The Canada Revenue Agency (CRA) was asked to consider a situation where spouses A and B jointly acquired foreign property for $150,000. A paid $75,000 in cash and gave $75,000 to his spouse to jointly buy the property. The question asked was how would the income and gains be shown on the relevant foreign reporting form.
The CRA confirmed in a technical interpretation that, provided the spouses had joint ownership of the property, the following would happen:
(1) the CRA would compare each’s spouse’s share of the property to the $100,000 limit; and
(2) each of their shares would be based on the amount contributed by each of them to the purchase cost of the property.
The taxpayer suggested that the income tax attribution rules should apply and that B’s share of the income or capital gains earned from the property should be attributed back to A since A provided all the cash to buy the property. More specifically, the CRA was asked how A and B would report the income and gains earned from the property on their Form T1135.
The CRA confirmed that the Form T1135 reporting requirements described were totally independent from any income or other determination in respect of the attribution rules, or any other income tax attribution rules. Each of A and B would have to report on Form T1135 not only their ownership interest in the specified foreign property (if the cost amount of the property exceeded $100,000) but also their share of the income or gains realized on the property without consideration for the attribution rules.
The personal representative of an estate where there is a surviving spouse may take some relief from this position particularly where there are joint accounts.