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5013-G 1997 General Income Tax Guide for Non-Residents and Deemed Residents of Canada

We have archived this page and will not be updating it.

You can use it for research or reference.

We have archived this page and will not be updating it.

You can use it for research or reference.

WHAT'S NEW FOR 1997?

We list the major changes below. For more details on these and other changes, see the areas outlined in red in this guide.

INCOME TAX AND BENEFIT RETURN - We have redesigned the return to make it easier for you to complete. For more details, see page 9.

SCHEDULES - We have added five new schedules:

NATIONAL REGISTER OF ELECTORS - If you are a deemed resident of Canada, you can check a box, on page 1 of your income tax return, to allow Revenue Canada to provide your name, address, and date of birth to Elections Canada to help keep up to date your information currently on the National Register of Electors. See page 4 of this guide for details.

GOODS AND SERVICES TAX/HARMONIZED SALES TAX (GST/HST) - In Newfoundland, Nova Scotia, and New Brunswick, provincial sales taxes have been harmonized with the GST, resulting in the HST. In this guide we refer to both taxes.

CHILD SUPPORT PAYMENTS (lines 128 and 220) - New rules may apply to child support payable after April 30, 1997.

FARMING AND THE NET INCOME STABILIZATION ACCOUNT (NISA) - For reporting information, see lines 135 to 143.

RRSP DEDUCTION (line 208) - We have added an example that shows how to complete Schedule 7.

REPAYMENT OF EI BENEFITS (line 235) - The chart you use to calculate how much you have to repay is now included with your T4E slip.

SUPPLEMENTARY CANADA PENSION PLAN (CPP) CONTRIBUTION PAYABLE (line 309) RETURNED CHEQUES - Starting April 1, 1998, if you make a payment with a cheque that your financial institution does not honour, we may charge you a fee. See line 485 for details.

ELECTING UNDER SECTION 217 - New rules apply for calculating federal tax. See the section called "Electing Under Section 217" on page 51 for more information.

1997 FEDERAL BUDGET

This guide and return package includes the following income tax changes that have been announced, but were not law at the time of printing. If they become law as proposed, they will be effective for 1997, or as of the dates indicated.

CANADA OR QUEBEC PENSION PLAN BENEFITS (line 114) - Any lump-sum benefits you received for previous years may qualify for special tax treatment.

TAXABLE CAPITAL GAINS (Line 127) - The amount you have to include in your income has been reduced for certain property donated after February 18, 1997, to most charities.

ATTENDANT CARE EXPENSES (line 215) - The annual limit of $5,000 has been eliminated.

DISABILITY AMOUNT (line 316) - Starting February 19, 1997, an audiologist can certify that a person's hearing impairment meets the requirements for this claim.

TUITION AND EDUCATION AMOUNTS (line 323) - We have combined these two amounts on this line. Certain fees that you could not previously claim are now allowable. The monthly education amount has been increased to $150. In addition, you may be able to carry forward part or all of your credits and claim them in a future year.

MEDICAL EXPENSES (line 330) - There are additional expenses that you can claim.

DONATIONS AND GIFTS (line 349) - The maximum amount you can claim has changed for charitable donations and for gifts made (or agreed to in writing) after February 18, 1997, to Canada, a province, or a territory. In addition, you now claim these government gifts on line 340 of Schedule 9.

REFUNDABLE MEDICAL EXPENSE SUPPLEMENT (line 452) - There is a new, refundable credit you may be able to claim for medical expenses.

La version française de cette publication est intitulée Guide d'impôt général pour les non-résidents et les résidents réputés du Canada 1997

WHERE DO YOU FIND …

Age amount
Alimony
Amounts for infirm dependants age 18 or older
Amounts transferred from your spouse
Annuity payments
Attendant care expenses
Authorizing your representative

Balance owing
Basic federal tax
Basic personal amount

Canada or Quebec Pension Plan benefits
Canada or Quebec Pension Plan contributions
Canada Pension Plan, supplementary contribution payable
Canada Savings Bonds
Capital gains and capital gains deduction
Carrying charges
Changing your return
Charitable donations
Child care expenses
Child support
Child Tax Benefit
Commission income
Cultural gifts

Death benefits (other than Canada or Quebec Pension Plan death benefits)
Deceased persons, filing for
Deemed resident
Direct deposit
Disability amount
Dividends and dividend tax credit
Do you have to file a tax return?

Ecological gifts
Education amount
Elections Canada
Employment income and expenses
Employment Insurance benefits
Employment Insurance premiums
Equivalent-to-spouse amount

Federal individual surtax
Federal tax
Filing date
Foreign property
Foreign tax credit

Goods and services tax/harmonized sales tax (GST/HST) credit
Government gifts

Home Buyers' Plan
Hours of service

Identification
Income that is not taxed
Instalments
Interest and other investment income
Interest expenses
Interest on refunds and balances owing
Internet access
Investment tax credit

Labour-sponsored funds tax credit
Late-filing penalty
Legal fees
Loans and transfers of property
Losses

Maintenance
Medical expenses
Medical expense supplement, refundable
Minimum tax
Moving expenses

Net federal supplements
Non-refundable tax credits
Non-residents
Non-residents electing under section 217
Northern residents deductions

Old Age Security pension
Overseas employment tax credit

Partnership income - Limited or non-active
Pension income amount
Pension or superannuation income
Pensions from a foreign country
Political contributions
Provincial tax

Refunds
Registered education savings plan income
Registered pension plan deduction
Registered retirement income fund (RRIF) income
Registered retirement savings plan (RRSP) income and deduction
Rental income
Repaying income amounts
Research grants
Residential ties
Retiring allowances (severance pay)

Safety deposit box charges
Saskatchewan Pension Plan income and deduction
Scholarships
Self-employment income
Severance pay
Social assistance payments
Social benefits repayment
Social insurance number
Spousal amount
Spouse - defined2
Support payments
Surtax for non-residents and deemed residents of Canada

Tax deducted per information slips
Tax shelters
Tax transfer for residents of Quebec
Transfer of amounts from dependants
Tuition fees

Union, professional, or like dues
United States Social Security benefits

Vow of perpetual poverty

Wage-loss replacement plans
Workers' Compensation benefits

THE INFORMATION ON THIS PAGE APPLIES TO YOU ONLY IF YOU ARE A DEEMED RESIDENT OF CANADA.

NATIONAL REGISTER OF ELECTORS

Please indicate "Yes" on page 1 of your income tax return to authorize Revenue Canada to give your name, address, and date of birth to Elections Canada to help keep up to date your information currently on the National Register of Electors.

The Register is an automated data base maintained by Elections Canada, containing the name, address, and date of birth of persons eligible to vote in Canada. It will be used to produce voters lists without having to conduct door-to-door enumerations, saving approximately $30 million for each federal election or referendum.

KEEPING THE REGISTER UP TO DATE

Each year, voter information (including name and address and new voters turning 18) changes for almost 4 million Canadians. If you indicate "Yes" each year, you will allow us to give your name, address, and date of birth to Elections Canada. If you indicate "No," we will not give Elections Canada any information.

Indicating "Yes" on page 1 of your income tax return will not add your name to the Register if it is not already there. Indicating "No" will not delete your name if it is already there, and you will not lose your right to vote. If you recently turned 18 and you indicate "Yes," Elections Canada will send you a letter for you to confirm your voter eligibility and asking if you will allow your name to be added to the Register.

CONFIDENTIALITY

If you indicate "Yes" on page 1 of your return, we will give only your name, address, and date of birth to Elections Canada to help keep up to date your information currently on the National Register of Electors. Under the Canada Elections Act, information in the Register can be used only to create voters lists for federal, provincial, territorial, municipal, and schoolboard elections, and to provide the names and addresses of eligible electors to candidates, political parties, and Members of Parliament. You can write to Elections Canada to ask not to be included on these lists or the Register.

CONTACTING ELECTIONS CANADA

You can contact Elections Canada directly at:

Telephone: 1-800-INFO-VOTE (1-800-463-6868) toll free in Canada and the United States (613) 993-2975 from outside Canada and the United States

Teletypewriter: 1-800-361-8935 (for individuals with a hearing impairment) toll free in Canada and the United States

Fax: (613) 954-8584

Internet: http://www.elections.ca

E-mail: eleccan@magi.com

Mail: 257 Slater Street Ottawa ON K1A 0M6

LET OUR SYMBOLS BE YOUR GUIDE…

This guide gives information on the income you need to report and the deductions and credits you are entitled to claim when completing your 1997 income tax return. It will also help you determine your tax payable and any refund to which you are entitled.

YOU DON'T NEED TO READ THE WHOLE GUIDE!

Beginning on page 14 with "Line 101 - Employment income" our symbols will lead you directly to the information in this guide that may apply to you. Before you start, it is important that you:

JUST FOLLOW THE SYMBOL THAT APPLIES TO YOU… Each line number in this guide corresponds to the same line number on your tax return. If the symbol that applies to you appears beside the line number, the information for that line may apply to you. If the symbol does not appear, the information does not apply to you.

NOTE
The symbols are for reference only. If your symbol appears at a line number, it does not mean that all the information for that line number applies to you. Also, keep in mind that this guide applies only to individuals listed on page 7 under the heading "Is this tax package for you?"

Visually impaired persons can get information on services available to them, and can order publications in braille or large print, or on audio cassette or computer diskette, by calling 1-800-267-1267 weekdays from 8:15 a.m. to 5:00 p.m. (Eastern Time). From outside Canada, call the International Tax Services Office.

AT YOUR SERVICE

WHAT IF YOU NEED HELP?

In this guide, we use plain language to explain the most common tax situations. If you need more help after reading this guide, we have other services available.

You can use our Tax Information Phone Service (T.I.P.S.) Info-Tax service to get recorded information on many tax topics. See the T.I.P.S. information at the end of this guide.

We have other income tax guides and pamphlets you may find helpful. Some of these contain the related forms you may need. We will send you some of these guides in the mail by late February, depending on the type of income you reported and the deductions or credits you claimed on your 1996 tax return.

We mention the relevant guides or pamphlets for a particular topic in the related line instructions of this guide. We also refer to interpretation bulletins and information circulars that give more details on specific tax topics. Publications mentioned in this guide are available at all tax services offices, including the International Tax Services Office.

INTERNET ACCESS

If you have access, you can find many of our publications at http://www.rc.gc.ca on the Internet.

Confidentiality procedures prevent us from providing personal tax information over the Internet. Therefore, you should direct any enquiries to the International Tax Services Office.

BEFORE YOU CONTACT US

We want to provide you with the best service possible. You can help us answer your questions more quickly if you have all of your information ready. Before contacting us at the International Tax Services Office, you should do all of the following:

Being prepared helps us both!

You will find the address and telephone numbers of the International Tax Services Office included with this package.

HOURS OF SERVICE

REGULAR HOURS - You can call or visit us Monday to Friday, from 8:15 a.m. to 5:00 p.m. (except holidays). For faster service, call or visit us before 10:30 a.m. or after 1:00 p.m.

EVENING HOURS - Evening telephone service is available from February 23 to April 30 (Monday to Thursday only) from 5:00 p.m. to 9:00 p.m.

GETTING PERSONAL TAX INFORMATION

Your personal tax information is confidential. Therefore, we follow certain procedures before giving personal information to you or your representative, including your spouse. See "Authorizing your representative" below.

IN PERSON - If you visit us, we will ask you for one piece of signed identification with your picture. You can also provide two pieces of signed identification and your Notice of Assessment, Notice of Reassessment, or information about the contents of your return.

BY PHONE - If you telephone us and you want information about your account, we will ask you for your social insurance number or temporary taxation number, your date of birth, and the total income from line 150 of your return. If you are enquiring about your assessment, we may ask for additional information from your return.

BY FAX - You can send us correspondence by facsimile. However, because of the nature of facsimile services, we are not responsible for misdirected, incomplete, or illegible documents.

AUTHORIZING YOUR REPRESENTATIVE

You can authorize a representative, including your spouse, to get information on your tax matters by completing and signing Form T1013, Consent Form.

If your representative visits us, he or she must show two pieces of identification, a Form T1013, Consent Form, that you completed and signed, and your Notice of Assessment, Notice of Reassessment, or information about the contents of your return.

We will only give information to your representative after we are satisfied that you have authorized us to do so.

BEFORE YOU START

DO YOU HAVE TO FILE A TAX RETURN?

You have to file a 1997 income tax return if any of the following applies to you:

NOTE
Even if none of these requirements apply, you can still file a return. For example, you may have received income for which you could contribute to your registered retirement savings plan (RRSP). To keep your RRSP deduction limit (see page 25) up to date, you have to file a return.

IS THIS TAX PACKAGE FOR YOU?

Use this package if any of the following apply to you:

WHAT IF YOU CAN'T USE THIS PACKAGE? WHERE CAN YOU GET THE TAX PACKAGE YOU NEED?

If after reading the above information, you cannot use this package, contact the International Tax Services Office for the package you need. You will find the address and telephone numbers included with this package.

ARE YOU A NON-RESIDENT?

You are a non-resident of Canada for tax purposes if you have not established residential ties (see definition on this page) in Canada, and you:

WHAT INCOME SHOULD YOU REPORT? - On your return, include income from Canadian sources such as scholarships, fellowships, bursaries, net research grants, and taxable capital gains resulting from disposing of taxable Canadian property. If you received income from employment in Canada or from a business with a permanent establishment in Canada, use the tax package for the province or territory where you earned the income.

