Important Information Entries on Profile T776 relevant to Federal Underused Housing Tax (UHT)

niceday · ‎February 16, 2023

From year 2022, individual Canadian or PR owning residential properties as Partner of a partnership are required to file UHT form by April 30,2023. Information on T776 will show the ownership type.

1) Profile T776 Part 1 – Your percentage of the partnership

When Type of ownership “Co-owner/sole-proprietor” box is checked and Part 2 Co-owners’ details and percentage of ownership (50%) is entered, Part 1 “Your percentage of the partnership” shows 50% for Co-ownership (Spouses) clients. That 50% shouldn’t be showing up there for Co-owners, who don’t own the property as a partner of a partnership. But if it is overridden as 0, no amounts will be linked to T1 line 12599 &12600. How to fix it?

Maybe Profile can design the calculation of co-owner's rental income/loss to be based on field of Part 2: percentage of ownership filed (50%) instead of field of Part 1 “Your percentage of the partnership” and also “Part 1: Percentage of the partnership” to be left for users to enter, if partnership applies.

CRA reference: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/rental-income/ownership.html#...

And the T776 form on the link (Updated 2 weeks ago?) looks like not updated: Amounts from The T776 Statement of Real Estate Rentals not flowing to the T1 jacket (intuit.ca)

2) Profile T776 Line 10 – Partners under Partnerships:

If Part1 “percentage of partnership” for co-owner spouse remains as 50% anyway and it could be explained that the ownership type was actually Co-ownership instead of partnership, amount of Co-owners’ net income/loss shows the same on both Line 9 (as Co-owner) and Line 10 (partner). Line 9 amount should be directly linked to box 9946 and no amount should be showing on Line 10 (Partner) (as Tax cycle 2021 shows). Again, if amount on Line 10 (partner) is overridden as $0, no amount showing on Line 9946 and being linked to T1 Line 12600. How to fix it?

3) Will CRA see the box of Type of ownership “Co-owner/sole-proprietor” was checked on Profile T776 when E-filed? Will CRA receive the profile T776 form or just the T1 jacket?

For tax perspective, tax refund/owing will be the same amount for the 50/50 split regardless of type of ownership (Co-ownership of Partnership).

However, as the type of ownership on T776 is crucial for this new UHT filing requirement (hefty penalty or potential future problems for our clients), can Profile development team please redesign T776 entries related to the type of ownership with new version issued or advise how to get around asap, as a high priority issue?

Thank you.

ProFile Duncan · ‎February 16, 2023

Hi,

From what I can see individual renters are not exempt from the UHT-2900 filing requirement, as discussed at this CRA website
For the second question , neither line 9 nor 10 of the T776 are sent to CRA with an electronic filing. Line 9946 is.
Also note the selection on partnership or co-owner affects the use of CCA entries in ProFile

niceday · ‎February 17, 2023

Hi Duncan,

Thanks a lot for your prompt response and the clarification about Line 9 & 10 of T776.

From CRA guides about UHT, filing obligation depends on who are excluded owners or affected owners.

Canadian and Permanent resident owning residential properties are excluded owners who are not required to file the UHT unless in the capacity of Partner of a partnership. as discuss :Who is an excluded owner

https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/uhtn1/introduction-...

Who is an excluded owner

You are an excluded owner of a residential property if you are any of the following:

the government of Canada or a province, or an agent of the government of Canada or a province
an owner of the residential property as a trustee of any of the following trusts:
- a mutual fund trust for Canadian income tax purposes
- a real estate investment trust for Canadian income tax purposes
- a specified investment flow-through (SIFT) trust for Canadian income tax purposes
an individual who is a citizen or permanent resident of Canada, unless you are an owner of the residential property as either of the following:
- a trustee of a trust (except if you are the personal representative of a deceased individual, in which case you are an excluded owner of the residential property)
- a partner of a partnership

---------------------------------------------------------------------------------------------------------------------------------------I've attended several seminars introducing UHT obligations and exemption. And it was clarified in the seminars that individual Canadian and permanent resident owners who own residential rental properties as Co-owners instead of partners of a partnership of the residential rental properties are excluded owners for UHT purpose.

Thus it is very important to have the correct ownership type on T776 being submitted to CRA: Co-owner or Partner of a partnership.

Profile please kindly have the filed of "Part 1: Percentage of partnership" improved to not showing Co-ownership % as Partner % for T776 information reporting or maybe leave it for users to enter.

I can see that the selection on partnership or co-owner affects the use of CCA entries in Profile and maybe it is another part of the improvement Profile would need to deal with at the same time?

Appreciate your reply, Duncan and hopefully we can move further asap to improve Profile usage experience and keep up to date with CRA policy.

ProFile Duncan · ‎February 17, 2023

Hi,

We cannot change the wording on a CRA form. The "Your percentage of the partnership" is on the actual CRA T776.
Also the CCA behavior is required. Partners will all have the same CCA claimed. This may not be the case for co-owners

niceday · ‎February 17, 2023

Hi Duncan,

For sure absolutely nobody can ever change any wording on any CRA form.

Based on my understanding, Field of “Part 1 Percentage of partnership %” is only applicable to a partner in a partnership to complete with their percentage of the partnership.

And for Co-owners who are not partners in a partnership, it is not an applicable area and the field shouldn’t be entered with any percentage number by default of the programming design of the tax preparation software.

It makes more sense that the partner’s percentage will be showing up in the field of “Part 1 Percentage of partnership”, when Profile T776 “Type of ownership: Partnership box” is checked (instead of the “Co-owner/Sole proprietor” box is checked.)

Can Profile improve to reach the above for users? As the Field of “Part 1- Percentage of partnership %” may matter for UHT purpose. Thanks.

CRA reference:

https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/rental-income/completing-form...

Part 1 – Identification

Fill in this part to identify yourself and your real estate rentals. Write down your name and your social insurance number.

If you are a partner in a partnership, enter your percentage of the partnership and provide the partnership business number.

ProFile Duncan · ‎May 02, 2023

Hi,

The filing electronically does not mention co-owner or partnership, just listed in the CRA electronic filing is the percentages applicable and the information for those who receive a share,

Hope this helps

veryedumacated · ‎September 27, 2023

Any clarification updates regarding form T776 and definition of a partnership? In most cases, for couples who jointly own a rental property, I checked the "co-owners" box on their 2022 tax return. Does this mean those "co-owner" clients are exempt from filing the UHT? I also filed a few returns that were owned jointly by spouse where I indicated "partnership" on their 2022 tax return. There is no formal partnership, the property tax bill shows both spouses names, no partership reported on the property tax bill. Is this exempt from filing the UHT Return?