T1135 - Foreign Spec Property: How to report vacant land in india?
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Posted on: 17-04-15 10:15:23
Dear All,
I was hoping to get some guidance on complying with T1135 form for this tax year.
Q: How to determine adjusted cost base of plot? Registration Value or receipts of cash paid?
Q: How does one determine fair market value in absence of a service like MLS in canada?
any comments / insights highly valued.
Thanks in advance
I will provide you here with a little bit of information that you should evaluate before you submit the T1135 form. (filling and submission.)
When you say LAND, I was under the impression that you are holding a large tract of land.
When you say that it is a PLOT, I am sure it is in a subdivision with a permit and you can readily build your home there. Now the question is how much is it worth? Not its size and shape. If it is under $100,000 Canadian, then just hold it and enjoy the part of holding it. The REGISTRAR of Land and Property there in every Village, will generally have a basic cost base associated with every street and Zone, based upon its last sale as recorded by him in his registry. That information is also available to the general public. You can also obtain the same through any broker or from whom you purchased it from. I am sure he will extend the same courtesy to you even now. Once you get to know that value, you can decide its cost base and see what are the profits that you made by holding the same. If it is higher than the purchase value, then you have made a profit. (But all of this is academic and it will only enter the picture or your filing of T 1135, IF YOU SELL IT)
You normally pay a price to the seller and assume the other expenses. Such as Stamp paper costs and the legal fees etc., to get it registered. The seller normally pays a commission to the agent. So, you can add all of the expenses and come up with a figure to get your total purchase price. That will include the last NP. (Some expenses incurred such as your travel, assessing the location, phone calls etc., are to your personal expenses.) Any other monies paid to the seller is off the record. It is not of the correct colour.
Each country has its own system that they follow in buying and selling of fixed assets. You will have to learn the nitty-gritty of the same and if you did not know it, we will call you a novice or still wet behind the ears. Most of the Brokers there will work with referrals and through word-of-mouth. It will be nice to know how you came to know about the availability of the land? Also, it will be interesting to know how you bought the PLOT.
You can also give us a rundown as to where you are and where it is that you did the purchase. It will help us all if you can tell us the town and the country too. I can only guess it is not here in Canada.
FH.
Hello Senior Desi,
Let me first thank you for taking the time and effort to reply in great detail. It is appreciated.
Here are some further details:
Live and work in Canada. Purchased plots in gated communities in a prominent city in Andhra Pradesh, India. They are small sized residential properties, not farmland. Have been holding them for about 3 years now. Don't intend to sell it in near future. So there is no real profit to report( unless notional profit is reportable).
The price paid to the developer for land is X ( paid by cheque - includes custom development). The cost of land registered with the Town and Country is Y. X is greater than Y. These numbers are from the time of acquisition - 3 years back. What would be adj cost ? X or Y?
The form asks for max cost during the year and cost at year end. Do these have any relation to cost of acquisition X, Y above? OR is it that only current market rates apply?
Current Market Rate : I will take your suggestion and contact some local brokers to get the same. Again, the issue is that market rate with local registration authority are much usually lower what brokers quote.
To summarize, my queries briefly:
1. Acquisition cost should be X or Y?
2. Current Market Rates : Broker quoted or from Local Registrar of land?
3. If there is no sales transaction at all, what do you report under gain /loss ?
Thanks in advance for your guidance.
Cheers!
Quote:
Originally posted by canuck123
Hello Senior Desi,
Let me first thank you for taking the time and effort to reply in great detail. It is appreciated.
Here are some further details:
Live and work in Canada. Purchased plots in gated communities in a prominent city in Andhra Pradesh, India. They are small sized residential properties, not farmland. Have been holding them for about 3 years now. Don't intend to sell it in near future. So there is no real profit to report( unless notional profit is reportable).
The price paid to the developer for land is X ( paid by cheque - includes custom development). The cost of land registered with the Town and Country is Y. X is greater than Y. These numbers are from the time of acquisition - 3 years back. What would be adj cost ? X or Y?
The form asks for max cost during the year and cost at year end. Do these have any relation to cost of acquisition X, Y above? OR is it that only current market rates apply?
Current Market Rate : I will take your suggestion and contact some local brokers to get the same. Again, the issue is that market rate with local registration authority are much usually lower what brokers quote.
To summarize, my queries briefly:
1. Acquisition cost should be X or Y?
2. Current Market Rates : Broker quoted or from Local Registrar of land?
3. If there is no sales transaction at all, what do you report under gain /loss ?
Thanks in advance for your guidance.
Cheers!
