My father left me a condo worth more than 250K in another country and I rented it out. How to report both the property and the rental income? A step-by-step instruction applicable to TurboTax 2016 would be greatly appreciated.
It would be more appropriate and simpler to report the net rental income (if greater than zero) on the Foreign Income slip as Other Income and the foreign taxes paid, if any. The form T776 is designed and used for rental income of Canadian properties. Consider all the provisions under the Income Tax Act for rental income that have no bearing on how that US income will be assessed, further, if there is a net loss it is simply stated as 'Zero' income, and not a loss.
The asset is still reported as an 'Foreign Property' on the T1135, if it is not used primarily for personal use.
It would be more appropriate and simpler to report the net rental income (if greater than zero) on the Foreign Income slip as Other Income and the foreign taxes paid, if any. The form T776 is designed and used for rental income of Canadian properties. Consider all the provisions under the Income Tax Act for rental income that have no bearing on how that US income will be assessed, further, if there is a net loss it is simply stated as 'Zero' income, and not a loss.
The asset is still reported as an 'Foreign Property' on the T1135, if it is not used primarily for personal use.
Income reported on the Foreign Tax Credit and the T1135 will not change your total income. It is needed on the Foreign Tax Credit, so it will calculate the foreign tax credit properly. As for the T1135, this is merely information reporting for CRA, so it is separate from your income tax return.
On the T1135, you will need to report ALL foreign property and all corresponding income. Again, income entered on the T1135 is information for CRA, and doesn't affect your income tax return. The T1135 is filed separately from your income tax return (you will see a button to file the T1135 as well as your regular Netfile button).
We suggest that you enter your Foreign Rental Income on the T776 Form. If you do so, DO NOT enter it on the Foreign Slip. Please see my previous post regarding tips on filling out the T776.
I've also updated my previous answer. Hopefully, it is a bit clearer now:
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