MY WIFE AND I ARE CANADIAN/US CITIZENS FILING TAXES IN BOTH…

Question

MY WIFE AND I ARE CANADIAN/US CITIZENS FILING TAXES IN BOTH COUNTRIES.WE HAVE
HAD A HOUSE IN THE USA SINCE 2000.WE JUST HEARD THAT WE SHOULD HAVE FILED A
SEPARATE CANADIAN TAX FORM TO DISCLOSE THIS SINCE 2007 OTHERWISE WE WOULD BE
PENALIZED 6000 DOLLARS PER MONTH.OUR HOUSE HAS A TAXABLE VALUE OF 230,000 AND AN
ASSESSED VALUE OF 78,000.WE HEARD THAT WE ARE ALLOWED 100,000 EACH BEFORE WE
HAVE TO FILE. PLEASE TELL US WHAT THE FACTS ARE. MANY , MANY THANKS

CharteredAccountant · Accepted Answer

CharteredAccountant :

Hello and thank you for your question.

CharteredAccountant :

With respect to your situation, I am assuming that you are Canadian residents.
Whether or not you were required to disclose the foreign property depends on
what it was used for. If it was a rental property or an investment property then
you were supposed to have reported it assuming the cost was greater than
$200,000 assuming it was jointly owned.

CharteredAccountant :

The reason for the $200K is that in order to report such items the cost is
supposed to have exceeded $100K per taxpayer.

CharteredAccountant :

The form you are referring to is here...
http://www.cra-arc.gc.ca/E/pbg/tf/t1135/t1135-07e.pdf
[http://www.cra-arc.gc.ca/E/pbg/tf/t1135/t1135-07e.pdf] it lists some of the
items which are excluded from such reporting such as personal use property.

CharteredAccountant :

With respect to penalties, it normally would be $25 per day up to a maximum of
$2,500 per year for late filing.

CharteredAccountant :

However, if you were supposed to report the property then you could use the
voluntary disclosure program of CRA whereby late filing of such items is
accepted and the penalty waived provided they have not yet approached you to
file the forms.

CharteredAccountant :

Here is a link to the voluntary disclosure program...
http://www.cra-arc.gc.ca/gncy/nvstgtns/vdp-eng.html
[http://www.cra-arc.gc.ca/gncy/nvstgtns/vdp-eng.html]

JACUSTOMER-uje21gjo- :

WHICH VALUE IS USED.......THE ASSESSED 78,000 OR THE TAXABLE
230,000............SOMETIMES THE PROPERTY HAS BEEN RENTED AND SOMETIMES WE HAVE
LIVED THERE FULL TIMES....DOES THAT CHANGE ANYTHING

CharteredAccountant :

The value to be considered is the original cost to you.

CharteredAccountant :

With respect to the change back and forth from personal use to investment, once
you report it I would continue to report it for consistency. There is no
mechanism for penalty if you report it in years that is is personal use. ie
cannot be criticized for reporting too much.

JACUSTOMER-uje21gjo- :

AT PRESENT IT IS BEING LEASED UNTIL MAY NEXT YEAR AT WHICH TIME IT WILL BE OUR
PERMANENT RESIDENCE...AS A LEASED PROPERTY WHAT IS REQUIRED NOW?........THE
ORIGINAL COST WAS 199,000 US DOLLARS IN 2000 ...DO THEY GO BY THE CANADIAN
DOLLAR OR US DOLLAR COST........WE HAVE A RESIDENCE IN CANADA THAT HAS NOT YET
SOLD..........WE WORK FULL TIME IN THE USA IN BEVERLY HILLS AS CHEFS FOR A
FAMILY HERE...........WE RETIRE NEXT YEAR AND IF THE CANADIAN PROPERTY DOES NOT
SELL WE WILL LIVE 6 MONTHS THERE AND 6 MONTHS HERE...........WHAT ARE OUR LEGAL
OBLIGATIONS

CharteredAccountant :

Regarding the cost, it would be based on the Cdn $ equivalent.

CharteredAccountant :

As it is being leased it is considered an investment property and should have
been reported.

CharteredAccountant :

In your situation, I would complete 1 of the forms for each year of ownership
and submit it to CRA under the voluntary disclosure program. It should result in
no penalty and then you will be up to date.

JACUSTOMER-uje21gjo- :

SO EVEN IF THE VALUE IS UNDER 200,000 IF IT IS LEASED EVEN THOUGH IT IS LOSING
MONEY WE STILL HAVE TO FILE A FORM...................

CharteredAccountant :

As the CRA policy is based on cost then yes you would still have to report it.
Cost is something CRA likes to use because it is definite. This is what it cost
someone. As opposed to value which is open to opinions. 2 people value things
differently.

