2015-0611141E5 T1135 reporting - former resident of Canada

Principal Issues: Where a former individual resident of Canada returns to Canada part-way in a taxation year, what is the taxpayer’s reporting period in respect of Form T1135?

Position: In the situation described, where a former resident of Canada returns to Canada part-way in the year, the individual’s reporting period would be for the individual’s taxation year, defined as the calendar year in subsection 249(1) of the Act.

Reasons: The reporting period in subsection 233.3(3) of the Act refers to a reporting entity’s taxation year or fiscal period.

Author: Skulski, Katharine
Section: 233.3, 233.7, and 248(1)

XXXXXXXXXX                                                                                                          2015-061114
                                                                                                                                  Katharine Skulski

July 11, 2016

Dear Ms. XXXXXXXXXX

Re:  Form T1135 reporting – former resident of Canada

We are writing in response to your email dated February 17, 2015 and our telephone conversation (XXXXXXXXXX/Skulski) of September 29, 2015 in which you asked for our views on the reporting period of a former resident of Canada who immigrates to Canada part way through a taxation year.  We apologize for the delay in responding.

You have described a hypothetical situation in which an individual former resident of Canada (the “Taxpayer”) immigrates to Canada on July 1, 2014.  The Taxpayer owned specified foreign property throughout the year (including the time of immigration) consisting of shares of non-resident corporations (that are not foreign affiliates) with a total cost amount of $500,000. In addition, during 2014, but prior to the date of immigration, the Taxpayer acquired and disposed of another property that was specified foreign property.

Our comments

This technical interpretation provides general comments about the provisions of the Income Tax Act (“Act”), where referenced.  It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination.  The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R6, Advance Income Tax Rulings and Technical Interpretations.

Pursuant to subsection 233.3(3) of the Act, a reporting entity for a taxation year or fiscal period, is required to file a return for the year or period in prescribed form on or before the entity’s filing-due date for the year.  A reporting entity for a taxation year or fiscal period is defined in subsection 233.3(1) of the Act as a “specified Canadian entity” for the year or period where at any time in the year or period, other than a time when the entity is non-resident, the total cost amount to the entity of specified foreign property exceeds $100,000. A specified Canadian entity for a taxation year is defined in subsection 233.3(1) of the Act to include a taxpayer resident in Canada in the year.

The reporting period under subsection 233.3(3) of the Act applies with respect to the reporting entity’s taxation year, which is defined in subsection 249(1) of the Act.  In particular, paragraph 249(1)(c) of the Act provides that for an individual, the taxation year is the calendar year.  Although the determination of whether a particular specified Canadian entity is a reporting entity excludes the time the entity is non-resident, such exclusion does not extend to the reporting entity’s reporting period.  In the situation that you have described, where the Taxpayer has established that he or she is a reporting entity for a taxation year, the Taxpayer would file the return in prescribed form (i.e., Form T1135) in respect of his or her specified foreign property for the taxation year.

We trust that these comments will be of assistance.

Yours truly,

Bob Naufal
Manager
Administrative Law Section
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

cc. Steve Shalaby, Acting Manager, Aggressive Tax Planning Policy Section

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