ARE YOU A NON-RESIDENT ELECTING UNDER SECTION 217?

Certain types of Canadian-source income you receive as a non-resident are subject to withholding tax. This withholding tax usually represents your final Canadian tax liability on the income. However, under section 217 of the Income Tax Act, you can elect to file a Canadian tax return and report certain types of your Canadian-source income. Choosing to file this return is called "electing under section 217."

By filing a section 217 return, you may be able to claim non-refundable tax credits and pay tax on this income at the same rate that residents of Canada pay. You claim the tax withheld as a credit on line 437 of the return. If this tax withheld is more than the amount you have to pay, we will refund the difference to you.

Section 217 may apply to you if you were a non-resident of Canada at any time in 1997 and you received any of the Canadian-source income listed on page 51 in the section called "Does section 217 apply to you?"

Section 217 definitely applies to you if you filed Form NR5, Application by a Non-Resident of Canada for a Reduction in the Amount of Non-Resident Tax Required to Be Withheld, for 1997. If you filed Form NR5, you have to file a section 217 return.

WHAT INCOME SHOULD YOU REPORT? - On your return, include any section 217 income (see listing on page 51) that was paid or credited to you in 1997, plus your 1997 Canadian-source business and employment income, and taxable capital gains from disposing of taxable Canadian property.

ARE YOU A DEEMED RESIDENT?

You are a deemed resident of Canada for tax purposes if you stayed in Canada for 183 days or more during 1997, and you did not establish residential ties (see definition on this page) in Canada.

You are also a deemed resident if you lived outside Canada during 1997, you did not have residential ties in Canada, and you were:

WHAT INCOME SHOULD YOU REPORT? - On your return, include your world income, which includes all Canadian and foreign income you received or earned in 1997.

WERE YOU A MEMBER OF THE OVERSEAS CANADIAN FORCES SCHOOL STAFF WHO LEFT CANADA IN 1997?

If you were and you severed your residential ties, you are an emigrant.

If this is your situation, you should use the income tax package for the province or territory where you lived just before you left Canada. You should also get the pamphlet called Emigrants and Income Tax, for the special rules that apply to you.

However, if you wish, you can file as a deemed resident of Canada while you are serving abroad. If you make this choice, you should use the income tax package for the province or territory where you lived just before you left Canada. In future years, you will use the income tax package for non-residents and deemed residents of Canada.

DID YOU LIVE IN QUEBEC JUST BEFORE YOU LEFT CANADA?

If so, even though we may consider you to be a deemed resident of Canada, under Quebec law you may be considered to be a factual resident of that province. If this is the case, you may have to pay Quebec income tax while you are serving abroad.

To avoid double taxation (federal non-resident and deemed resident surtax plus Quebec income tax), attach a note to your return telling us that you are filing a Quebec provincial tax return, and that you are asking for relief from the federal non-resident and deemed resident surtax.

WHAT ARE RESIDENTIAL TIES?

Residential ties include a home in Canada, a spouse or dependants who stayed in Canada while you were living outside Canada, and personal property in Canada. Other ties that may be relevant include social ties in Canada, a Canadian driver's licence, Canadian bank accounts or credit cards, and provincial or territorial hospitalization insurance coverage. For more details, contact the International Tax Services Office.

FILING YOUR RETURN

GETTING STARTED

First gather all the documents you will need to complete your return. This includes your information slips (such as T3, T4, T4A, and T5 slips) and receipts for any deductions or credits you plan to claim. As you prepare your return, and you come to a line that applies to you, look it up in this guide, or see the back of your information slips for more instructions.

Mail or deliver your return in the envelope included with this guide. If you are preparing other people's returns, mail or deliver each person's return in a separate envelope.

NOTE
If you have a farming business and you are participating in the net income stabilization account (NISA) program, use the envelope contained in the guide called Farming Income and NISA.

INCOME TAX AND BENEFIT RETURN

The income tax return has a new look. We have redesigned it to make it easier for you to calculate your taxes, and to apply for any credits and benefits to which you may be entitled.

We have set aside page 1 of the return for items not related to calculating your taxes. First complete the Identification area. Then, if you are a deemed resident, you can help keep up to date the National Register of Electors and apply for the GST/HST credit.

On pages 2 and 3, you enter all of your income and deductions, in order to calculate your net income (line 236) and taxable income (line 260). Your net income is used to calculate amounts such as personal and GST/HST tax credits. You also claim your non-refundable tax credits on page 3.

On page 4, you claim refundable tax credits, and calculate your refund or balance owing.

WHAT DATE IS YOUR 1997 RETURN DUE?

Generally, your 1997 income tax return has to be filed on or before April 30, 1998.

NOTE
If you file your return after April 30, 1998, your goods and services tax/harmonized sales tax (GST/HST) credit and Child Tax Benefit payments may be delayed.

SELF-EMPLOYED PERSONS - If you were carrying on a business in 1997 (unless the expenditures of the business are primarily in connection with a tax shelter), your 1997 income tax return has to be filed on or before June 15, 1998. In addition, if you are the spouse of an individual carrying on such a business, your 1997 income tax return also will have to be filed on or before June 15, 1998. However, if you have a balance owing for 1997, you still have to pay it on or before April 30, 1998.

NON-RESIDENTS ELECTING UNDER SECTION 217 - Your 1997 section 217 return is due on or before June 30, 1998. However, if you are including Canadian-source business and employment income, or taxable capital gains from disposing of taxable Canadian property on the return, and you have a balance owing, you have to pay it by April 30, 1998.

DECEASED PERSONS - As the legal representative (executor or administrator) of the estate of an individual who died in 1997 or before May 1, 1998, (June 16, 1998, for a self-employed individual or that individual's spouse) you may have to file a 1997 return for that individual (see "Do you have to file a tax return?" on page 7). If so, the 1997 return for the deceased individual (and for the individual's spouse) has to be filed on or before whichever of the following two dates is later:

For details about your filing requirements and options, get the income tax guide called Preparing Returns for Deceased Persons.

NOTE
If you received income in 1997 for a person who died in 1996 or earlier, do not file a 1997 return for that income on behalf of that person. However, you may have to file a T3 Trust Income Tax and Information Return for the estate.

WHAT ARE THE PENALTIES IF YOU FILE YOUR RETURN LATE?

If you owe tax for 1997, and do not file your 1997 return within the dates we specify under "What date is your 1997 return due?" (on this page) we will charge you a late-filing penalty. We will also charge you interest. For more information, see "When will we pay or charge interest?" on page 10.

The penalty is 5% of your balance owing for 1997, plus 1% of your balance owing for each full month that your return is late, to a maximum of 12 months. Your late-filing penalty may be higher if we charged you a late-filing penalty on a return for any of the three previous years. Even if you cannot pay the full amount you owe on or before April 30, 1998, you can avoid this penalty by filing your return on time.

We may waive this penalty and interest if you file your return late because of circumstances beyond your control. If this happens, include a letter with your return giving the reasons why you filed your return late. For details, get Information Circular 92-2, Guidelines for the Cancellation and Waiver of Interest and Penalties.

NON-RESIDENTS ELECTING UNDER SECTION 217 - If you file your 1997 section 217 return after June 30, 1998, your election is not valid.

WHEN WILL WE PAY OR CHARGE INTEREST?

We will pay you compound daily interest on your 1997 income tax refund, starting on whichever of the following three dates is LATEST:

If you have a balance owing for 1997, we charge compound daily interest starting May 1, 1998, on any unpaid amount owing for 1997. This includes any balance owing if we reassess your return, and any penalty we may charge you.

WHAT DO YOU INCLUDE WITH YOUR RETURN AND WHAT RECORDS DO YOU KEEP?

Include one copy of each of your information slips. Your tax return, the guide explanations, the forms, or the schedules will tell you when to attach other supporting documents, such as certificates, forms, schedules, or official receipts.

If you make a claim without the required receipt, certificate, schedule, or form, we may disallow your claim. It could also delay the processing of your return.

Even if you do not have to attach certain supporting documents to your return, keep them in case we select your return for review. Generally, you should keep your supporting documents for six years.

You should also keep a copy of your 1997 return, the related Notice of Assessment, and any Notice of Reassessment. These can help you complete your 1998 return. For example, your Notice of Assessment for 1997 will tell you:

NON-RESIDENTS AND NON-RESIDENTS ELECTING UNDER SECTION 217 - You also need to include a completed Schedule 12, Statement of World Income. Although you do not have to pay tax in Canada on income from outside Canada, we need this information to determine your allowable amount of non-refundable tax credits.

WHAT IF YOU ARE MISSING INFORMATION?

You should receive most of your information slips by early April. Wait until you get all your receipts and information slips before filing your return.

However, if you have to file a 1997 return, as explained on page 7, be sure to file it even if some slips or receipts are missing. Include the income, and attach a note to your return, stating which slips or receipts are missing and what you are doing to get them.

MISSING INFORMATION SLIP - If you have not received an information slip by early April, contact the issuer. However, you may not receive a T5 slip for an amount under $50.

Even if you do not have an information slip, you still have to report the income when you file your return. For example, if you know that you will not be able to get your T4 slip on or before April 30, use your pay stubs to calculate your income and the amounts your employer has deducted (such as Canada or Quebec Pension Plan contributions, Employment Insurance premiums, union dues, and income tax).

Attach to your return a note explaining the problem and, if possible, attach a photocopy of your pay stubs. The note should also give the payer's name and address, and the amounts you have calculated.

HOW DO YOU REPORT FOREIGN INCOME AND OTHER AMOUNTS?

If you are a deemed resident of Canada, report foreign income and other amounts (such as foreign taxes and expenses paid) in Canadian dollars. Calculate how much to report by multiplying your foreign income or expense by the exchange rate that was in effect on the day you received the income or paid the expense. If the amount was paid at various times throughout the year, you can contact us to get an average annual rate.

CHILD TAX BENEFIT (CTB)

If you are a deemed resident of Canada and you are responsible for the care of a child who is under 18, you can apply for the CTB for that child.

To apply for the CTB, submit a completed Form RC66, Child Tax Benefit Application, as soon as possible after your child is born or begins to live with you.

After we process your CTB application, we will send you a Child Tax Benefit Notice, telling you the amount to which you are entitled (if any) and how we calculated it. If you qualify, you will receive the payments no later than the 20th of every month. However, if your total benefit for the year is less than $120, we will send it, in most cases, all in one payment.

The CTB is based on the income shown on your tax return and your spouse's (if applicable, see page 12) tax return. Therefore, to qualify for the credit, you both have to file a return every year, even if there is no income to report.

Once you have applied for the CTB, you have to advise us immediately of any of the following changes (as well as the date it happened or will happen):

The pamphlet called Your Child Tax Benefit has more details. For more information about the CTB, call us.

AFTER YOU FILE

WHEN CAN YOU EXPECT YOUR REFUND?

We can usually process your return in four to six weeks. If you filed your return before April 16, wait four weeks before you call. If you filed your return after April 15, wait six weeks before you call.

To find out about your refund, call our automated T.I.P.S. (Telerefund) service. Telerefund will tell you the status of your 1997 refund. See the T.I.P.S. information at the end of this guide.

WHAT HAPPENS TO YOUR RETURN AFTER WE RECEIVE IT?

When we receive your return, we usually review it based on the information you provided, and send you a Notice of Assessment based on that review. However, in some cases, we may select your return for a more detailed review before we assess it. Therefore, we may ask you to give us documents to verify the deductions or credits you claimed. In other cases, after we have assessed your return, we may select your return to verify the income you reported, or the deductions or credits you claimed.

HOW DO YOU CHANGE YOUR RETURN?

If you need to make a change to any return you have sent us, do not file another return for that taxation year. Instead, send both of the following to the International Tax Services Office:

NOTE
Do not send your Form T1-ADJ or letter with your 1997 return.

You can ask for a refund for taxation years as far back as 1985. It usually takes eight weeks before we mail you a Notice of Reassessment.

CAN YOU FILE A RETURN TO CLAIM A REFUND FOR A PREVIOUS YEAR?

If you have not already filed one, you can file a return (other than to make an election under section 217) to claim a refund for the 1985 taxation year or any year after that. If you are filing a return for a year before 1997, make sure you attach receipts for all the deductions or credits you are claiming.

WHAT IS A VOLUNTARY DISCLOSURE?

If you have never filed an income tax return, stopped filing returns for two or more years, or sent us a return that was incomplete, we encourage you to voluntarily file or correct your return. We will then assess or reassess your return without applying a penalty. You will only have to pay the tax you owe, with interest. Information Circular 85-1, Voluntary Disclosures, has more details.

IF YOU MOVE, WHAT SHOULD YOU DO?

If you move, let us know your new address as soon as possible. This will ensure that you keep getting any goods and services tax/harmonized sales tax (GST/HST) credit or Child Tax Benefit (and similar provincial program) payments to which you may be entitled.

If you use direct deposit, and your move has resulted in a change to your account at your financial institution, be sure to advise us of your new account. We also need to know your new address to mail you your tax package for next year.

You can change your address by calling, writing, or visiting us. If you are writing, send your letter to the International Tax Services Office. Make sure you sign it, and include your social insurance number or temporary taxation number, your new address, and the date of your move.

If you are writing for other people, include their social insurance numbers or temporary taxation numbers and have each of them sign the letter authorizing the change to his or her records.

