The T1 Income Tax and Benefit Return has a yes/no question “Did you own or hold foreign property at any time in 2011 with a total cost of more than CAN$100,000?”

If the answer is “yes”, Form T1135 Foreign Income Verification Statement, needs to be completed and filed. There are severe penalties for failure to file the form, for making false statements, omissions, etc. They range from $25 per day, with a minimum penalty of $100 to a maximum of $2,400. In certain circumstances, there can be a further penalty of $500 per month, with a maximum of $24,000. A total penalty of 5% of the unreported amounts may apply after 24 months.

Two important points surround this question: one, “cost” and two, “at any time in 2011”. Cost means you have to report all foreign properties if their total cost exceeds $100,000CAN. “At any time in 2011” means just that. It doesn’t matter if you did or did not hold that property at December 31, 2011. Form T1135 must then be filed and requires categorization of each type of property and a requirement to report the total income from the foreign property on the T1.

Property that must be reported include: funds in foreign bank accounts, shares of non-resident corporations wherever held, foreign rental property, shares of Canadian corporations on deposit with a foreign broker, etc. There are a number of other items. There are also specific exclusions from reporting that are listed. The most important are personal-use property and property used in an active business.