with Canadian brokerage. That means, I don't need to file T1135 even though ETFs are more than 100k. 

One more question - If Jazzman's parents hadn't rented out their property, they wouldn't need to file T1135. 

Can anybody please confirm my understanding? Thanks!


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## twa2w (Mar 5, 2016)

jazzman said:


> Hi everyone,
> 
> I have a question about declaring foreign real estate
> ....
> ...


Since your parents are now renting out the home, it is no longer considered personal use property. However, they do not have to declare it if their purchase price was less than 100,000 Cdn equivelant. The current value has no bearing on this.

Cheers
J


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## OhGreatGuru (May 24, 2009)

I have looked casually thru CRA's publications and/or web site on this subject, out of curiosity as to their definition of "personal-use property". And I find the whole thing rather ambiguous or circuitous. 

For example, their web site has the following Q&A:

_22. Does specified foreign property include property that does not produce income (for example, vacant land)?
Yes. Specified foreign property includes property that does not produce income._

So, whether it is generating income or not seems to be irrelevant. I have an unfounded suspicion that the definition of "personal-use" hinges upon whether or not the tax payer is personally using the property during the year. But this would seem to open a really gaping hole in our capital gains tax laws for anyone owning a vacation property outside of Canada.


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## jazzman (Dec 15, 2014)

Hi, 

Are you confident about this? The purchase price was less than $100,000 but the current value is close to $250,000. Can you provide a link of wheree you read the fact that it is the PURCHASE price not CURRENT value?

Thank you



twa2w said:


> Since your parents are now renting out the home, it is no longer considered personal use property. However, they do not have to declare it if their purchase price was less than 100,000 Cdn equivelant. The current value has no bearing on this.
> 
> Cheers
> J


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## twa2w (Mar 5, 2016)

From your initial post, the question on your tax return is
'"Did you own or hold foreign property at any time in the year with a total cost of more than CAN$100,000?”
The question states cost, not value. CRA website states cost as well.


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## jazzman (Dec 15, 2014)

Interesting, I assumed they meant value of the property. I will look into what they mean by COST on the property. Does it mean how much money I spend to maintain the property? Sorry!


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## jazzman (Dec 15, 2014)

Turbotax, which is a credible resource for tax info, seems to indicate that CRA means value

https://turbotax.intuit.ca/tax-reso...aring-foreign-property-on-your-tax-return.jsp


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## jazzman (Dec 15, 2014)

you are correct!

9. Is the $100,000 threshold based on the fair market value of the property?
No, it is based on the cost amount. The cost amount is defined in subsection 248(1) of the Income Tax Act and generally is the adjusted cost base and not the fair market value.


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## AltaRed (Jun 8, 2009)

jazzman said:


> you are correct!
> 
> 9. Is the $100,000 threshold based on the fair market value of the property?
> No, it is based on the cost amount. The cost amount is defined in subsection 248(1) of the Income Tax Act and generally is the adjusted cost base and not the fair market value.


Note the key words... Adjusted Cost Base. That is a defined term and is based on original cost (including closing costs) and any capital improvements made that can legally be added to the Cost Base for tax purposes.

Analogy: Someone buys VTI ETF, 2000 units @ $50 CAD equivalent (not USD) including commission = $100kCAD. Over time, DRIPs add units such that X more units costing a total of $23kCAD equivalent. Adjusted cost base of that asset is now $123k CAD equivalent.... based on the forex in place at the time of purchase.


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## jazzman (Dec 15, 2014)

good point, I am thinking, perhaps, I should just declare the damn property and not worry about it. Better safe than sorry.


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