NOTE
Because an individual's personal information is confidential, generally we will not provide a change of address to other government departments or Crown corporations, such as Human Resources Development Canada or Canada Post. Similarly, they do not provide such information to us. An exception is if you allow us to give certain information to Elections Canada. See page 4 for more details.

SHOULD YOU BE PAYING YOUR 1998 TAXES BY INSTALMENTS?

If our records show that you may have to pay your taxes by instalments, we will send you an Instalment Reminder in advance, showing the amount we suggest you pay and the date the payment is due.

To find out if you should pay your 1998 taxes by instalments, estimate your 1998 tax and credits. Use those amounts to complete the chart on the next page, which contains the most common factors to consider. If you would like to know all of the factors, or if you want to calculate your instalment payments, get Form T1033-WS, Worksheet for Calculating 1998 Instalment Payments.

1998 Instalment requirements
Total payable (line 435) not including amounts on lines 421 and 424 $ 1 ________
Tax credits (line 482) 2 ________
Total of amounts on lines 448, 450, 457, and 476 - 3 ________
Line 2 minus line 3 - 4 ________
Line 1 minus line 4 $ 5 ________

You may have to pay your 1998 taxes by instalments if both of the following apply:

For more information about instalment payments, or instalment interest charges, get the pamphlet called Paying Your Income Tax by Instalments.

IDENTIFICATION

It is important that you complete the entire identification area of your return. We need this information to calculate your goods and services tax/harmonized sales tax (GST/HST) credit, and any benefit to which you may be entitled under the Child Tax Benefit Program. If you provide incomplete or incorrect information, the processing of your return, and any refund, credit, or benefit to which you may be entitled, will be delayed.

Non-residents electing under section 217 - Write "section 217" at the top of page 1 of your return.

LABEL - If you have a personalized label, attach it to your return. If your name, your address, your social insurance number (SIN) or temporary taxation number, or your spouse's SIN is incorrect, put a line through the wrong information, and print your changes clearly on the label.

We work closely with Canada Post to keep our postage costs down, while still making sure you get the mail that we send you as quickly as possible. As a result, when we process your income tax return, we may have to modify part of your address to meet Canada Post's requirements.

Therefore, the address on your tax package, Notice of Assessment, or any other correspondence we send you may be different from the one you indicated on your return.

SOCIAL INSURANCE NUMBER (SIN) - You have to give your SIN to anyone who prepares a tax information slip (such as a T3, T4, T5, or T600 slip) for you. If you do not give your SIN, you may have to pay a $100 penalty each time you do not provide it.

CHECK YOUR INFORMATION SLIPS CAREFULLY. If your SIN is not shown on your slip or is incorrect, please advise the slip preparer. If you do not have a SIN, apply for one at any Human Resources Centre of Canada.

If you are a non-resident who cannot get a SIN, attach a note to your return to let us know, and we will assign you a temporary taxation number.

SPOUSE - The term spouse used throughout this guide applies to a legally married spouse and a common-law spouse. A common-law spouse is a person of the opposite sex who, at that particular time in 1997, lived with you in a common-law relationship, and either:

Once either of these two situations applies, we consider you to have a common-law spouse, except for any period that you were separated for 90 days or more because of a breakdown in the relationship.

EXAMPLE 1
On May 1, 1994, Bruce and Brenda, who have no children, began to live together in a common-law relationship. On July 15, 1996, they separated because of a breakdown in their relationship. On February 27, 1997, they began to live together again. We consider Bruce and Brenda to be spouses as of February 27, 1997, the date they reconciled.

This is because they once lived together in a common-law relationship for 12 continuous months.

EXAMPLE 2
Hans and Sandra, who have no children, have been living together in a common-law relationship since April 13, 1996. However, for the months of July 1996 and October 1996, they lived apart because of a breakdown in their relationship. We consider Hans and Sandra to be spouses as of April 13, 1997. When calculating the 12 continuous months requirement, they have to include the two months they lived apart because each period of separation was less than 90 days.

PROVINCE OR TERRITORY OF RESIDENCE - Enter "other" on this line.

SELF-EMPLOYED - If you are either a deemed resident or a non-resident electing under section 217, and you were self-employed in 1997, enter the province or territory where your business was located. Only enter a province or territory if you had a permanent establishment there.

ELECTIONS CANADA

If you are a deemed resident of Canada, you can authorize us, by completing the applicable area on page 1 of your return, to give certain information to Elections Canada to help maintain the National Register of Electors. See page 4 of this guide for more information.

GOODS AND SERVICES TAX/HARMONIZED SALES TAX (GST/HST) CREDIT APPLICATION

In Newfoundland, Nova Scotia, and New Brunswick, provincial sales taxes have been harmonized with the GST, resulting in the HST. You can only receive the GST/HST credit if you apply for it each year, even if you received it in the previous year. To apply for the payments, you have to complete this area on page 1 of your 1997 tax return. Your credit is based on the information provided on your return and, if applicable, your spouse's return (see the definition of "spouse" on page 12). If you qualify, you will receive the payments in July and October of 1998, and January and April of 1999.

Before you complete this area on your return, be sure to read all of the information in this section. If you apply, we will let you know in July of 1998 the amount to which you are entitled, if any, and how we calculated your credit.

WHO CAN APPLY?

You can apply for the GST/HST credit if, at the end of 1997, you were a deemed resident of Canada and you:

NOTE
If you have a spouse, only one of you can apply for the credit. No matter which one of you applies, the credit will be the same.

WHO CANNOT APPLY?

You cannot apply for the GST/HST credit if, at the end of 1997, you:

NOTE
You cannot claim the credit for your spouse or child who met either of the last two conditions at the end of 1997.

NUMBER OF CHILDREN

You can claim a GST/HST credit for each of your children who, at the end of 1997:

LOANS AND TRANSFERS TO NON-RESIDENT TRUSTS Only one person can claim a GST/HST credit for a particular child.

NET INCOME OF SPOUSE

Your spouse's net income is the amount from line 236 of your spouse's return, or the amount that would be your spouse's net income if your spouse completed a return.

INCOME LIMIT

In the chart that follows, look up the number of children you have. If your net family income is less than the income limit shown across from the number of your children, you may be entitled to receive the credit.

Your net family income is the total of your net income and, if applicable, your spouse's net income.

Number of children Income limit
0 $34,000
1 $36,000
2 $38,500
3 $40,500
4 $42,500
5 and more apply

NOTE
These income limits are only guidelines to help you decide if you should apply for the credit. If you apply, we will send you a notice by the end of July 1998 to let you know the amount to which you are entitled, if any.

CALCULATING YOUR GST/HST CREDIT

To find out how to calculate your GST/HST credit, call our T.I.P.S. (Info-Tax) service. See the T.I.P.S. information at the end of this guide.

We may apply your GST/HST credit against certain outstanding government debts, such as Canada Student Loans, Employment Insurance benefit overpayments, Immigration loans, and training allowance overpayments. We may also apply it to satisfy a garnishment order under the Family Orders and Agreements Enforcement Assistance Act.

FOREIGN PROPERTY

If you are a deemed resident of Canada, you have to report your income from all sources, both inside and outside Canada.

You have to report in 1998 certain dealings you had with non-resident trusts in 1996 or 1997.

LOANS AND TRANSFERS TO NON-RESIDENT TRUSTS

If you are a deemed resident of Canada, you may have loaned or transferred funds or property to a non-resident trust after 1995. If so, you have to complete and file Form T1141, Information Return in Respect of Transfers or Loans to a Non-resident Trust. For more information, see Form T1141.

DUE DATES FOR FORM T1141 - For non-resident trusts to which you loaned or transferred funds or property in 1996, you have to file Form T1141 on or before April 30, 1998. For 1997, the deadline for filing it is the same as for your 1997 tax return (see "What date is your 1997 return due?" on page 9). File it separately from your tax return.

PENALTIES - There are substantial penalties for failing to complete and file Form T1141 by the due date.

BENEFICIARIES OF NON-RESIDENT TRUSTS

If you are a deemed resident of Canada and, after 1995 you received funds or property from, or been indebted to, a non-resident trust in which you had or will have absolute or conditional rights as a beneficiary, either directly or indirectly, you have to complete and file Form T1142, Information Return in Respect of Distributions From and Indebtedness to a Non-resident Trust.

DUE DATES FOR FORM T1142 - For non-resident trusts from which you received funds or property (or to which you were indebted) in 1996, you have to file Form T1142 on or before April 30, 1998. For 1997, the deadline for filing it is the same as for your 1997 tax return (see "What date is your 1997 return due?" on page 9). File it separately from your tax return.

PENALTIES - There are substantial penalties for failing to complete and file Form T1142 by the due date.

OWNERSHIP OF FOREIGN PROPERTY

Under proposed changes, you will only have to begin reporting in 1999 certain foreign property you owned in 1998. You will not have to report any foreign property you owned in 1996 or 1997.

TOTAL INCOME

If you are a deemed resident of Canada, you have to include in income most amounts you received in 1997. This includes amounts from employment, pensions, self-employment, and other sources.

Whether you are a deemed resident, a non-resident, or a non-resident electing under section 217, some amounts you may have received in 1997 are not taxed. Do not include any of the following amounts in your income:

NOTE
Income earned on any of the above amounts is taxable (such as interest you earn when you invest lottery winnings).

LOANS AND TRANSFERS OF PROPERTY

If you are a deemed resident of Canada, you may have to report any income, including dividends (see line 120) or interest (see line 121), from property (including money and any replacement property) you either:

You may also have to report capital gains (see line 127) or losses from the disposition of property you loaned or transferred to your spouse.

For details, get Interpretation Bulletin IT-510, Transfers and Loans of Property made after May 22, 1985, to a Related Minor, or IT-511, Interspousal and Certain Other Transfers and Loans of Property.

TAX SHELTERS

To claim deductions or losses from tax shelter investments, attach to your return a completed Form T5004, Statement of Tax Shelter Loss or Deduction. Make sure your form shows the tax shelter identification number.

LINE 101 - EMPLOYMENT INCOME (for Deemed residents and Non-residents)

Enter the total of amounts shown in box 14 of all your T4 or T4 Short slips. If you have not received your T4 or T4 Short slip by early April, or if you have any questions about an amount on a slip, contact your employer.

If you have employment expenses, see line 229 for details.

NOTE
If you received a housing allowance as a cleric, the allowance may be included in box 14 of your T4 slip. If so, subtract the amount of the allowance from the amount in box 14, and include the difference on line 101. Include the allowance on line 104.

TAX TIP
Your contributions to the Canada or Quebec Pension Plan (box 16 or 17 of your T4 or T4 Short slips) determine the amount of benefits you will receive under either of these plans. If there are no contributions in box 16 or 17 of your T4 or T4 Short slips, or if you have any questions about the amount of your contributions, contact your employer.

COMMISSIONS (BOX 42)

Enter on line 102 the total commissions you received as an employee from box 42 on all your T4 or T4 Short slips. This amount is already included in your income on line 101, so do not add it again when you calculate your total income on line 150. If you have commission expenses, see line 229 for details.

If you are a self-employed commission salesperson, get the income tax guide called Business and Professional Income to determine how to report your commission income and claim your expenses.

LINE 104 - OTHER EMPLOYMENT INCOME (for deemed residents, non-residents and non-residents electing under section 217)

Include your total employment income not reported on a T4 or T4 Short slip, such as tips and foreign employment income (in Canadian dollars).

NOTE
If you are a deemed resident and you have employment income from the United States, the amount on your W-2 slip may have been reduced by contributions to a "401(k) plan." Those contributions are not deductible on your Canadian return. Therefore, you have to add this amount into your income as well.

TAX TIP
You may be able to contribute to the Canada or Quebec Pension Plan for tips you received through employment. See line 310 for details.

Also, include on this line the total of the following amounts:

RESEARCH GRANTS - Subtract your expenses from any research grant you received and enter the net amount on this line. Your expenses cannot be more than the grant you received. Attach to your return a list of your expenses. For details, get Interpretation Bulletin IT-75, Scholarships, Fellowships, Bursaries, Prizes, and Research Grants.

WAGE-LOSS REPLACEMENT PLANS - Box 28 of your T4A slip includes the payments you received from these plans. There should also be a note on the slip identifying them. You may not have to report the full amount on your tax return. You can reduce the payments you received by the contributions you made to the wage-loss replacement plan after 1967, if you did not use the contributions on a previous year's return to reduce the income you had to report. For more information, get Interpretation Bulletin IT-428, Wage Loss Replacement Plans.

GST/HST AND QST REBATES - If you are an employee who paid and deducted employment expenses in 1996 or earlier, you may have received a GST/HST or QST rebate in 1997 for those expenses. If so, you include on line 104 the rebate you received. However, a rebate for a vehicle or musical instrument you bought for which you can claim capital cost allowance, is treated differently. The income tax guide called Employment Expenses contains instructions on how to report such rebates and information about capital cost allowance.

LINE 113 - OLD AGE SECURITY PENSION (for Deemed residents and Non- residents electing under section 217)

Include the amounts from box 18 of your T4A(OAS) slip, and box 24 of your T4A(P) slip, if applicable. Do not include on line 113 the amount in box 21 of your T4A(OAS) slip. For details on how to report this income, see line 146.

If you do not have your T4A(OAS) or T4A(P) slip, contact the nearest Income Security Programs office of Human Resources Development Canada.

