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Hi Allan,
I bought an Agricultural property in India in 2007. I became a Canadian PR in 2009. Now I am a Canadian citizen. I was not gaining any income from this property until now. But there is an appreciation value to the land which could be over CAD 100K.
Since it's a personal property with no income gained over these years, I had not declared it during my tax filings.
I am currently planning to sell the property. What are my obligations at this time. When do I declare it to the CRA thru the T1135? After I sell the property or should I be declaring it sooner.
Thanks for your advise.
Thank you for your question. In my opinion, vacant land is not personal use property. Personal use property includes a cottage, vacation property, or second residence. You must report the cost amount of the vacant land on form T1135. The cost amount is equal to the fair market value of the land (as determined by a certified appraiser in India) based on the date that you became a tax resident of Canada. If the cost amount (expressed in Canadian dollars) is more than $100,000, then it must be reported on form T1135.
Note: In the year of immigration to Canada, you are not required to fill out form T1135.
I suggest that you submit the form T1135 for the required years through the Voluntary Disclosure Program, providing that you meet the conditions. In this manner, you will not be penalized. Furthermore, the difference between the selling price (net of selling costs) and the cost amount of the land (as described above) will be subject to Canadian capital gains tax. You can, however, claim a foreign tax credit on your Canadian tax return for the Indian capital gains taxes paid.