-----------------
Your Purchase Price is 'X' and that stays as it is. (Cost of acquisition, legal fees taxes etc.,) This is the only item currently considered.
The other improvements that you have made and the expenses that you incurred are yours to show at the time of sale. So, keep a running account of the expenses. Such as taxes paid, improvements made and other funds that you spend to keep it saleable, such as getting rid of grass, garbage that gets thrown in or even planting a board that says "Trespassers will be Prosecuted". SAVE all of these if they are in the paper format, plus any interest you pay to the bank or a co-op society. ALL OF THESE ARE EXPENSES that will be deducted from the sale at the end.
if you cannot obtain the current rates, then, your ORIGINAL PRICE is taken into consideration. (No other price is needed.) The MARKET PRICE is what you will get if you sell it now. The question is are you willing to sell it for a loss? if not, hold on to it. So, your "X" still is good, as it is not sold. (NO Gain OR Loss)
The gain or loss only enters into the calculations if and when you sell it. No notional profits enter into Canadian System at all.
You only have to submit a form if its total cost is above Can.$100,000. Please read the form.
FH.
http://www.cra-arc.gc.ca/E/pbg/tf/t1135/t1135-14e.pdf
• Complete and file this form if at any time in the year the total cost amount to the reporting taxpayer of all specified foreign property was more than $100,000 (Canadian).
Thanks Full House. That was very helpful!
Cheers!
Quote:
Originally posted by Full House
Your Purchase Price is 'X' and that stays as it is. (Cost of acquisition, legal fees taxes etc.,) This is the only item currently considered.
The other improvements that you have made and the expenses that you incurred are yours to show at the time of sale. So, keep a running account of the expenses. Such as taxes paid, improvements made and other funds that you spend to keep it saleable, such as getting rid of grass, garbage that gets thrown in or even planting a board that says "Trespassers will be Prosecuted". SAVE all of these if they are in the paper format, plus any interest you pay to the bank or a co-op society. ALL OF THESE ARE EXPENSES that will be deducted from the sale at the end.
if you cannot obtain the current rates, then, your ORIGINAL PRICE is taken into consideration. (No other price is needed.) The MARKET PRICE is what you will get if you sell it now. The question is are you willing to sell it for a loss? if not, hold on to it. So, your "X" still is good, as it is not sold. (NO Gain OR Loss)
The gain or loss only enters into the calculations if and when you sell it. No notional profits enter into Canadian System at all.
You only have to submit a form if its total cost is above Can.$100,000. Please read the form.
FH.
http://www.cra-arc.gc.ca/E/pbg/tf/t1135/t1135-14e.pdf
• Complete and file this form if at any time in the year the total cost amount to the reporting taxpayer of all specified foreign property was more than $100,000 (Canadian).
Sorry to say, but I tend to disagree with your explanation - though I might be wrong!!
Firstly, the cost of acquisition is NOT necessarily X, unless we know why for registration it is shown lower than X. X was paid by cheque so that is official, but at the same time, Y is as per government records, which is more official!!
Secondly, the cost is also dependent on the fact whether the plot was purchases before landing in Canada or after. If before landing, the market value of the land on the day of landing would be considered the cost of acquisition, irrespective of X and Y.
Thirdly, why would regular expenses for maintaining the plot be added to the cost at the time of sale? Maximum is they can be charged against income from the plot, if any. And since they are vacant plots, obviously there is not income which is being reported.
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Chandresh
Advice is free – lessons I charge for!!
I was only trying to help the O.P. Since he did not start the post with a dollar figure, I said to him, if the purchase price, plus the legal fees and Stamp Paper costs exceed $100,000 then he is on the hook to report to the CRA with T1135 form. Because the value on paper is greater than the $100,000. limit.
Then he enters back with his 'X' and 'Y' values in Rupees. Once again I told him that the Value 'X' should be taken into account and he has a cheque to show for it. Moreover it is of a higher value. I do accounting in my spare time. That is the reason I told him to stick with the 'X'.
When I do the auditing, the cheque that he paid with has more standing and validity. There in India he could have gotten some help at the Indian end to get to the value 'Y'.
And to give you a VERY ABSURD EXAMPLE if the O.P. paid for the property with a cheque, which exceeds 100k, say $101k and someone FUDGES the papers (Documents) to brings the value upto $99k somehow to get him under the wire, which will exempt him from filing T1135, then I am off the hook and also OFF the case for cooking the books.
I just want to keep my conscience clear, after knowing what has taken place and still point to him the right direction and say "THISAWAY".
You sure are free to question me. In my opinion, you should question the O.P. May be he will spill the beans.
FH.
