Tax filing for sponsored parents

[Wik.haider]

Hi there helpful folk,
I have a few questions. I really don't find accountants helpful when it comes to explaining what needs to be done. Anyway, if you can help, i'd really really appreciate:

1. Should you file your parents as your dependents? Is there a benefit either way? In my case, they live at my residence and technically I am responsible for all their expenses but they are self-sufficient financially. They have no income in Canada as they are old and retired.

2. For their taxes, should they be filling the T1135 in the first year? My parents landed on 6th Dec 2020. An excerpt from Canada.ca specifies in one of the FAQ's as below:

What is the reporting requirement for new immigrants? How is the cost amount determined for property that was owned at the time of immigration to Canada?

An individual does not have to file Form T1135 for the tax year in which he or she first became resident in Canada. For a new resident, the cost amount of foreign property is its fair market value at the time he or she first became resident in Canada. Use this fair market value in determining the new resident's Form T1135 filing requirement in future years.

FYI - contrary to this FAQ, two renowned accountants I called said they have to file and one of them even said they have to insert the cost price and not the fair market value. That is why I kind of don't trust their answers.

3. How to determine the Fair Market Value? Is there a good way?

4. If I call the CRA, will they help answer some of these questions for me?

5. Last and probably the hardest question - the expectation is I would inherit some of these assets to be filed in T1135. Do you know if I cash out and bring the money to Canada and a new Fair Market Value say after 10 years, I will be heavily taxed on their capital gains?

I would really appreciate if anyone can weigh in on any of these questions. Thanks in advance

 

[steaky]

Hi there helpful folk,
I have a few questions. I really don't find accountants helpful when it comes to explaining what needs to be done. Anyway, if you can help, i'd really really appreciate:

1. Should you file your parents as your dependents? Is there a benefit either way? In my case, they live at my residence and technically I am responsible for all their expenses but they are self-sufficient financially. They have no income in Canada as they are old and retired.

2. For their taxes, should they be filling the T1135 in the first year? My parents landed on 6th Dec 2020. An excerpt from Canada.ca specifies in one of the FAQ's as below:

What is the reporting requirement for new immigrants? How is the cost amount determined for property that was owned at the time of immigration to Canada?

An individual does not have to file Form T1135 for the tax year in which he or she first became resident in Canada. For a new resident, the cost amount of foreign property is its fair market value at the time he or she first became resident in Canada. Use this fair market value in determining the new resident's Form T1135 filing requirement in future years.

FYI - contrary to this FAQ, two renowned accountants I called said they have to file and one of them even said they have to insert the cost price and not the fair market value. That is why I kind of don't trust their answers.

3. How to determine the Fair Market Value? Is there a good way?

4. If I call the CRA, will they help answer some of these questions for me?

5. Last and probably the hardest question - the expectation is I would inherit some of these assets to be filed in T1135. Do you know if I cash out and bring the money to Canada and a new Fair Market Value say after 10 years, I will be heavily taxed on their capital gains?

I would really appreciate if anyone can weigh in on any of these questions. Thanks in advance

A) Your parents should file their own returns including T1135. Your dependants are your children.

B) For example, if they own stocks listed in SG, you can easily google how much USD the stock price on 6 Dec 2020 and how much USD their holdings was worth

C) Some posters said CRA agents on the phone were helpful, while others don't agree

D) Depends when you inherit those assets and sell them. Even if you cash out but remain them outside Canada, you can be taxed on the capital gain.

 

[canuck78]

Hi there helpful folk,
I have a few questions. I really don't find accountants helpful when it comes to explaining what needs to be done. Anyway, if you can help, i'd really really appreciate:

1. Should you file your parents as your dependents? Is there a benefit either way? In my case, they live at my residence and technically I am responsible for all their expenses but they are self-sufficient financially. They have no income in Canada as they are old and retired.

2. For their taxes, should they be filling the T1135 in the first year? My parents landed on 6th Dec 2020. An excerpt from Canada.ca specifies in one of the FAQ's as below:

What is the reporting requirement for new immigrants? How is the cost amount determined for property that was owned at the time of immigration to Canada?

An individual does not have to file Form T1135 for the tax year in which he or she first became resident in Canada. For a new resident, the cost amount of foreign property is its fair market value at the time he or she first became resident in Canada. Use this fair market value in determining the new resident's Form T1135 filing requirement in future years.

FYI - contrary to this FAQ, two renowned accountants I called said they have to file and one of them even said they have to insert the cost price and not the fair market value. That is why I kind of don't trust their answers.

3. How to determine the Fair Market Value? Is there a good way?

4. If I call the CRA, will they help answer some of these questions for me?

5. Last and probably the hardest question - the expectation is I would inherit some of these assets to be filed in T1135. Do you know if I cash out and bring the money to Canada and a new Fair Market Value say after 10 years, I will be heavily taxed on their capital gains?

I would really appreciate if anyone can weigh in on any of these questions. Thanks in advance

If they only landed in Dec 2020 they aren't tax residents and don't have to file this year. In 2021 international income from any sources need to be reported. You will need to look at their individual case for any tax treaties.

 

[Wik.haider]

If they only landed in Dec 2020 they aren't tax residents and don't have to file this year. In 2021 international income from any sources need to be reported. You will need to look at their individual case for any tax treaties.

Are you sure about this? Can you guide me to the source of this answer Lord Canuck ?
FYI - there is a tax treaty between Pakistan and Canada.

 

[Wik.haider]

A) Your parents should file their own returns including T1135. Your dependants are your children.

B) For example, if they own stocks listed in SG, you can easily google how much USD the stock price on 6 Dec 2020 and how much USD their holdings was worth

C) Some posters said CRA agents on the phone were helpful, while others don't agree

D) Depends when you inherit those assets and sell them. Even if you cash out but remain them outside Canada, you can be taxed on the capital gain.

Thanks a bunch. Confirmed some of my hunches. As an addendum to your answer 'B', the FAQ says: An individual does not have to file Form T1135 for the tax year in which he or she first became resident in Canada.

Based on that I am really happy to hear what Canuck just posted.

 

[canuck78]

When it comes to property the fact that it is no longer their primary residence will likely be the issue but I am not an accountant.

 

[Wik.haider]

When it comes to property the fact that it is no longer their primary residence will likely be the issue but I am not an accountant.

Sorry I didn't clarity. I meant sure about the fact they are not tax residents yet if they landed in Dec 2020?

 

[canuck78]

Thanks a bunch. Confirmed some of my hunches. As an addendum to your answer 'B', the FAQ says: An individual does not have to file Form T1135 for the tax year in which he or she first became resident in Canada.

Based on that I am really happy to hear what Canuck just posted.

A little more complicated than that. They weren't PRs for over 6 months. They were really PRs for a few weeks in the 2020 tax year. Selling a home as your primary residence is treated differently than a property that is not your primary residence which is why the first year is mentioned. There maybe a tax treaty related to land in India so I would contact an accountant familiar with Indian and Canadian taxes and treaties.

 

[Wik.haider]

A little more complicated than that. They weren't PRs for over 6 months. They were really PRs for a few weeks in the 2020 tax year. Selling a home as your primary residence is treated differently than a property that is not your primary residence which is why the first year is mentioned. There maybe a tax treaty related to land in India so I would contact an accountant familiar with Indian and Canadian taxes and treaties.

Hmm makes sense. I think I will have to go down that route and trust someone.
Thanks a bunch for guiding me.