Does T1135 use cost or market value?
Cost amount, in aggregate — and that single word changes who has to file. A holding bought long ago and now worth many times what was paid for it can sit under the line, while a recent purchase of something worth far less can sit over it. Clients who compare their portfolio statement against the threshold therefore get the wrong answer in both directions, and the ones most surprised are usually those whose foreign holdings have done well. Work from what was paid, converted to Canadian dollars, and add the holdings together. Market value is relevant to the tax on a gain, not to whether the statement is required.
Do I file T1135 if the foreign property lost money?
Yes, if the cost test is met. The statement reports what you hold rather than what it earned, so a loss-making year, a dormant holding and a property that has never produced a cent are all still reportable. Nothing here depends on tax being payable. That is what makes the exposure awkward: the income position can be entirely correct — declared, taxed, nothing owing — and the statement that lists the holdings can still be missing for every year they were held. If you are checking past years, work from the holdings you owned rather than from the income slips you received.
How do I work out the cost amount of inherited property?
Not from what you paid, because you paid nothing. Cost amount is a tax figure rather than a purchase price, and for property that came to you rather than being bought it has to be established from the documents surrounding the transfer: the estate accounts, the valuation used when the property passed, the date it became yours and the exchange rate applying then. Ask for that paperwork early. Executors abroad wind estates up and stop answering letters, and reconstructing a figure years afterwards from local land or share records is slower and less convincing than obtaining it while the estate is still open.
Do I have to file T1135 every year I hold the property?
The test is applied year by year, so the answer can change without your holdings changing character. Buying adds to the aggregate cost, selling takes cost out of it, and the statement follows: a run of filing years can be interrupted by one in which a large holding was disposed of, and a quiet year can pull you back in when something is acquired. Do not assume that because last year’s answer was no, this year’s is too, or the other way round. Keep a running cost schedule of the foreign holdings and test it each year. It is a short check once the schedule exists.
What if I have never filed T1135 for past years?
Establish the years before you file anything. The penalties in this area attach per statement and per year, so the size of the problem is set by how many years the test was actually met in — which is a cost computation rather than a guess, and often fewer years than the client fears. The order of work is: build the cost schedule, identify the years over the line, assemble the supporting documents, then decide how to bring those years forward, then file. Filing a stack first and explaining later removes a choice that is worth having. If a letter has already arrived, start with what it asks for.
Does a rising exchange rate push me over the T1135 threshold?
Not by itself. The aggregate is built from cost amounts expressed in Canadian dollars, and a cost is fixed when the property is acquired and converted at that point. Later movements in the currency, like later movements in the market, change what the holding is worth rather than what it cost. What does move the aggregate is activity: acquiring, disposing, or acquiring in a currency that happens to be expensive on the day. This is another reason the running cost schedule is worth keeping — it turns the annual test into adding up recorded figures rather than re-reading statements each spring.
What is T1135 and who files it?
The T1135 is Canada's foreign income verification statement, filed by a resident whose specified foreign property exceeds the reporting threshold measured on cost, not market value. It is an information return, so it is required on the facts whether or not the property produced income or tax. Its penalties run per year and are not proportionate to tax owing, which is why missed years are dealt with as a package rather than one at a time. See T1135.
How do you avoid double taxation?
You claim relief once, in the right country, in the right order. Usually the source country taxes first, the residence country then gives a credit for that tax against its own charge on the same income, and a treaty caps the source-country rate. Getting the order wrong is what produces a double charge you then have to unwind. The mechanism differs by income type, which is why we map the whole position before filing either return. See how to avoid double taxation.