NOTE
If your net income before adjustments (line 234) is more than $53,215, you may have to repay all or a part of your OAS benefits. See line 235 for details.

If you are a non-resident electing under section 217, and you received OAS benefits in 1997, you also have to complete Form T1136, Old Age Security Return of Income. For more details, get this return and the related guide.

NON-RESIDENTS ELECTING UNDER SECTION 217 - Your Old Age Security benefits may be shown in box 16 of your NR4-OAS slip.

LINE 114 - CANADA OR QUEBEC PENSION PLAN BENEFITS (for Deemed residents and Non-residents electing under section 217)

Enter the total Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) benefits shown in box 20 of your T4A(P) slip. This amount is the total of the amounts in boxes 14 to 18. If your T4A(P) slip has an amount in box 16, 17, or 18, read the part of this section that applies to you.

CPP OR QPP LUMP-SUM BENEFITS - If you received a lump-sum CPP or QPP benefit in 1997, all or part of it may have been for a year before 1997. This amount is already included on your T4A(P) slip, and you have to report all of it for 1997. However, under proposed changes, you may be eligible for a more beneficial tax treatment. If the part that relates to a previous year is $300 or more, you may have that part taxed as if you had received it in the previous year. We will automatically apply the tax calculation that benefits you most. We will tell you the results on your Notice of Assessment or Notice of Reassessment.

You may have received a lump-sum CPP or QPP benefit in 1996 (other than a disability benefit) of which $300 or more relates to 1995 or previous years. If so, you may not have received the more beneficial tax calculation for that payment. To receive this tax calculation, call Human Resources Development Canada, at 1-800-277-9914, to get a statement that shows how much of the payment applies to each previous year, and then ask us to adjust your 1996 return. For more details on how to do this, see "How do you change your return?" on page 11.

NOTE
We applied the more beneficial tax treatment automatically to lump- sum disability benefits paid in 1996.

NON-RESIDENTS ELECTING UNDER SECTION 217 - Your CPP or QPP benefits may be shown in box 16 or 26 of your NR4 slip if income code 46 is located in box 14 or 24 of the slip.

CPP OR QPP DISABILITY BENEFIT (BOX 16)

Enter on line 152, located below and to the left of line 114, the amount of your CPP or QPP disability benefits from box 16. This amount is already included in your income on line 114, so do not add it again when you calculate your total income on line 150.

Lump-sum CPP or QPP disability benefits you received in 1997 already qualify for the special tax treatment discussed under "CPP or QPP lump- sum benefits"above.

CPP OR QPP CHILD BENEFIT (BOX 17)

Include a child benefit only if you received it because you were the child of a deceased or disabled contributor. Any benefits paid for your children are their income, even if you received the payment.

CPP OR QPP DEATH BENEFIT (BOX 18)

As a beneficiary of the estate of the deceased person, you can choose to include this amount either on line 114 of your own return, or on a Trust Income Tax and Information Return for the estate. Do not report it on the deceased person's individual return. The taxes payable may be different, depending on which return you use. For more information, get the income tax guide called T3 Guide and Trust Return.

LINE 115 - OTHER PENSIONS OR SUPERANNUATION (for Deemed residents and Non-residents electing under section 217)

Include on this line any other pensions or superannuation you received (box 16 on T4A slips and box 31 on T3 slips).

If there is a lump-sum amount shown in box 18 of your T4A slip or box 22 of your T3 slip, report it on line 130.

You may also have to report on this line other amounts that you received. Read the parts of this section that correspond to the type of income you have.

TAX TIP
If you have to report your pension or annuity payments on line 115, you may be able to claim the pension income amount. See line 314 for details.

ANNUITY AND REGISTERED RETIREMENT INCOME FUND (RRIF) PAYMENTS

If you have an amount in box 24 of your T4A slip, box 16 or 20 of your T4RIF slip, or box 19 of your T5 slip, report the amount as follows:

NOTE
If there is an amount in box 18 or 22 of your T4RIF slip, see the instructions on the back of the slip.

PENSIONS FROM A FOREIGN COUNTRY

If you are a deemed resident of Canada, report in Canadian dollars the total amount of your 1997 foreign pension income. Do not deduct from your foreign income the amount of tax the foreign country withheld. See "How do you report foreign income and other amounts?" on page 10.

Attach a note to your return, identifying the type of pension you received and where it came from.

You may have to report amounts you received from United States individual retirement accounts (IRAs). For details, contact the International Tax Services Office.

TAX TIP
You can claim a deduction on line 256 for the part of your foreign pension income that is tax-free under a tax treaty. If you do not know whether any part of your foreign pension is tax-free in Canada, contact the International Tax Services Office.

UNITED STATES SOCIAL SECURITY - If you are a deemed resident, include on line 115 the full amount, in Canadian dollars, of your U.S. social security benefits. You can claim a deduction for this income. See line 256 for details.

Benefits paid for your children are their income, even if you received the payments.

LINE 119 - EMPLOYMENT INSURANCE BENEFITS (for Deemed residents and Non- residents electing under section 217)

Enter the amount shown in box 14 of your T4E slip. If you repaid to Human Resources Development Canada excess benefits you received, you may be entitled to a deduction. See line 232 for details.

NOTE
If your net income before adjustments (line 234) is more than $39,000, you may have to repay some of the benefits you received. See line 235 for details.

LINE 120 - TAXABLE AMOUNT OF DIVIDENDS FROM TAXABLE CANADIAN CORPORATIONS (for Deemed residents)

Enter on line 120 the taxable amount of all dividends from taxable Canadian corporations, as shown in box 11 on T5 slips, box 31 on T4PS slips, box 32 on T3 slips, and in the details area on T5013 slips.

If you received foreign dividends, see "Foreign interest and dividend income" on page 19 for details on how to report this income.

HOW TO REPORT

Enter the taxable amount of your dividends from taxable Canadian corporations in Part I of Schedule 4. You have to report your dividends even if you did not receive an information slip. If you did not receive one, you can calculate the taxable amount of dividends you received by multiplying the dividends you actually received by 125%.

Taxable dividends received from taxable Canadian corporations qualify for the federal dividend tax credit. This credit reduces the amount of tax you owe. Complete Method B of Schedule 1 to claim this credit. See "Line 425 -Federal dividend tax credit" on page 49 for details.

NOTE
Special rules apply for income from property (including shares) one family member lends or transfers to another. See "Loans and transfers of property" on page 14 for more information.

TAX TIP
In some cases, it may be better for you to report all the taxable dividends your spouse received from taxable Canadian corporations. You can only do this if, by including the dividends in your income, you will be able to claim or increase your claim for the spousal amount (see line 303).

If you use this option, you may be able to take better advantage of the dividend tax credit. Also, do not include these dividends in your spouse's income when you calculate claims such as the spousal amount on line 303 or amounts transferred from your spouse on Schedule 2.

LINE 121 - INTEREST AND OTHER INVESTMENT INCOME (for Deemed residents)

Include on this line your interest from Canadian sources, and interest and dividend income from foreign sources. You also include the interest on any income tax refund you received in 1997, which is shown on your Notice of Assessment or Notice of Reassessment.

Report the amounts you actually received, as well as amounts that were credited to you in the year. The interest you report depends on the type of investment and when you made it.

NOTE
Special rules apply for income from most property (including money) one family member lends or transfers to another. See "Loans and transfers of property" on page 14 for more information.

Generally, when you invest your money in your child's name, you have to report the income from those investments. However, if you deposited Child Tax Benefit payments into a bank account or trust in your child's name, the interest earned on those payments is your child's income.

HOW TO REPORT

Use Part II of Schedule 4 to list your investments, and attach copies of any information slips. Generally, you report your share of interest from a joint investment based on how much you contributed to the investment.

EXAMPLE
Karen and Pavel received a T5 slip from their joint bank account showing the $400 interest they earned in 1997. Karen had deposited $4,000 and Pavel had deposited $1,000 into the account.

Karen reports $320 interest, calculated as follows:

$4,000 (her share) x $400 (total interest)/$5,000 (total) = $320

Pavel reports $80 interest, calculated as follows:

$1,000 (his share) x $400 (total interest)/$5,000 (total) = $80

To determine the amounts you have to report, read any of the following sections that apply to you:

BANK ACCOUNTS

Report interest paid or credited to you in 1997, even if you did not receive an information slip. You may not receive a T5 slip for amounts under $50.

TERM DEPOSITS, GUARANTEED INVESTMENT CERTIFICATES (GICS), AND OTHER SIMILAR INVESTMENTS

On these investments, interest builds up over a period of time, usually longer than one year. Generally, you do not receive the interest until the investment matures, or you cash it in. For more information on Canada Savings Bonds, see "Canada Savings Bonds (CSBs)" on page 18.

For most investments you made in 1990 or later, you have to report the interest each year, as you earn it.

The amount of income you report is based on the interest you earned during each complete investment year. For example, if you made a long- term investment on July 1, 1996, calculate the first year's interest to the end of June 1997 and report it on your 1997 tax return. Report the interest from July 1997 to June 1998 on your 1998 return.

NOTE
Your investment agreement may specify a different interest rate each year. If so, report the amount on your T5 slip, even if it is different from what the agreement specifies, or what you received. The issuer of your investment can tell you how this amount was calculated.

For information about reporting methods for investments (including CSBs) made in 1989 or earlier, call our T.I.P.S. (Info-Tax) service. See the T.I.P.S. information at the end of this guide.

CANADA SAVINGS BONDS (CSBS)

Interest on a CSB designated by the letter "R," for regular interest, is paid annually until the bond matures, or you cash it in. Interest on a bond designated by the letter "C," for compound interest, is not paid until you cash it in.

TAX TIP
If you bought bonds through your payroll savings plan, you can deduct the interest charges you paid to buy the bonds. See line 221 for details.

HOW TO REPORT

"C" bonds, Series 45 and subsequent, and all "R" bonds - Report the amount shown on the T5 slip.

"C" bonds, Series 42 to 44 (1987-1989) - The rest of this section applies only to these bonds. If you are already using the annual accrual method to report your bond interest on these bonds, complete Chart 1 below.

Chart 1: Interest to report for "C" bonds using the annual accrual method

For each series: Series 42 Series 43 Series 44
A - Face value of bonds      
B - Amount from line A divided by 100 = = =
C - Interest amount x 15.05 x 13.81 x 12.53
Line B x Line C Include this amount on line 121 = = =

If you want to change to the annual accrual method, complete Chart 2 to calculate the amount to report.

Chart 2: Interest to report for "C" bonds if you want to change to the annual accrual method

For each series: Series 42 Series 43 Series 44
A - Face value of bonds      
B - Amount from line A divided by 100 = = =
C - Interest amount x 15.05 x 35.78 x 23.10
Line B x Line C Include this amount on line 121 = = =
If you already use the cash or receivable method, you have to report the interest at least every three years. Using this method, you should have reported the following amounts of interest for each $100 of bonds: If you cashed Series 42, 43, or 44 "C" bonds in 1997, report the amount shown on the T600 slip minus any part of that amount that you reported in previous years. To calculate the amount you should have reported for each $100 of bonds, use Chart 3 below.

Chart 3: Interest already reported for each $100 of "C" bonds cashed before maturity

For each series: Series 42 Series 43 Series 44
Annual accrual method 100.66 84.09 67.10
Cash or receivable method 100.66 62.11 56.53
TREASURY BILLS (T-BILLS)

If you disposed of a T-Bill at maturity in 1997, you have to report as interest the difference between the price you paid for it and the proceeds of disposition shown on your T5008 slip, Statement of Securities Transactions, or account statement.

If you disposed of a T-Bill before maturity in 1997, you may also have to report a capital gain or loss. For details, get the income tax guide called Capital Gains.

EARNINGS ON LIFE INSURANCE POLICIES

Report the earnings which have accumulated on certain life insurance policies in the same way as you do for other investments. In all cases, your insurance company will send you a T5 slip.

For policies bought before 1990, you can choose to report accumulated earnings annually by telling your insurer in writing that you choose to do so.

FOREIGN INTEREST AND DIVIDEND INCOME

Report gross foreign interest and dividend income in Canadian dollars. Do not deduct from your foreign income the amount of tax the foreign country withheld. For more information on how to convert your foreign income into Canadian dollars, see "How do you report foreign income and other amounts?" on page 10.

TAX TIP
If you paid foreign taxes on foreign investment income you received, you may be able to claim a foreign tax credit. See "Lines 431 and 433
- Federal foreign tax credit" on page 49 for details.

LINE 122 - NET PARTNERSHIP INCOME: LIMITED OR NON-ACTIVE PARTNERS ONLY (for Deemed residents and Non-residents electing under section 217)

If you were a limited partner of a partnership that did not include a rental or farming operation, enter your share of the partnership's net income or loss on line 122.

If you were a partner (other than a limited partner) of a partnership that did not include a rental or farming operation, enter your share of the partnership's net income or loss on line 122 only if you were both:

Report your net rental income or loss from a partnership on line 126. Report your net farming income or loss from a partnership on line 141.

If none of the above applies to you, enter your share of the partnership's net income or loss on the applicable self-employment line of your return (see lines 135 to 143).

NOTE
If the partnership has a loss, the amount you can claim could be limited. For details, contact the International Tax Services Office.

If you have a tax shelter, see "Tax shelters" on page 14.

HOW TO REPORT

NOTE
You may have to make Canada Pension Plan contributions on the net income you report on line 122. See line 310 for details.

