As I am preparing my income taxes, I am reminded yet again of the trap that the Canada Revenue Agency has set for taxpayers in the T1 General form with this innocuous question:. The penalties for failing to complete and file T by the due date April 30 are severe. Since the penalty is levied for each year, a taxpayer could face penalties running into the tens of thousands of dollars. It is entirely appropriate to levy strict penalties on taxpayers trying to hide income in foreign jurisdictions.
It does not seem reasonable to levy stiff penalties on taxpayers who are reporting and paying taxes on investments held in Canadian accounts but inadvertently missed filing paperwork. In fact, the punishment strikes me as cruel and unjust. CC, thanks for investigating and sharing your thoughts. This post helped a great deal as I reviewed my own situation.
I agree with you that an honest taxpayer could easily mess this up. This would solve a number of problems for me. Does this form actually impact the amount of taxes paid or your tax calculation in any way? It seems to be for disclosure purposes.. You have to disclose how much foreign property you own in addition to how much income you derived from it. I guess the idea is that if you have a lot of foreign property but report very little income from it, this will raise a flag at CRA.
CRA views this as a way to make sure your foreign income matches up reasonably with your foreign assets. So, CRA sees it as verifying your foreign income. Taxpayers generally see it as a form where they have to disclose the amount of their foreign assets. If a taxpayer answered yes, they have to file Form T and mail it in before April It is best to provide accurate information in it.
I agree with 1 and 2. Trading summaries and tax slips are reported to the CRA and it is a simple matter for CRA to catch errors or deliberate omissions by taxpayers. As opposed to the current value of the ETFs …. Great info on your blog by the way, thanks a bunch for spreading the knowledge. This post raised my curiosity since I am too in a situation that I thought will require me filling this T as of next year… but what you say for foreign properties held for personal use not being counted towards these foreign assets is very interesting.
Wondering if you could share some more info on it… maybe a link where you read about it. Interested to know since I am a dual citizen, Canadian and another country and in a situation where my parents passed away and inheritance is coming my way in the form of a few properties in the foreign country which totals more than K. In other words they are for personal use… As this does not really match with what I knew… which is: You personally do not incur any tax hit since that is tax exempt inheritances, gifts etc but if the value of those properties combined is more than K CRA requires you to fill that form since you now have a value of more than K outside Canada and on it you list the real market value of those properties at the time of inheritance.
And later on if you sell them for a higher price and have a capital gain they will tax that, just like when selling a non principal residence property here in Canada. Also interesting to know what happens if you do rent them out. And in this case I think CRA for sure will not consider those exempt from foreign property list as above in 1 where you just hold them without gaining any income from them.
It does not matter how many personal use properties a taxpayer owns. None of them go in Form T Here are the relevant portion from the document linked to in the post:. Am I required to file Form T if the property is: If the property is personal use property i. As a result, in situation a , you would not need to report the condominium since it is held primarily for personal use and enjoyment. In situations b and c , the property is an income-earning investment property that is not held primarily for personal use and enjoyment.
The tax treatment of a personal property is exactly as you describe. The fair market value of the property on the date of acquisition whether inheritance or other means becomes your adjusted cost base.
When you sell the property, you owe capital gains tax on the difference between the sale proceeds and the ACB.
There may be tax treaties between Canada and another foreign country that provide relief for double taxation. CRA does provide you with some guidance but you may need the help of tax specialists:. Hey CC and thanks a lot for the answers. And I will use an example as it is easier to understand I hope. I mean for regular USD trading accounts is clear: But say you have USD cash in your US trade account I wonder what happens to US short sales transactions… because as you know with leverage there you can end up controlling larger amounts.
So say during the year you have a short sale type transaction that had a balance of K. Your cash balance was never above K but I wonder if this short sale one puts you within the T requirements…? In theory I think it should not because in your short account you indeed had K from the short sale but you owed X number of stocks instead and it is not like you can withdraw those K from there. You can only use them to purchase back the stock. Just a note here for those who file electronically.
Completing the form and submitting it to the CRA via Netfile or Efile, does not fulfill the obligations. You still need to print, sign and mail the form to Ottawa before April Thanks for another great post.
I need to find out if employee stock options or RSUs which have vested but have not been sold would count towards this limit. Based on your article, we would not have to file a Form T Am I correct in this? A call option that is purchased clearly falls under this definition as it is a right to own a specified foreign property.
As far as covered calls go they are a right to dispose of not acquire a specified foreign property so I would say they are not included. Writing naked or uncovered puts are a little more confusing. To me they are an obligation to own a specified foreign property as they give you no right to acquire that property unless sold to you at or before expiry but I can see how it might be interpreted otherwise. You may have to File Form T March 28, at As I am preparing my income taxes, I am reminded yet again of the trap that the Canada Revenue Agency has set for taxpayers in the T1 General form with this innocuous question: Some notes about Form T This post is of an informational nature and should not be construed as tax advice.
This article has 20 comments Unsure in Calgary March 28, at Ram thanks for your excellent posts. Avrex Money March 28, at 2: Michael James March 28, at 9: Michael March 28, at 9: Canadian Capitalist March 28, at Bill March 28, at Canadian Capitalist March 28, at 2: Cost refers to ACB, not market value of the property. Tara March 28, at 1: RBVH April 1, at Hi CC Great info on your blog by the way, thanks a bunch for spreading the knowledge.
Interested to know your opinion. Canadian Capitalist April 2, at Here are the relevant portion from the document linked to in the post: CRA does provide you with some guidance but you may need the help of tax specialists: What do you think? Kevin April 11, at 1: Tim April 13, at Rob December 16, at 2: Mustafa Alidina February 24, at Homer J March 2, at 8: So writing naked puts, that I either buy back or expire worthless, how do they get calculated?
What about covered calls that expire or get assigned? FV April 14, at 5: Homer J, I have the same question as you do, any luck in finding an answer? Here are my thoughts on this. November 11, — comments. July 29, — comments. The high cost of peace of mind November 3, — comments.
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