Tag Archives: Form T1135

The Moore case – A recent Form #T1135 taxpayer victory

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This is the fifth post in my series of posts about Canada’s Foreign Asset reporting requirements. The first post described the range of Foreign Asset reporting requirements. The second post discussed the conditions which trigger the requirement to file Form T1135. The third post focuses on how to complete and file Form T1135. The fourth post was a short summery of the penalties for failing to file T1135. This fifth post is about the recent Moore case which was an example of taxpayer victory in resisting the draconian and unreasonable Form T1135 penalties.

The Judgement of Boyle, J really speaks for itself.

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Failure to file Canada Foreign Property Returns – #T1135 – Penalties and voluntary disclosure

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Introduction – Form T1135 is a “Penalty Jackpot” for the Canada Revenue Agency

To be FORMwarned is to be FORMarmed!

On July 14, 2019 the text on the page referenced in the above tweet included:

Penalties

This page provides information (including a table of penalties and frequently asked questions) about penalties for late or improperly filed forms and information returns.

Failing to file

The penalty for failing to file a return is $25 per day for up to 100 days (minimum $100 and maximum $2,500). This penalty does apply to Form T1142.

When failing to file is done knowingly or under circumstances amounting to gross negligence, the penalty is $500 per month for up to 24 months (maximum $12,000), less any penalties already levied. This penalty does not apply to Form T1142.

After 24 months, the penalty is 5% of whichever of the following resulted in the requirement to file the information return, less any penalties mentioned above already levied:

– the cost of the foreign property

– the fair market value of the property transferred or loaned to the trust

– the cost of the shares and indebtedness of the foreign affiliate

– Note – This penalty does not apply to Form T1142.

The CRA may issue a demand to file a return to a person or partnership under subsection 233(1) of the Income Tax Act. If so, and if the person or partnership knowingly or under circumstances amounting to gross negligence fails to comply with the demand, the penalty is $1,000 per month for up to 24 months (maximum $24,000), less any penalties already levied.This penalty does apply to Form T1142.

False statements or omissions

A penalty applies to people who knowingly or under circumstances amounting to gross negligence make false statements or omissions in an information return.

For Form T1142, the penalty is the greater of either:

– $2,500 or
– 5% of whichever of the following the false statement or omission was made about:
– the fair market value of the distributed property or
– the indebtedness

For the other information returns, the penalty is the greater of either:

– $24,000 or
– 5% of whichever of the following the false statement or omission was made about:
– the cost of the foreign property
– the fair market value of the property transferred or loaned to the trust or
– the cost of the shares and indebtedness of the foreign affiliate

Due diligence exception for penalties

The penalty for omissions on Forms T1134 and T1141 does not apply to taxpayers who make diligent efforts to get the requested information and who:

– disclose in the return the unavailability of the information and file the information within 90 days of it later becoming available

A “Table Of Penalties” may be found here.

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John Richardson – Follow me on Twitter @Expatriationlaw

A Form T1135 Primer – How to complete and file Form T1135

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Possible Updates!! Note that this was written in July of 2019. You should use this as a guide but make sure to work with the current rules (they have likely changed).

This is the third post in my series of posts about Canada’s Foreign Asset reporting requirements. The first post described the range of Foreign Asset reporting requirements. The second post discussed the conditions which trigger the requirement to file Form T1135. This third post focuses on how to complete and file Form T1135.

For many individuals, the threshold question of WHETHER you are required to file Form T1135 will be more difficult than HOW to file Form T1135.

This post ASSUMES that you have met the reporting threshold and focuses on:

1. A review of whether Form T1135 is required

2. What information is required to be reported on the T1135

3. How to complete Form T1135

4. Where/how to file Form T1135

Form T1135 is available on the Canada Revenue Agency site here.

I have also uploaded the form.

t1135-17e

You should print the form and have it available while you read this post. Form T1135 has broken the different categories of assets into seven different categories of foreign property.

Here we go …

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A Canada Form T1135 Primer – Parsing the language and understanding the basic reporting requirement

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The purpose of this post …

This is the second of my posts about Canada’s foreign asset reporting requirements. The first post introduced Canada’s Foreign Asset Reporting Requirements. This post will focus specificlly on Form T1135 as it applies to individuals. Individuals are disadvantaged because they may or may not use professional tax advisers. Form T1135 is a “compliance trap” and can lead to serious penalties for inadvertent noncompliance. (The case of Takenaka v AGC, 2018 FC 347 will be of great interest to U.S. citizens moving to Canada who retain their home in the United States. Ditto for certain U.S. life insurance policies.)

This post is for the purpose of helping individuals understand Form T1135 and the reporting obligations it implies. Obviously this is general discussion and not advice specific to your situation. Form T1135 reporting requirements are surprisingly complex. The Canada Revenue Agency is surprisingly unforgiving for “foot faults” in relation to this form.

Part A: Parsing the language – what is the basic Form T1135 reporting requirement?

If you want to understand the law it’s a good idea to begin with reading the law (make a note of that point). In this case the text of the law is found in Section 233.3 of the Income Tax Act of Canada (a not particularly obscure statute).

This post will guide you through the statute. Please note that all words in italics (whether bolded or not) are my personal commentary/explanation.
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