CERTIFIED FEATURE FILMS AND CERTIFIED PRODUCTIONS

You may have invested in a Canadian certified feature film or certified production for reasons other than to earn income from a business. If so, and if you want to claim capital cost allowance, you have to file with your return a T1-CP slip, Statement of Certified Productions, which the producer issues. Otherwise, we may disallow your claim. Use the back of the T1-CP slip to calculate your allowable claim.

LINE 126 - RENTAL INCOME (for Deemed residents)

Generally, you report rental income payable to you in 1997. You have to include with your return a statement showing your rental income and expenses for the year. You can use Form T776, Statement of Real Estate Rentals, to help you calculate your net rental income.

Enter your gross rental income on line 160 and your net rental income or loss from real estate rentals on line 126. If you have a rental loss, show the amount in brackets. If you were a member of a rental partnership, you should also include any amount in box 20 of your T5013 slip, Statement of Partnership Income, or that the partnership allocated to you in its financial statements.

The income tax guide called Rental Income contains Form T776, as well as details on rental matters.

If you have a tax shelter, see "Tax shelters" on page 14.

LINE 127 - TAXABLE CAPITAL GAINS (for Deemed residents, Non-residents and Non-residents electing under section 217)

A capital gain or a capital loss usually occurs when you sell or dispose of property, such as real estate or shares. If you are a non- resident, or a non-resident electing under section 217, a capital gain or a capital loss occurs when you dispose of TAXABLE CANADIAN PROPERTY.

The taxable part of a capital gain is 75% of the net amount of your capital gains minus your capital losses for the year.

Under proposed changes, if you realized a capital gain after 1991 as a result of a mortgage foreclosure or conditional sales repossession, the capital gain is excluded from income when calculating your GST/HST credit, Child Tax Benefit payments, age amount (line 301), social benefits repayment (line 235) and refundable medical expense supplement (line 452). If this applies to you, contact the International Tax Services Office for more details.

When you donate capital property to a charity, we consider you to have sold the property at its fair market value. As a result, you may have to report a capital gain or loss for that property.

Under proposed changes, you will have to include in your income only 37.5% of certain capital gains. This applies to gains from certain property donated to any of the qualified donees listed under line 349 (other than a private charitable foundation) after February 18, 1997. The types of property affected are:

Attach to your return Form T1170, Capital Gains on Gifts of Certain Capital Property, providing details of each of these properties and when you donated it.

In addition, you may be able to claim a reserve for gains you realize on donations of non-qualifying securities to any qualified donee listed under line 349. For details on these changes, get the guide called Capital Gains and the pamphlet called Gifts and Income Tax.

HOW TO REPORT

Use Schedule 3 to calculate your taxable capital gains or allowable capital losses and attach the completed schedule to your return. If all of your gains or losses are shown on T3, T4PS, T5, or T5013 slips, or on a financial statement from a partnership, enter the total on line 174 of Schedule 3. If your securities transactions are indicated on an account statement, or a T5008 slip, use the information on these documents to help you complete Schedule 3. For more information about these and other capital dispositions, get the income tax guide called Capital Gains.

If you have a taxable capital gain, enter the amount from line 199 on Schedule 3 on line 127 of your return. If you have a net capital loss, complete Schedule 3 but do not claim it on line 127. You can only use it to reduce your taxable capital gains of other years. See the "Note" at line 253 for details on how to carry back your loss.

TAX TIP
If you are a deemed resident, you may be able to claim a deduction for the taxable capital gain you report. See line 254 for details.

LINE 128 - SUPPORT PAYMENTS RECEIVED (for Deemed residents)

The term "support" used in this section replaces the former references to "alimony" and "maintenance." It refers to both spousal and child support.

Enter on line 156 the total amount of spousal and child support you received in 1997. Enter on line 128 the taxable amount. For information about non-taxable amounts, see "Child support" on this page.

Generally, the support payments you received are taxable, if ALL of the following conditions are met:

NOTE
There are exceptions to these conditions. If you separated in 1997, or if you do not know whether the payments you received are taxable, get the pamphlet called Support Payments.

CHILD SUPPORT

Generally, you do not have to include in your income child support that becomes payable after April 30, 1997, under a court order or written agreement dated May 1, 1997, or later. There may be an exception if your order or agreement recognizes such payments you received before May 1, 1997. For more information, see the pamphlet called Support Payments.

You do have to include in your income amounts received that became payable under orders and agreements dated before May 1, 1997, unless one of the following applies:

NOTE
You may be receiving both child support that is not taxable under the new rules and taxable spousal support. If so, and the child support is in arrears, you will not have to include in your income any spousal support payments until you receive all of the required child support.

You may have to register your court order or written agreement by using Form T1158, Registration of Family Support Payments. For more information, see the pamphlet called Support Payments, which includes this form.

TAX TIP
You may have to report support payments you received from a resident of another country. However, if the support payments are tax-free in Canada because of a tax agreement between Canada and the other country, you can claim a deduction for the payments on line 256. To find out if the payments you received are tax-free, contact us.

You may be able to claim a deduction for support income you repaid under a court order. For details, get the pamphlet called Support Payments.

LINE 129 - REGISTERED RETIREMENT SAVINGS PLAN (RRSP) INCOME (for Deemed residents and Non-residents electing under section 217)

Generally, you have to enter on line 129 the total amount shown in boxes 16, 18, 20, 22, 26, 28, and 34 of all your T4RSP slips. This is the case unless your spouse made a contribution to your RRSP. See "Spousal RRSPs" below for more details.

TAX TIP
Annuity payments shown in box 16 of your T4RSP slip may qualify for the pension income amount. See line 314 for more details.

SPOUSAL RRSPS

Your spouse may have to report some or all of the RRSP income shown in boxes 20, 22, or 26 of your T4RSP slips if either:

To calculate the amount from a spousal RRSP that each of you has to report, complete Form T2205, Calculating Amounts From a Spousal RRSP or RRIF to Include in Income. Both you and your spouse should include this form with your returns. Attach the T4RSP slip to your return. However, only the person whose name is shown on the slip as the annuitant can claim the income tax deducted (box 30).

NOTE
If you and your spouse were living apart because of a breakdown in the relationship when you withdrew funds from your RRSP, you have to report the whole amount shown on your T4RSP slips.

For more details on RRSP income, get the income tax guide called RRSPs and Other Registered Plans for Retirement.

REPAYMENTS UNDER THE HOME BUYERS' PLAN (HBP)

If you withdrew funds from your RRSP under the HBP before 1996, you should have received a Home Buyers' Plan Statement of Account from us in the fall of 1996, indicating the amount of your annual repayment for 1997. You have to make this repayment by contributing to your RRSP on or before March 1, 1998, and designating it using line 246 of Schedule 7. Do not make the repayment to us. For more information, see "Home Buyers' Plan (HBP) repayments" on page 25.

If you have not made a repayment for 1997, you have to include the required repayment, as indicated on your repayment statement, on line 129 of your return. You also have to include an amount on line 129 if you repay less than the required repayment. For more details, get the pamphlet called Home Buyers' Plan (HBP) for the year you made your withdrawal.

LINE 130 - OTHER INCOME (for Deemed residents, Non-residents and Non- residents electing under section 217)

Use this line to report taxable income that is not reported anywhere else on the return. Identify the type of income you are reporting in the space to the left of line 130 on your return. This will support any deductions you are entitled to claim against this income. If you have more than one type of income, attach a note to your return giving the details.

NOTE
Special rules apply for income from property one family member lends or transfers to another. See "Loans and transfers of property" on page 14 for more information.

SCHOLARSHIPS, FELLOWSHIPS, BURSARIES, STUDY GRANTS, AND ARTISTS' PROJECT GRANTS

Total all the amounts you received in 1997 (box 28 of your T4A slips).

EXAMPLE
Kimiko received a $1,500 scholarship to attend university. She subtracts the $500 tax-free amount and reports $1,000 on line 130.

NOTE
If you received an artists' project grant, you can subtract the $500 or your expenses, whichever you prefer, but not both. However, the expenses you claim cannot be more than the grant. You cannot claim personal living expenses while at your usual place of residence.

Report prizes and awards you received as a benefit from your employment or in connection with a business. However, these are not eligible for the $500 tax-free amount. If you received a research grant, see line 104.

For more information, get Interpretation Bulletin IT-75, Scholarships, Fellowships, Bursaries, Prizes, and Research Grants.

LUMP-SUM PAYMENTS

Include lump-sum payments from pensions and deferred profit-sharing plans (box 18 of your T4A slips and box 22 of your T3 slips).

RETIRING ALLOWANCES ( SEVERANCE PAY)

A retiring allowance includes an amount paid as severance pay. Include the amount shown in box 26 of your T4A slips.

Also, include any retiring allowance included in the amount in box 26 of your T3 slips. Details regarding the retiring allowance will be shown in box 36 and in the footnotes area of the slips.

NOTE
You may be able to deduct legal fees you paid to get a retiring allowance. See line 232 for details.

TAX TIP
You may be able to transfer part or all of your retiring allowances to your registered retirement savings plan (RRSP). See "Transfers" on page 24. However, if you make this transfer, you may have to pay minimum tax. See "Minimum tax" on page 43 for details.

DEATH BENEFITS (OTHER THAN CANADA OR QUEBEC PENSION PLAN DEATH BENEFITS)

A death benefit is an amount you receive, after a person's death, for that person's employment service. It is shown in box 28 of your T4A slips or box 35 of your T3 slips. You may not have to pay tax on up to $10,000 of the benefit you received.

If you are the only one to receive a death benefit, report the amount you receive that is more than $10,000. Even if you do not receive all of the death benefit in one year, the total tax-free amount for all years cannot be more than $10,000.

To find out what to report if anyone else also received a death benefit for the same person, call our T.I.P.S. (Info-Tax) service. See the T.I.P.S. information at the end of this guide.

Attach a note to your return stating the amount of death benefits you received but did not include in your income.

REGISTERED EDUCATION SAVINGS PLANS (RESPS)

Include on line 130 the total taxable payments you received from an RESP (box 26 of your T3 slips).

Under proposed changes, starting in 1998, the subscriber to an RESP may be able to receive the income portion of payments from an RESP. For more details, get the information sheet called Registered Education Savings Plans.

OTHER INCOME

Also report the following amounts on line 130:

LINES 135 TO 143 - SELF-EMPLOYMENT INCOME (for Deemed residents and Non-residents electing under section 217)

Enter on the appropriate line your gross and net income or loss from self-employment. If you have a loss, show it in brackets. Include with your return a statement showing your income and expenses. For more information, contact the International Tax Services Office.

If your fiscal period does not end on December 31, 1997, the guide called Reconciliation of Business Income for Tax Purposes, will help you calculate the business income to report on your 1997 return. If you filed Form T1139, Reconciliation of 1996 Business Income for Tax Purposes, with your 1996 return, you have to complete the 1997 version of this form and attach it to your return.

NOTE
If you are a deemed resident, you may have to make Canada Pension Plan contributions on your self-employment earnings. See line 310 for details.

The following income tax guides contain additional information and forms you may need to help you calculate your self-employment income:

NOTE
If you are participating in the net income stabilization account (NISA) program and you are filing a paper return, use the envelope contained in the guide called Farming Income and NISA.

If you use your home for day care, the pamphlet called Using Your Home for Day Care has more information.

Generally, if you were a limited or non-active partner, you enter your net income or loss on line 122. However, if your net income or loss is from a rental operation, you enter it on line 126. If it is from a farming operation, enter it on line 141.

If you were an active partner and received a T5013 slip, Statement of Partnership Income, report the amount from box 18 on the line of your return shown in box 12. This is your share of the partnership's income or loss. Also report the partnership's gross income as shown in box 31. Attach the T5013 slip to your return. If you did not receive this

slip, you should attach the applicable self-employment form indicated above, or your financial statement.

If you have a tax shelter, see "Tax shelters" on page 14.

LINE 144 - WORKERS' COMPENSATION BENEFITS (for Deemed residents)

Enter the amount shown in box 10 of your T5007 slip. Claim a deduction on line 250 for the benefits you entered on line 144.

LINE 145 - SOCIAL ASSISTANCE PAYMENTS (for Deemed residents)

Enter the amount shown in box 11 of your T5007 slip, unless you lived with your spouse at the time either of you received the social assistance payments. In that case, the spouse with the higher net income on line 236 (without including these payments, or deducting the amounts on lines 214 or 235) has to report these payments, no matter whose name is on the slip.

If you and your spouse have the same net income, whoever received the payments has to report them. If you received a Relevé 5 slip from the province of Quebec, the instructions on the back of the slip explain how to report this income.

NOTE
You may not have to include certain social assistance payments you or your spouse received for being a foster parent or for caring for a disabled adult who lived with you. However, if the payments are for caring for your spouse or an individual related to you or your spouse, you or your spouse (whoever has the higher net income) will have to include them. For more information, contact the International Tax Services Office.

Claim a deduction on line 250 for the social assistance payments you entered on line 145.

LINE 146 - NET FEDERAL SUPPLEMENTS (for Deemed residents)

Enter the amount shown in box 21 of your T4A(OAS) slip.

If your net income before adjustments (line 234) is $53,215 or less, claim a deduction on line 250 for the net federal supplements you entered on line 146. If line 234 of your return is more than $53,215, contact the International Tax Services Office to find out how much you can deduct on line 250.

