Specified Foreign Property: What Counts for the $100,000 Limit in Ontario

Many Ontario residents own a condo, cottage or piece of land in another country. Whether that property has to be reported on Form T1135 depends on how you use it, not just on where it is.

This article explains the $100,000 limit, what is excluded, how a vacation home turns into reportable property, and what can go wrong if a return is missed. It is general information. Because use and cost vary, confirm your case with a lawyer or accountant.

The $100,000 rule in plain words

Canadian residents, corporations and certain trusts must file Form T1135, the Foreign Income Verification Statement, if they own specified foreign property costing more than $100,000 at any time in the year. The form has two parts. The simplified Part A applies if the total cost was more than $100,000 but less than $250,000 throughout the year, and the detailed Part B applies at $250,000 or more.

The test is cost, not what the property is worth today. The $100,000 threshold is based on cost amount, generally the adjusted cost base, not fair market value. A property you bought years ago for less may still be under the line even if it is now valued higher, and the reverse is also possible.

What is excluded

Specified foreign property does not include personal-use property as defined in section 54, such as a vacation home used mainly as a personal residence. It also excludes property used or held exclusively in carrying on an active business.

• A foreign vacation home you use mainly for yourself and your family is generally outside the form.
• Property used or held exclusively in an active business is excluded.
• Whether other foreign land, such as an undeveloped lot held for investment, is reportable depends on the facts, so it is worth confirming.

When renting changes the answer

The CRA gives a Florida condo example. A condo used only as a vacation home is personal-use property and is not reported on T1135. The same condo rented for eight months with a reasonable expectation of profit is specified foreign property and must be reported. Part-year rental only to recover expenses, with no expectation of profit, is treated as personal use.

Keep records that show why you rented the place and how you priced it, since your expectation of profit is the point in question.

Income is taxable even below the threshold

Staying under $100,000 does not make foreign income tax-free. Canadian residents must report all income earned from foreign property, whatever its cost amount. Falling below the T1135 threshold does not exempt that income from tax.

Deadlines and penalties

Form T1135 is due on the same date as the income tax return: on or before April 30 for most individuals, on or before June 15 for self-employed persons, and no later than six months after the end of the fiscal period for corporations.

• Failure to file is $25 per day for up to 100 days, with a minimum of $100 and a maximum of $2,500.
• A knowing or grossly negligent failure is $500 per month for up to 24 months, to a maximum of $12,000.
• After more than 24 months, the penalty is 5% of the property's cost.
• A false statement or omission is the greater of $24,000 and 5%.

The due-diligence exception in section 233.5 does not apply to T1135. The CRA's reassessment period is also extended by three years if you failed to report income from specified foreign property and the form was not filed, was filed late, or was filed inaccurately.

What to do next

• List every foreign property you own and its cost in Canadian dollars, using your purchase records.
• Note how each property is used: personal, rented, held for investment or used in a business.
• Compare the total cost of reportable property with $100,000 and $250,000.
• Keep rental records showing your reasons and pricing for any part-year rental.
• If you missed a filing, speak to an accountant or lawyer soon, because penalties and the longer reassessment period can build.

Frequently asked questions