The Lato Letter: Volume 3, Issue 5.

The Lato Letter: Volume 3, Issue 5.

Normally April 30th (this year actually May 5th) marks the deadline for filing the necessary documents to complete your personal income tax return. Things are a little different this year and there has been a great degree of confusion regarding the form that makes it different. The form I am referring to is called a T1135, a Foreign Income Verification Statement, and it must be completed by anyone holding greater than $100,000 of foreign investments.

Before I discuss this form, let me be perfectly clear that I am NOT giving tax advice and that you should contact your tax advisor or the Canada Revenue Agency (CRA) with any questions or decisions regarding this form.

Back in January, I wrote to my clients that those clients owning more than the $100,000 limit of foreign investments must complete the T1135 by April 30th and the T1135 information requested at that time was extremely cumbersome and detailed. There is no need to delve into what information was required because on February 28th, CRA announced new filing requirements for those taxpayers falling into that $1000,000 or more of foreign assets category.

Those taxpayers must still indicate on their tax return that they hold more than the $100,000 limit of foreign investments but they now have until July 31, 2014 to file the T1135 form. The bigger change that was announced is that for 2013 at least, and hopefully beyond, taxpayers are able to utilize the 2013 Transitional Reporting Method if their foreign securities are held in an account of a registered Canadian securities dealer. You can access the T1135 form and the accompanying notes by clicking on this link.

I will briefly walk you through the reporting requirements under the 2013 Transitional Reporting Method as outlined by the notes on page 4 of the form. In section 6, on page 2, the following items must be completed:

1) Description of Property – enter the name of the securities dealer or dealers and the account number where your foreign holdings are held

2) Country Code – enter CAN

3) Maximum Cost etc – enter zero

4) Cost Amount at Year End – enter the market value of the foreign holdings (in CDN$) held in that account

5) Income – enter the foreign income (in CDN$)as reported on the T5 slip that you received from your securities dealer for that account

6) Gain (loss) on disposition – enter the total capital gain (in CDN$) or loss that was realized in that account

Please not that you should NOT tick the box near the bottom of page 1 regarding the T3/T5 exception.

I will be pleased to answer any basic questions about this information but as stated in the second paragraph, please contact your tax advisor for more specific information regarding your situation. If you do not have a tax advisor and would like to hire one, the auditors for Padlock Investment Management, Segal LLP and specifically Dan Natale, would be eager to fulfill that role and are highly recommended by me.

This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change without notice.

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