Foreign investments

What you need to know about foreign investments on your tax return this year

Jamie Golombek: Do you own property in Florida or foreign stocks like Apple or Google? Don’t forget to file the new updated “Foreign Income Verification Statement”

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If you held foreign investments with a total cost of more than $100,000 at any time in 2014, remember to file the recently updated Form T1135 “Foreign Income Verification Statement” when you prepare your tax return this season. .

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Declarable foreign property will include the obvious things like money in a bank account in Florida or rental property in Arizona, but will also include foreign stocks, like Apple or Google, that are held in your unregistered Canadian brokerage account. This excludes foreign securities held in Canadian mutual funds or in a registered account such as an RRSP, RRIF, TFSA or RESP.

The form is due April 30, the normal filing date for most taxpayers, but can be filed until June 15 if you or your spouse or partner were self-employed in 2014. Penalties for filing Form T1135 late are severe: $25 for each day beyond the deadline, up to a maximum of $2,500, plus interest.

On the form, you are asked to report the types of foreign investments you held in 2014 and their maximum cost during the year. You must also report their fair market value at the end of the year, as well as the country in which these assets are located. Taxpayers are also asked about the income (loss) from these investments as well as the gain (or loss) from the disposition of these assets in 2014.

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New for 2014 is the Simplified Global Reporting which applies if your foreign securities are held in an account with a Canadian registered securities dealer or a Canadian trust company.

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If so, simply complete section 7 at the bottom of the form, where you indicate the name of your broker/trust company where the securities are held, and then indicate, country by country, the amount total the maximum fair market value of your foreign securities during the year as well as the fair market value at the end of the year, together with any income, gain (or loss) from these investments.

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This replaces the need to find and report the highest amount of each foreign security you owned in 2014, which could be quite an expensive and time-consuming process.

Also new this tax filing season is the ability to file the form electronically, using either EFILE (if prepared by a tax professional) or NETFILE, if you prepared your own return using CRA-certified tax preparation software. Note that corporations, trusts and partnerships are still required to file a hard copy of this form.

Although the 2014 T1135 may be simpler than other years, especially if you can use the new simplified aggregate reporting method, it still seems unnecessary to require taxpayers to report on the T1135 everything held in an account. Canadian brokerage to start.

After all, the CRA already receives detailed income and earnings information on all assets (Canadian and foreign) held in these accounts through traditional T3, T5 and T5008 returns.

The additional T1135 reporting required for Canadian brokerage accounts seems overkill to me.

Jamie Golombek, CPA, CA, CFP, CLU, TEP is Managing Director, Tax and Estate Planning at CIBC Wealth Advisory Services in Toronto.

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