JACUSTOMER-uje21gjo- :

PLEASE LET ME RECAP..........WE ARE AMERICAN RESIDENTS.... THE COST OF THE USA
PROPERTY WAS UNDER $ 200 000 CANADIAN IN 2000.....................OUR RENTAL OF
THIS USA PROPERTY STARTED IN MAY 2011 .......WHAT IF ANYTHING SHOULD WE
FILE(WHICH FORM) AND FROM WHAT DATE

JACUSTOMER-uje21gjo- :

LET ME RECAP..........WE ARE AMERICAN RESIDENTS.... THE COST OF THE USA PROPERTY
WAS UNDER $ 200 000 IN 2000.....................OUR RENTAL OF THIS USA PROPERTY
STARTED IN MAY 2011 .......WHAT IF ANYTHING SHOULD WE FILE....(WHICH FORM) ....
AND FROM WHAT DATE

CharteredAccountant :

Sorry for the delay in responding. I lost internet connection travelling and
have now regained it.

CharteredAccountant :

In your original posting you stated that the property was $199,000 US dollars
which in 2000 would have been worth more than $200,000 Cdn. If it in fact was
$199K Cdn then the original cost for each of you was less than $100K so assuming
you do not own other US property then it does not need to be reported.

CharteredAccountant :

In addition you say that the rental only started in May 2011 whereas previously
you said that it was rented sometimes. If it was not an investment property
until May 2011 then 2011 would be the first year that you would have had to
report it as prior to that it would have been a personal use property.

CharteredAccountant :

So assuming that the cost was greater than $200K and the rental began in 2011
then for 2011 you need to file this form.

CharteredAccountant :

http://www.cra-arc.gc.ca/E/pbg/tf/t1135/t1135-07e.pdf
[http://www.cra-arc.gc.ca/E/pbg/tf/t1135/t1135-07e.pdf]

CharteredAccountant :

As the 2011 return was due less than 1 year ago you would not have to file under
the voluntary disclosure program.

JACUSTOMER-uje21gjo- :

MANY THANKS FOR RETURNING.......... TO FURTHER COMPLICATE THIS.....MY WIFE
POINTED OUT TO ME THAT THE AMERICAN REAL ESTATE INVESTOR THAT PUT UP THE 30,000
DOLLAR DOWNPAYMENT FOR THE PROPERTY IN 2000, HAS A CERTIFIED BUT UNREGISTERED "
"SEPARATE DECLARATION OF TRUST" FROM US GIVING HIM A 40% INTEREST IN THE
PROPERTY..............MY WIFE AND I ARE THE ONLY ONES ON TITLE AND PAY THE 1ST &
2ND MORTGAGES(160,00O & 80,000)......... 1) IS THE INVESTOR'S " SEPARATE
DECLARATION OF TRUST" RECOGNIZED BY CRA .....IE: MY WIFE AND I OWNING 60% AND
40% OWNERSHIP GOING TO THE INVESTOR, OR IS THERE ANOTHER FORM THAT NEEDS TO BE
FILLED OUT FOR THIS TO BE VALID 2) IF WE COME IN UNDER $200,000 CANADIAN DO WE
STILL HAVE TO FILE THE INVESTMENT PROPERTY FORM FOR THIS PRESENT RENTAL AND THE
OTHER 2 VERY SHORT TERM RENTALS IN 2001 AND 2008 3) WE FILE TAXES IN CANADA FOR
OUR INVESTMENT/RESORT PROPERTY AND FOR OUR BC CORPORATION.........(BOTH HAVE
HEAVY LOSSES EACH YEAR)...........WE WORK AND RESIDE IN THE USA IN ORDER TO
OFFSET THOSE LOSSES (1992- PRESENT) WE FILE EMPLOYMENT AND PROPERTY TAXES HERE
IN THE USA....... WE HAVE NEVER MIXED THE 2 TAXES IE: USED THOSE LOSSES IN
CANADA TO LESSEN OUR TAX BURDEN HERE IN THE USA .......LAST YEAR WE HAD TO
DISCLOSE ALL CANADIAN BANK ACCOUNTS TO THE USA.........IS THAT NOW A LAW IN
CANADA TOO DOES OUR PERMANENT AMERICAN RESIDENCE CREATE ANY OTHER CRA
REQUIREMENTS OR FORMS THAT NEED FILING ALONG WITH THE PROPERTY DISCLOSURE IE :
DO THEY NEED TO KNOW ABOUT OUR USA CORPORATION WHICH HAS ZERO ASSETS 4)WHAT WAS
THE 1ST YEAR THAT CRA REQUIRED THIS IE: WHAT IS THE 1ST YEAR WE SHOULD HAVE
FILED MANY THANKS FOR YOUR PATIENCE

CharteredAccountant :

Regardless of whether or not ownership is registered it affects the need to
report. If you only own 60% of the property then your requirement for reporting
would be based on the cost of the 60% that you own. There is no other form that
needs to be filled out. Just retain a copy of the certified document in case it
was ever questioned.

CharteredAccountant :

If you are under the $200K limit then there is no need to file the form
attesting to ownership of foreign property.

CharteredAccountant :

No beyond the requirement to report the cost of any investment holdings
exceeding the $100K each there is no requirement to file any documents.

CharteredAccountant :

The CRA requirement predates your ownership in the property. It started in the
late 1990's

CharteredAccountant :

Hello, I am just checking back to see if you require any additional information
or clarification. If not please click on the accept button in order that
JustAnswer will remove the question from my workboard. Thank you in advance.
Colin

Customer:

MANY THANKS COLIN

MY WIFE AND I ARE CANADIAN/US CITIZENS FILING TAXES IN BOTH…

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