NET INCOME

LINE 206 - PENSION ADJUSTMENT (for Deemed residents and Non-residents electing under section 217)

Enter on line 206 the total of all amounts in box 52 of your T4 or T4 Short slips, or box 34 of your T4A slips.

Generally, this total represents the value of the benefits you earned in 1997 under a registered pension plan (RPP) or a deferred profit- sharing plan (DPSP).

Do not include the pension adjustment (PA) amount in your income, and do not deduct it on your return. Simply enter this amount on line 206.

We will use it to calculate your 1998 registered retirement savings plan (RRSP) deduction limit, which we will show on your Notice of Assessment for 1997. See line 208 for details.

If you have any questions about how your PA was calculated, ask your employer.

NOTE
If you are a deemed resident and you participated in a foreign pension plan in 1997, you may have to enter an amount on this line.

For details, contact the International Tax Services Office.

LINE 207 - REGISTERED PENSION PLAN (RPP) DEDUCTION (for Deemed residents and Non-residents electing under section 217)

Enter the total of all deductible amounts you contributed to your RPPs.

These amounts are included in box 20 of your T4 or T4 Short slip, in box 32 of your T4A slip, or on your union or RPP receipt.

You can deduct the total amount unless it is more than $3,500 and your information slip shows a past-service amount. If this is the case, get the income tax guide called RRSPs and Other Registered Plans for Retirement for information on how much you can deduct. You should also get that guide if you contributed to an RPP in a previous year and could not deduct part of the amount.

Generally you have to start receiving a pension from your RPP by the end of the year you turn 69. However, if, before March 6, 1996, your RPP already provided a specific starting date for your pension benefits, that date will remain in effect.

RECEIPTS - With the exception of your T4, T4 Short, and T4A slips, do not include your receipts with your return. However, you have to keep them in case we ask to see them.

NOTE
You cannot deduct contributions you made to pension plans in other countries, with two exceptions. Under the Canada-France Income Tax Convention and the Canada-Netherlands Income Tax Convention, you may be able to deduct, under certain circumstances, contributions to a pension plan. If you have contributed to a pension plan in either France or the Netherlands, contact the International Tax Services Office to find out if you can deduct the amount.

LINE 208 - REGISTERED RETIREMENT SAVINGS PLAN (RRSP) DEDUCTION (for Deemed residents, Non-residents and Non-residents electing under section 217)

This section gives general information on RRSPs. If you need more information after reading this section, get the income tax guide called RRSPs and Other Registered Plans for Retirement.

RECEIPTS - Attach to your return official receipts for all amounts you contributed from March 2, 1997, to March 1, 1998, including those you are not deducting on your 1997 return and those you are designating as Home Buyers' Plan repayments. See "Home Buyers' Plan (HBP) repayments" on page 25.

Also attach Schedule 7 if you have to complete it. See "Schedule 7, RRSP Contributions, Transfers, and Designations of Repayments Under the Home Buyers' Plan" on page 25.

You may have made contributions from January 1, 1997, to March 1, 1997, that you did not deduct on your 1996 return. If you did not attach the receipts and a properly completed Schedule 7 to your 1996 return, see "Undeducted RRSP contributions" on page 25.

We will accept a photocopy of a receipt only if the issuer certifies that it is a true copy. If you contributed to your spouse's plan, the receipt has to show your name as the contributor and your spouse's name as the annuitant.

MAXIMUM YOU CAN DEDUCT

The maximum you can deduct on line 208 is whichever of the following amounts is less:

YOUR RRSP CONTRIBUTIONS - This includes amounts you contributed to your own RRSP or an RRSP for your spouse based on your "1997 RRSP deduction limit." They also include transfers and amounts you are designating as Home Buyers' Plan (HBP) repayments. For more information about these subjects, see later in this section.

NOTE
Your RRSP contributions do not include the following amounts:

Generally, neither you nor your spouse can contribute to your RRSP after the end of the year you turn 69. However, if you were 70 or 71 at the end of 1997, you and your spouse were allowed to make contributions to your RRSP until the end of 1997. If an RRSP annuity contract you purchased before March 6, 1996, already specifies the amount, frequency, and specific starting date, that date will remain in effect.

You may no longer be able to contribute to your own RRSP, but still have an RRSP deduction limit that you have not used. If so, you can still contribute to an RRSP for your spouse (and deduct the contributions) as long as your spouse's age allows.

TRANSFERS - You may have received certain types of income and reported them on line 115, 129, or 130 of your 1997 return. If you contributed any of these amounts to your own RRSP on or before March 1, 1998, you can deduct this contribution, called a transfer, in addition to any RRSP contribution you make based on your "1997 RRSP deduction limit." Include the amounts you are transferring on lines 240 and 245 of Schedule 7.

For example, if you received a retiring allowance in 1997, you would report it on line 130 of your return. You can contribute to your RRSP up to the eligible part of that income, and deduct it as a transfer.

If you transfer amounts to an RRSP, you may have to pay minimum tax. See "Minimum tax" on page 43 for details.

NON-RESIDENTS AND NON-RESIDENTS ELECTING UNDER SECTION 217 - You can transfer certain Canadian-source amounts otherwise subject to withholding tax, to a registered retirement savings plan (RRSP), a registered pension plan (RPP), or a registered retirement income fund (RRIF) without having tax withheld. These amounts include payments out of an RPP, deferred profit-sharing plan, a RRIF, an RRSP, or a retiring allowance. The transfers have to be direct transfers, and you have to complete Form NRTA1, Authorization for Non-Resident Tax Exemption. For more information, contact the International Tax Services Office.

OVERCONTRIBUTIONS - If you contribute to an RRSP more than you can deduct, you may have to pay a special tax.

The income tax guide called RRSPs and Other Registered Plans for Retirement gives more details on contributions, deductions, transfers, and overcontributions.

1997 RRSP DEDUCTION LIMIT

We will show your 1997 RRSP deduction limit on your latest Notice of Assessment or Notice of Reassessment for 1996, or on Form T1028, Your RRSP Deduction Limit Statement for 1997.

If you do not have your notice or Form T1028, you can find out your limit for 1997 by calling our automated T.I.P.S. (RRSP) service, or by contacting the International Tax Services Office. See the T.I.P.S. information at the end of this guide.

If you would like to calculate your 1997 RRSP deduction limit, get the income tax guide called RRSPs and Other Registered Plans for Retirement.

NOTE
You can carry forward the part of your RRSP deduction limit that you do not use. The amount you can carry forward is called your unused RRSP deduction room. Your RRSP deduction limit includes any unused RRSP deduction room accumulated after 1990.

You can carry forward indefinitely your unused RRSP deduction room accumulated after 1990.

You may have earned income in a previous year for which you did not file a return. In order to update your RRSP deduction limit, you would have to file a return for that year.

SCHEDULE 7, RRSP CONTRIBUTIONS, TRANSFERS, AND DESIGNATIONS OF REPAYMENTS UNDER THE HOME BUYERS' PLAN

You have to complete this schedule and attach it to your return if any of the following applies. You:

There is an example of how to complete Schedule 7 on page 26. It is important that you complete this schedule, because the information you provide allows us to verify any claim for undeducted RRSP contributions on your future returns. This information will also enable us to tell you, on your Notice of Assessment or Reassessment for 1997, your undeducted RRSP contributions available for you to deduct on your 1998 return.

UNDEDUCTED RRSP CONTRIBUTIONS - You may have made a contribution to your own RRSP or an RRSP for your spouse that you did not deduct on any income tax return. This could happen if you made a contribution to your RRSP that is more than your RRSP deduction limit for the year. It could also happen if you chose not to claim an RRSP contribution you made in a year.

If you made contributions in the first 60 days of 1998 (January 1, 1998, to March 1, 1998) that you are not deducting on your 1997 return, be sure to complete Schedule 7 and include the contributions on line 245. Otherwise, we may reduce or disallow any claim for these contributions you may make on your return for a future year.

NOTE
If you made RRSP contributions from March 1, 1996, to March 1, 1997, that you did not deduct on your 1996 return, you should have filed a completed Schedule 7 with your 1996 return. If you did not, you should submit a completed copy of a 1996 Schedule 7 to the International Tax Services Office. See "How do you change your return?" on page 11 for details. However, if either of the following applies, contact the International Tax Services Office:

If you do not have your 1996 Notice of Assessment or Notice of Reassessment, you can find out if you have undeducted RRSP contributions for 1996 by calling our automated T.I.P.S. (RRSP) service. See the T.I.P.S. information at the end of this guide.

INCOME TRANSFERRED - Include on line 245 of Schedule 7 all eligible amounts you reported on lines 115, 129, or 130 of your 1997 return and contributed to your own RRSP on or before March 1, 1998. Enter this amount on line 240 of Schedule 7 as well. See "Transfers" earlier in this section.

HOME BUYERS' PLAN (HBP) REPAYMENTS - If you withdrew funds from your RRSP under the HBP in 1995, you have to make your first annual repayment on or before March 1, 1998. If you withdrew funds in 1996, you have to make your first annual repayment on or before March 1, 1999. If you withdrew funds in 1997, you have to make your first annual repayment on or before February 29, 2000. Do not make the repayment to us.

NON-RESIDENTS AND NON-RESIDENTS ELECTING UNDER SECTION 217 - If you ceased to be a resident of Canada after you bought or built a qualifying home with funds you withdrew under the Home Buyers' Plan, contact the International Tax Services Office for the special rules that apply to you.

If you participated in the HBP and withdrew funds in 1995 or earlier, you should have received a Home Buyers' Plan Statement of Account for 1997 from us in the fall of 1996. The statement will show the amount you have to repay to your RRSP for 1997. Your statement will also confirm the total amount you have repaid to date.

NOTE
If you have not repaid the amount indicated on your statement of account on or before March 1, 1998, you have to include an amount in income. See line 129 for details.

Enter on line 246 of Schedule 7 the total of the RRSP contributions you made to your own RRSP from January 1, 1997, to March 1, 1998, that you want to designate as repayments under the HBP for 1997. Do this only if you did not deduct them or designate them as repayments on your 1996 return, and they were not refunded to you. YOU CANNOT DEDUCT ON YOUR RETURN ANY RRSP CONTRIBUTION YOU DESIGNATE AS AN HBP REPAYMENT ON SCHEDULE 7.

If you would like more information, get the pamphlet called Home Buyers' Plan (HBP).

EXAMPLE
Kristen made contributions of $1,000 to her RRSP on August 14, 1997, and $100 on January 19, 1998, February 11, 1998, and March 1, 1998. Kristen's 1997 RRSP deduction limit, shown on her 1996 Notice of Assessment, is $900. She did not have any undeducted RRSP contributions from 1996.

In addition, Kristen did not transfer any eligible income to her RRSP, and she did not have to designate a Home Buyers' Plan repayment for 1997. Kristen completes her Schedule 7 as follows:

Undeducted RRSP contributions from your 1996 Notice of Assessment or Notice of Reassessment 0 00 1
-----------------------------------------------------------------------
RRSP contributions made from March 2, 1997, to March 1, 1998 245 + 1,300 00 2
-----------------------------------------------------------------------
Add lines 1 and 2 = 1,300 00 3
-----------------------------------------------------------------------
RRSP contributions made from January 1, 1997, to March 1, 1998, you are designating as your HBP repayment (do not include any amounts that you will be including on lines 6 and 7 below) 246 - 0 00 4
-----------------------------------------------------------------------
RRSP contributions available to deduct for 1997 (line 3 minus line 4) = 1,300 00 5
-----------------------------------------------------------------------
Deduction you are claiming for 1997 for contributions you made to your RRSP or your spouse's RRSP based on your 1997 RRSP deduction limit 900 00 6
-----------------------------------------------------------------------
Eligible income reported on line 115, 129, or 130 that you transferred to your RRSP 240 + 0 00 7
-----------------------------------------------------------------------
Add lines 6 and 7 (the total cannot exceed the amount on line 5) Enter this total on line 208 of your return. = 900 00 > - 900 00 8
-----------------------------------------------------------------------
Undeducted RRSP contributions available to carry forward to 1998: Line 5 minus line 8 = 400 00 9
-----------------------------------------------------------------------

Kristen enters $900 on line 208 of her 1997 return, and attaches all $1,300 worth of her receipts and the completed Schedule 7 to her return. Kristen also has undeducted RRSP contributions of $400 that will be shown on her 1997 Notice of Assessment.

NOTE
When Kristen completes her 1998 income tax return, she will enter $400 on line 1 of the Schedule 7 that she will file with that return, in order to claim a deduction for those contributions.

LINE 209 - SASKATCHEWAN PENSION PLAN DEDUCTION (for Deemed residents, Non-residents and Non-residents electing under section 217)

You may be able to deduct contributions for 1997 to the Saskatchewan Pension Plan (SPP). You can deduct whichever of the following three amounts is least:

RECEIPTS - Attach your receipts to your return.

NOTE
You can only claim amounts you contributed (or your spouse contributed for you) to your own plan. Only your spouse can claim amounts you or your spouse contributed to your spouse's plan.

LINE 212 - ANNUAL UNION, PROFESSIONAL, OR LIKE DUES (for Deemed residents and Non-residents electing under section 217)

Enter the total of the following amounts:

Annual membership dues do not include initiation fees, special assessments, or charges for anything other than the organization's ordinary operating costs. You cannot claim charges for pension plans as membership dues even if your receipts show them as dues. For more information, get Interpretation Bulletins IT-103, Dues Paid to a Union or to a Parity or Advisory Committee, and IT-158, Employees' Professional Membership Dues.

