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bb_sam

Foreign Rental Income -- error message

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I have a foreign property that generates income but has a negative net income (with interest expenses being incurred in Canada and in the foreign country).  
 
Initially, I completed both a T776, and the Foreign Property Income statement under the T1135 interview setup.  Since I have other Canadian rental properties, the addition of the T776 triggered a NetFile error -- I had a total of 6 T776s but Ufile said I couldn't efile because of a rule that "more than 6" business statements have to paper file.  So, I deleted the T776 and kept the T1135 and the accompanying Foreign rental income sheet.   
 
I was able to properly record the income and net loss on the Foreign Rental Income form.  But, when the system calculates things properly, I am getting an error that says:
 
  • "You entered information regarding foreign rental income without entering an amount for the net income."
 
The message below the error suggests that the same amount must be entered on the Foreign Rental Income form in the "Gross amount of foreign business income" and "Net Foreign Business income or loss".   When I submit the report this way, the error goes away but the income and loss are not reflected as either income or an offset to the income from my Canadian rental properties.  More importantly, it looks like Ufile is doubling the loss when I do this -- which seems pointless since it isn't even using that loss for any purpose.
 
Not sure what to do to correct this?  

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Hi bb_sam,

Foreign rental income
To enter the amount of foreign rental income, you have two procedures to perform.

A. First, you must produce a rental income statement form by following these steps:

1. In the "Left side menu on the Interview tab", select "Interview setup".

2. On the right-hand side of the screen, go to the "Rental income" group, check the boxes for "Rental property income" and click "Next" at the bottom of the page.

3. In the "Left side menu on the Interview tab", select "Rental Income" and on the right-hand side, choose "T776 - Rental income property".

4. Since the building is located outside of Canada, you have 3 choices.

     A) On page "T776 - Rental Property Identification". You can leave the "Address of the rental property" blank and the program will use your home address of Canada and you may submit your return via NETFILE.

     B) Your second choice, which we favor, in the section "Address of the rental property" you indicate the civic number of the foreign property on the line "Street" and the line "City" you enter the city and state and the country. However, you indicate your province of Canadian residence and your Canadian postal code. You will be able to send by NETFILE.

     C) If you enter the full address of the property in the country where your property is located, you will not be able to submit your return by NETFILE, and then you must mail it to Revenue Canada.

5. Once the information regarding the identification of the property has been entered, click "Next" at the bottom of this page and you will have access to the items "Income, expenses", "Labour costs", "CCA" and "Partners" in the "Left side menu on the Interview tab". Complete the sections that relate to your situation.

B. Then, as a second operation, you must enter your net rental income and foreign taxes paid in the foreign income section by following these steps:

1. Return to the "Left side menu on the Interview tab", select "Interview setup".

2.  On the right-hand side of the screen, go to the "Investment income and expenses" group, check the boxes for "Foreign income or foreign property (T1135)" and click "Next" at the bottom of the page.

3. Select "Foreign income & property" and in the screen to your right, click the plus sign "+" icon to the right of the line "Foreign rental income".

4. On the page entitled "Foreign income - rental", indicate the country where the income was earned and other relevant information, enter the net rental income on the line "Foreign business income entered as business income". If applicable, enter the "Amount of foreign tax paid" on this rental income and click "Next" at the bottom of the page.

Form T2209 will be produced by the program and the program will tell you if you are eligible for the federal foreign tax credit. While for residents of Quebec, form TP-772 will be generated by the program and will show you on line 49 the foreign tax credit.

The foreign tax credit will be carried forward by the program to line 405 of federal Schedule 1 and line 409 of Schedule E of Quebec, Foreign Tax Credit. In addition, the program will generate federal form T776 - Statement of Real Estate Rentals, as well as form TP-128 - Income and Expenses Respecting the Rental of Immovable Property.

For more information, please consult the following link:

http://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/rental-income-non-resident-tax.html

Remember, if your foreign property has a value above $100 000 CAN., do not forget to indicate at "CRA questions" and complete the "T1135 Foreign Income Verification Statement".
 

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