When clients must report foreign assets

Tax season is a good time to remind clients about foreign reporting.

Clients with foreign property holdings with a cost amount of more than $100,000 must complete and file Form T1135 Foreign Income Verification Statement, says H&R Block Canada in a release.

Foreign property could include real estate, bank accounts, investment accounts, shares in foreign companies and bonds.

Canadian registered accounts (RRSPs, TFSAs, RRIFs) are exempt, as is overseas property solely for personal use or property used for business, says H&R Block. “However, as soon as a property is rented, it must be reported as a foreign asset.”

Read: Don’t let a vacation property dream become a tax nightmare

H&R Block offers these client examples where the form is required:

• Michael has a condo in Florida, which he rented out for most of the 2017 calendar year before selling it in December for $225,000. He’ll have to file Form T1135 because the cost was more than $100,000, and it wasn’t a personal-use property. Michael must also file a U.S. tax return.
• Last year Lisa inherited shares of a U.K. company from her brother. Her brother paid $75,000 for the shares and thus never had to file Form T1135. However, when Lisa inherited the shares they had increased in value and were worth $105,000, so she would be required to file the form.
• Sean has shares in a Canadian company, which is traded on a stock exchange outside Canada. Despite his stocks costing more than $100,000, he doesn’t have to report them as foreign income. (Many Canadian companies trade outside the country, says H&R Block.)

Also read:

Post-budget passive income strategies

CRA to increase filing requirements for trusts

CRA looks at analyzing big data to combat offshore tax evasion

Tax reform: hits and misses for cross-border clients

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.