The amount you paid, as shown in box 44 of your T4 or T4 Short slip or on your receipt, includes any goods and services tax/harmonized sales tax (GST/HST).

SEE PRINTED COPY FOR FOR FORM:

TAX TIP
You may be eligible for a rebate of any GST/HST you paid as part of your dues. See line 457 for details.

RECEIPTS - With the exception of your T4 or T4 Short slip, do not include your receipts with your return. However, you have to keep them in case we ask to see them.

LINE 214 - CHILD CARE EXPENSES (for Deemed residents, Non-resident and Non-residents electing under section 217)

You may be able to claim expenses you (or your spouse, if you have one) paid for someone to look after your children who, at any time in 1997, either were under 16 or had a mental or physical infirmity. The expenses must have been paid so that you (or your spouse) could do one of the following in 1997:

To make your claim, get Form T778, Child Care Expenses Deduction for 1997. However, if you claimed child care expenses on your 1996 return, the tax package we mailed to you should include this form. Attach a completed Form T778 to your return.

TAX TIP
You may be able to claim payments you made to a boarding school, sports school, or camp. For details, see Form T778.

NON-RESIDENTS AND NON-RESIDENTS ELECTING UNDER SECTION 217 - You can only deduct child care expenses if you meet the criteria outlined on Form T778 and the expenses were paid to a resident of Canada for services provided in Canada.

LINE 215 - ATTENDANT CARE EXPENSES (for Deemed residents)

Under proposed changes, the $5,000 limit has been eliminated on claims for expenses you paid for attendant care that allowed you to earn certain income. This includes income from employment or self- employment, a training allowance you received under the National Training Act for taking an occupational training course, and a research grant you received for conducting research. To calculate the amount you can claim, complete Form T929, Attendant Care Expenses.

For more information, call our T.I.P.S. (Info-Tax) service. See the T.I.P.S. information at the end of this guide. You also can get the guide called Information Concerning People with Disabilities, which contains Form T929.

RECEIPTS - Do not include your receipts or Form T929 with your return. However, you have to keep them in case we ask to see them.

LINE 217 - BUSINESS INVESTMENT LOSS (for Deemed residents, Non- residents and Non-residents electing under section 217)

A business investment loss is a special type of capital loss. For instance, such a loss can occur when you dispose of shares or certain debts of a small business corporation.

If you incurred a business investment loss, get the income tax guide called Capital Gains for details on how to complete line 217 and line 228. This line is located to the left of line 217.

If you have a tax shelter, see "Tax shelters" on page 14.

NON-RESIDENTS AND NON-RESIDENTS ELECTING UNDER SECTION 217 - A business investment loss applies to you only if the loss arises from property which would have been taxable to you in Canada.

LINE 219 - MOVING EXPENSES (for Deemed residents and Non-residents)

DEEMED RESIDENTS - Generally, you cannot deduct moving expenses. However, if you were a full-time student during 1997 and you moved to start a job or a business, or to attend a post-secondary educational institution, you may be able to deduct the expenses.

NON-RESIDENTS - You cannot deduct moving expenses unless you were a full-time student during 1997. If this is your situation, contact the International Tax Services Office for the special rules that apply to you.

HOW TO CLAIM

Get Form T1-M, Claim for Moving Expenses. You have to complete Form T1-M to determine how much you can deduct.

NOTE
If you moved in 1996 but could not claim all your moving expenses in that year, you can claim the remaining expenses against income you earned in 1997 at the new location.

RECEIPTS - Do not include your receipts or Form T1-M with your return. However, you have to keep them in case we ask to see them.

LINE 220 - SUPPORT PAYMENTS (for Deemed residents, Non-residents and Non-residents electing under section 217)

The term "support" used in this section replaces the former references to "alimony" and "maintenance." It refers to both spousal and child support.

Enter on line 230 the total amount of spousal and child support you paid in 1997. Enter on line 220 the deductible amount. For information about non-deductible amounts, see "Child support" later in this section.

Generally, you can deduct support payments, if all of the following conditions are met:

NOTE
There are exceptions to these conditions. If you separated in 1997, or if you do not know whether the payments you made are deductible, get the pamphlet called Support Payments.

You may have to report as income any reimbursement you received under a court order for alimony or maintenance payments. For details, get the pamphlet called Support Payments.

CHILD SUPPORT

Generally, you cannot deduct from your income child support that becomes payable after April 30, 1997, under a court order or written agreement dated May 1, 1997, or later. There may be an exception if your order or agreement recognizes such payments you made before May 1, 1997. For more information, see the pamphlet called Support Payments.

You can deduct from your income amounts paid that became payable under orders and agreements dated before May 1, 1997, unless one of the following applies:

NOTE
You may have to pay both child support that is not deductible under the new rules and deductible spousal support. If so, and your child support is in arrears, you will not be able to deduct any support payments until you pay all of the required child support.

You may have to register your court order or written agreement by using Form T1158, Registration of Family Support Payments. For more information, see the pamphlet called Support Payments, which includes this form.

RECEIPTS - Do not include your receipts or cancelled cheques, or your court order with your return. However, you have to keep them in case we ask to see them.

TAX TIP
If your court order or written agreement was signed in 1997, and it mentions the payments you made in 1996, you can ask us to adjust your 1996 return to claim those payments. See "How do you change your return?" on page 11.

LINE 221 - CARRYING CHARGES AND INTEREST EXPENSES (for Deemed residents)

You may be able to claim carrying charges and interest you paid to earn income from investments. To make your claim, complete Part IV of Schedule 4.

CARRYING CHARGES

Carrying charges include any of the following:

You cannot deduct on line 221 any brokerage fees or commissions you paid when you bought or sold securities. Instead, you use these costs when you calculate your capital gain or capital loss. For more information, get the income tax guide called Capital Gains.

CARRYING CHARGES FOR FOREIGN INCOME - If you have carrying charges for Canadian and foreign investment income, identify them separately on Schedule 4, according to the percentage that applies to each investment.

INTEREST EXPENSES

You can usually deduct the interest you paid on money you borrowed to earn investment income (such as interest or dividends, but not including capital gains). Generally, if you no longer use the borrowed money to earn income, you can no longer deduct the interest you paid on that money. However, if you no longer use the borrowed money to earn investment income in 1997, and any part of the borrowed money has been lost because the value of the property has declined, you may be able to deduct all or a part of the interest you paid on that money. For details, contact the International Tax Services Office.

NOTE
You cannot deduct the interest you paid on money you borrowed to contribute to a registered retirement savings plan (RRSP).

CANADA SAVINGS BONDS (CSBs) - When you buy bonds through payroll deductions, you pay an interest charge. You can claim this amount on line 221.

EXAMPLE
Michael bought $1,000 of Series 51 CSBs through payroll deductions. The total amount deducted from his pay for the bond was $1,013.32 (composed of the $1,000 face value of the bond plus $13.32 he paid in interest). Michael can claim the $13.32 on line 221.

POLICY LOAN INTEREST - To claim interest you paid during 1997 on a policy loan made to earn income, have your insurer complete Form T2210, Verification of Policy Loan Interest by the Insurer, on or before April 30, 1998.

RECEIPTS - Do not include your receipts or Form T2210 with your return.

However, you have to keep them in case we ask to see them.

If you have a tax shelter, see "Tax shelters" on page 14.

LINE 224 - EXPLORATION AND DEVELOPMENT EXPENSES (for Deemed residents, Non-residents and Non-residents electing under section 217)

If you invested in a petroleum, natural gas, or mining venture in 1997, but did not participate actively, you can deduct your expenses on this line. If you participated actively, follow the instructions at line 135.

HOW TO CLAIM

The statement has to identify you as a participant in the venture, show your allocation (the number of units you own, the percentage assigned to you, or the ratio of your units to those of the whole partnership), and give the name and address of the fund.

If you have a tax shelter, see "Tax shelters" on page 14.

RENOUNCED RESOURCE EXPENSES - If you received a T101 or T102 slip, use the instructions on the back of the slip to calculate your deduction. Attach to your return your slip and a note showing how you calculated your deduction.

DEPLETION ALLOWANCES - Claim these amounts on line 232.

If you have any questions about these expenses, contact the International Tax Services Office.

LINE 229 - OTHER EMPLOYMENT EXPENSES (for Deemed residents and Non- residents)

You may be able to deduct certain expenses you paid (including any goods and services tax/harmonized sales tax (GST/HST) you paid) to earn employment income if both of the following apply:

Most employees cannot claim employment expenses. You cannot deduct the cost of travel to and from work, or other expenses, such as clothes and tools.

You have to include with your return certain details about your employment expenses. Form T777, Statement of Employment Expenses, lists these details and will also help you calculate how much you can deduct. Attach a completed copy of this form to your return.

The income tax guide called Employment Expenses contains Form T777 and other forms you will need. The guide also explains the limits and conditions that apply when you claim employment expenses.

ARTISTS' EMPLOYMENT EXPENSES - If you are an artist who is an employee, you may be able to deduct expenses you paid to earn income from certain artistic activities. For details, get the income tax guide called Employment Expenses.

REPAYMENT OF SALARY OR WAGES - You can deduct salary or wages you reported as income on this year's return (or on a previous year's return) and which you repaid in 1997. This includes amounts you repaid for a period when you were entitled to receive wage-loss replacement benefits. However, you cannot deduct more than the income you received when you did not perform the duties of your employment.

LEGAL FEES - You can deduct legal fees you paid to collect or establish a right to salary or wages. However, you have to reduce your claim by any amount awarded to you, or any reimbursement you received for your legal expenses.

RECEIPTS - Do not include your receipts or forms with your return, except for Form T777. However, you have to keep them in case we ask to see them.

TAX TIP
You may be eligible for a rebate of any GST/HST you paid as part of your expenses. See line 457 for details.

LINE 232 - OTHER DEDUCTIONS (for Deemed residents, Non-residents and Non-residents electing under section 217)

Use this line to deduct the amounts explained in this section. Identify the deduction you are claiming in the space to the left of line 232. If you have more than one kind of deduction, or you want to explain your deduction more fully, attach a note to your return.

REPAYING INCOME AMOUNTS

If, in 1997, you repaid amounts (other than employment income, see "Repayment of salary or wages" under line 229) that you already reported as income, you may be able to deduct them on your 1997 return.

Attach receipts or other documents showing the amounts you repaid. You can claim repayments of any of the following:

EI BENEFITS - You may have received more benefits than you should have, and already repaid them to Human Resources Development Canada (HRDC). For example:

REFUND INTEREST - If we paid you interest on an income tax refund, you have to report the interest in the year you receive it, as explained at line 121 in this guide. If we then reassessed your return and you repaid some of the refund interest in 1997, you can deduct the amount you repaid.

LEGAL FEES

You can deduct any of the following:

However, you cannot claim legal costs to obtain a divorce or separation, to establish or revise a right to support payments, or to establish custody of a child.

For information on whether you can deduct other legal fees, get Interpretation Bulletin IT-99, Legal and Accounting Fees.

OTHER AMOUNTS YOU CAN DEDUCT

You can also deduct any of the following on this line:

If you have a tax shelter, see "Tax shelters" on page 14.

LINE 235 - SOCIAL BENEFITS REPAYMENT EMPLOYMENT INSURANCE (EI) BENEFITS (for Deemed residents, Non-residents and Non-residents electing under section 217)

You may have to repay part of the EI benefits (line 119) you received in 1997, if one of the following applies:

Beginning for 1997, you should complete one or both of the charts included with your T4E slip to calculate how much of your EI benefits you have to repay.

If you are a deemed resident and you also have to repay Old Age Security (OAS) pension benefits or net federal supplements that you received (see the next section), enter, on lines 7 and 13 of the following chart, the EI benefits that you have to repay.

OLD AGE SECURITY (OAS) PENSION BENEFITS AND NET FEDERAL SUPPLEMENTS

If you received OAS pension (line 113) or net federal supplements (line 146) and your net income before adjustments (line 234) is more than $53,215, you may have to repay all or a part of these benefits. Complete the following chart to calculate how much you have to repay.

NON-RESIDENTS AND NON-RESIDENTS ELECTING UNDER SECTION 217 - If you received OAS pension or net federal supplements in 1997, do not complete the following chart. Instead, enter on line 235 the amount from line 235 of your Old Age Security Return of Income.

OAS pension and net federal supplements repayment:

OAS pension from line 113 $ 1
Net federal supplements from line 146 + 2
Line 1 plus line 2 $ 3
OAS pension you repaid in 1997 and claimed on line 232 - 4
Line 3 minus line 4 (if negative, enter "0") $ 5
Net income before adjustments from line 234 $ 6
EI benefits repayment from line 10 of chart 1 or line 14 of chart 2 included with your T4E slip (if any) - 7
Line 6 minus line 7 $ 8
Base amount - 53,215.00 9
Line 8 minus line 9 (if negative, enter "0") 10
  x 15%
Multiply line 10 by 15% and enter the result on this line $ 11
OAS pension and net federal supplements repayment: Enter either line 5 or line 11, whichever is less. $ 12
Amount from line 7 above (if any) + 13
Total social benefits repayment payable (line 12 plus line 13) $ 14

Enter the amount from line 14 on lines 235 and 422 of your return.

NOTE
Recovery tax may have been withheld from your monthly OAS amount if you had an OAS repayment for 1996. The amount deducted is shown as "income tax deducted" in box 22 of your 1997 T4A(OAS) or T4A(P) slip. If you are a deemed resident, claim it on line 437, to reduce the amount of tax you owe when you file your 1997 return. Similarly, if you have an OAS repayment for 1997, tax may be withheld starting with your July 1998 OAS amount.

If you are a non-resident, or a non-resident electing under section 217, you should claim any recovery tax deducted from your OAS benefits on your Old Age Security Return of Income. Do not claim it on this return.

TAXABLE INCOME

LINE 237 - ACCUMULATED FORWARD-AVERAGING AMOUNT WITHDRAWAL (for Deemed residents)

If you made a forward-averaging election for 1987 or earlier, you may want to bring some or all of your accumulated averaging amount into income on your 1997 return.

To do this, get Form T581, Forward Averaging Tax Credits. Attach a completed copy to your return. You have to file your return and Form T581 by the filing due date.

NOTE
The return for 1997 is the last return on which you will be able to withdraw previously averaged amounts.

LINE 248 - EMPLOYEE HOME RELOCATION LOAN DEDUCTION (for Deemed residents)

Generally, you enter the amount shown as "Home Loan $xxx" in the footnotes area of your T4 slip. However, there is a limit to the amount you can deduct. To find out this limit for 1997, contact the International Tax Services Office.

LINE 249 - STOCK OPTION AND SHARES DEDUCTIONS (for Deemed residents and Non-residents electing under section 217)

If you have an amount in box 38 of your T4 slip, enter on this line the amount shown as "Stock-Option 110(1)(d) $xxx" or "Stock-Option 110(1)(d.1) $xxx" in the footnotes area.

LINE 250 - OTHER PAYMENTS DEDUCTION (for Deemed residents)

Generally, you can deduct the amount from line 147 of your return. This is the total of the Workers' Compensation payments, social assistance payments, and net federal supplements you entered on lines 144, 145, and 146.

NOTE
If your net income before adjustments (line 234) is more than $53,215 and you reported net federal supplements on line 146, you may not be entitled to claim the whole amount from line 147. Contact the International Tax Services Office to determine how much you can deduct.

LINE 251 - LIMITED PARTNERSHIP LOSSES OF OTHER YEARS (for Deemed residents and Non-residents electing under section 217)

If you had limited partnership losses in previous years that you have not already deducted, you may be able to claim part of these losses. For details, contact the International Tax Services Office.

You can carry forward limited partnership losses indefinitely. If you claim these losses, attach a statement showing a breakdown of your total losses and the year of each loss. You cannot use the amount in box 23 of your 1997 T5013 slip on your 1997 return.

LINE 252 - NON-CAPITAL LOSSES OF OTHER YEARS (for Deemed residents, Non-residents and Non-residents electing under section 217)

DEEMED RESIDENTS - Enter the amount of your unapplied non-capital losses you reported on your 1990 to 1996 tax returns, or your unapplied farming and fishing losses you reported on your 1987 to 1996 tax returns, that you want to apply in 1997. There are restrictions on the amount of certain farm losses that you can deduct each year. If you have a farming or fishing business, get the Farming Income, Farming Income and NISA, or Fishing Income tax guide for details.

If you need more information on losses, get Interpretation Bulletin IT-232, Losses - Their Deductibility in the Loss Year or in Other Years.

NOTE
You may want to carry back your 1997 non-capital or farming and fishing loss to your 1994, 1995, or 1996 return. To do this, use the Form T1A, Request For Loss Carry-Back, that is in the Farming Income, Farming Income and NISA, and Fishing Income tax guides, or get one from the International Tax Services Office. Attach a completed copy to your return. Do not file an amended return for the year or years to which you want to apply the loss.

NON-RESIDENTS AND NON-RESIDENTS ELECTING UNDER SECTION 217 - Contact the International Tax Services Office for the special rules that apply to you.

LINE 253 - NET CAPITAL LOSSES OF OTHER YEARS (for Deemed residents, Non-residents and Non-residents electing under section 217)

DEEMED RESIDENTS - Within certain limits, you can deduct your net capital losses of previous years that you have not already claimed. For details, get the income tax guide called Capital Gains.

NOTE
If you incurred a net capital loss in 1997, and you want to apply it against taxable capital gains you reported on your 1994, 1995, or 1996 return, get Form T1A, Request for Loss Carry-Back. Attach a completed copy to your return. Do not file an amended return for the year or years to which you want to apply the loss.

NON-RESIDENTS AND NON-RESIDENTS ELECTING UNDER SECTION 217 - Contact the International Tax Services Office for the special rules that apply to you.

LINE 254 - CAPITAL GAINS DEDUCTION (for Deemed residents)

You can claim a capital gains deduction for gains realized on qualified small business corporation shares and qualified farm property. For more details on this deduction, get the income tax guide called Capital Gains.

LINE 255 - NORTHERN RESIDENTS DEDUCTIONS (for Deemed residents)

To make your claim, use Form T2222, Northern Residents Deductions - 1997. For a list of the areas that qualify, get Form T4039, Northern Residents Deductions - Places in Prescribed Zones.

You can get both of these forms from any tax centre or tax services office, including the International Tax Services Office.

LINE 256 - ADDITIONAL DEDUCTIONS (for Deemed residents, Non-residents and Non-resident electing under section 217)

INCOME EXEMPT UNDER A TAX TREATY

You can claim a deduction for foreign income you included on your return. For example, under the Canada-U.S. income tax treaty, child support payments received from a U.S. resident are tax-free in Canada.

If you received foreign income and you do not know whether it is tax- free in Canada, contact the International Tax Services Office.

NOTE
You can deduct the amount of U.S. social security benefits you reported on line 115, because it is tax-free in Canada. However, see the next paragraph for new rules that will apply. You cannot claim any credit for U.S. tax withheld on these benefits.

If you are a deemed resident of Canada, under proposed changes to the Canada-U.S. tax treaty you will be able to claim a deduction for only 15% of your U.S. social security benefits. However, these payments will no longer be subject to U.S. withholding tax.

These changes will affect all payments made in 1996 and later taxation years, but will be applied to payments and returns only after the Canadian and U.S. governments approve the changes. After they have been approved, we will calculate and send you any refund for 1996 and 1997 to which you will be entitled.

For the 1996 and 1997 taxation years, we will not charge any additional tax that may result from these changes.

VOW OF PERPETUAL POVERTY

If you are a member of a religious order and have taken a vow of perpetual poverty, you can deduct the amount of earned income and pension benefits that you have given to the order. Attach a letter from your order or your employer stating that you have taken a vow of perpetual poverty.

EMPLOYMENT WITH A PRESCRIBED INTERNATIONAL ORGANIZATION

You can claim a deduction for your net employment income from certain international organizations, such as the United Nations and its Specialized Agencies, that you reported on this return. Net employment income is your employment income from these agencies minus the related employment expenses that you are claiming.

NON-REFUNDABLE TAX CREDITS

Non-refundable tax credits reduce the amount of income tax you owe. However, if the total of these credits is more than the amount you owe, you will not get a refund for the difference.

The information at lines 300 to 306 explains, in general, how to claim personal amounts. For more details, get Interpretation Bulletin IT-513, Personal Tax Credits.

DEEMED RESIDENTS - You can claim all the non-refundable tax credits that apply to you.

NON-RESIDENTS - You can claim the non-refundable tax credits on lines 316, 323 (other than the education amount), and 349 if they apply to you. You can claim the other applicable non-refundable tax credits if you have included at least 90% of your 1997 net world income on line 236 of your return.

To determine your allowable amount of non-refundable tax credits, complete Schedule 12, Statement of World Income, and Schedule 13, Allowable Amount of Non-Refundable Tax Credits. You will find these schedules included in this guide.

NOTE
For us to allow full non-refundable tax credits, you have to attach a completed Schedule 12 to your return.

NON-RESIDENTS ELECTING UNDER SECTION 217 - If you have included at least 90% of your 1997 net world income on line 236 of your return, you can claim all of the non-refundable tax credits that would apply to you if you had been resident in Canada throughout 1997.

If you do not meet this 90% rule, the total amount of non-refundable tax credit you can claim is limited to 17% of the section 217 income that was paid or credited to you in 1997. To determine your allowable amount of non-refundable tax credits, complete Schedule 12, Statement of World Income, and Schedule 13, Allowable Amount of Non-Refundable Tax Credits.

NOTE
For us to allow full non-refundable tax credits, you have to attach a completed Schedule 12 to your return.

AMOUNTS FOR NON-RESIDENT DEPENDANTS (LINES 303 AND 306)

You may be able to claim a personal amount for certain dependants who live outside Canada, if they depended on you for support. You may be able to make this claim for your spouse (line 303), or for your or your spouse's children and grandchildren who were born in 1979 or earlier and who were mentally or physically infirm (line 306). You cannot claim an amount for any other relatives who lived outside Canada for all of 1997.

If your spouse, or your or your spouse's children or grandchildren already have enough income or assistance for a reasonable standard of living in the country in which they live, we do not consider them to depend on you for support. Also, we do not consider gifts you send them to be support.

HOW TO CLAIM

LINE 300 - BASIC PERSONAL AMOUNT (for Deemed residents, Non-residents and Non-residents electing under section 217)

Claim the basic personal amount of $6,456.

LINE 301 - AGE AMOUNT (for Deemed residents, Non-residents and Non- residents electing under section 217)

If you were 65 or older on December 31, 1997, and your net income (line 236 of your return) is:

AGE AMOUNT

Maximum claim $ 3,482.00 1
Your net income from line 236 $ 2
Base amount - 25,921.00 3
Line 2 minus line 3 $ 4
  x 15% 5
Multiply line 4 by 15% and enter the result on this line - 6
Line 1 minus line 6 (if negative, enter "0") $ 7

Enter the amount from line 7 on line 301 of your return.

DATE OF BIRTH - Be sure to enter your date of birth in the Identification area on page 1 of your return.

TAX TIP
If you do not need all of your age amount to reduce your federal income tax to zero, you can transfer any unused amount to your spouse. See line 326 for details.

You may be able to claim all or part of your spouse's age amount. See line 326 for details.

LINE 303 - SPOUSAL AMOUNT

If you supported your spouse (as defined on page 12) in 1997, you may be able to claim a spousal amount. If your spouse's net world income (see the next section) is:

NET WORLD INCOME OF SPOUSE

If your spouse is a deemed resident, your spouse's net world income is the amount from line 236 of your spouse's return, or the amount it would be if your spouse completed a return. If your spouse is a non- resident, your spouse's net world income is your spouse's net income for 1997 from sources both inside and outside Canada.

If you were living with your spouse on December 31, 1997, you have to use your spouse's net world income for the whole year. This applies even if you got married in 1997, or if you separated and got back together in 1997.

If you separated in 1997 because of a breakdown in your relationship, and were not back together on December 31, 1997, you only have to reduce your claim by your spouse's net world income before the separation. For a common-law spouse, you also have to be separated for at least 90 days. There are exceptions to these conditions if you were required to make support payments to your spouse or former spouse. Get the pamphlet called Support Payments for information you will need to prepare your return correctly.

TAX TIP
If you cannot claim the spousal amount (or you have to reduce your claim) because of dividends your spouse received from taxable Canadian corporations, you may be able to reduce your tax if you report all of your spouse's dividends. See line 120 for details.

LINE 305 - EQUIVALENT-TO-SPOUSE AMOUNT (for Deemed residents, Non- residents and Non-residents electing under section 217)

You may be able to claim all or part of the $5,380 equivalent-to-spouse amount if, at any time in the year, you were single, divorced, separated, or widowed and, at that time, you supported a dependant to whom all of the following applied. The dependant must have been:

Your dependant may live away from home while attending school. If the dependant ordinarily lived with you when not in school, we consider that dependant to live with you for the purposes of this credit.

You cannot claim an equivalent-to-spouse amount if any of the following applies:

NOTE
For 1997 and later years, if you were separated, but reconciled during the year, you can claim the equivalent-to-spouse amount if you otherwise qualify for it and do not claim the spousal amount (line 303) for the year.

HOW TO CLAIM

LINE 306 - AMOUNTS FOR INFIRM DEPENDANTS AGE 18 OR OLDER (for Deemed residents, Non-residents and Non-residents electing under section 217)

You can claim an amount for your or your spouse's dependent child or grandchild only if that child or grandchild was mentally or physically infirm and was born in 1979 or earlier.

NOTE
A child can include anyone who has become dependent on you, even if he or she is older than you.

You can also claim an amount for a person who meets all of the following conditions. The person must have been:

NOTE
A parent includes someone on whom you were completely dependent and who had custody and control of you when you were under 19 years of age.

If someone else is claiming an amount on line 305 for the same dependant, you cannot claim an amount on line 306 for that dependant. If you are claiming an amount on line 305 for a dependant who is infirm and age 18 or older, you may also be able to claim an amount on line 306 for that dependant.

If you can deduct support payments you made for your child, or you are required to make non-deductible child support payments for that child, you cannot claim an amount on line 306 for that child. However, if you separated in 1997 due to a breakdown in your relationship, some special rules apply. For details, get the pamphlet called Support Payments.

HOW TO CLAIM

The maximum amount you can claim is $2,353. In addition, the dependant's net world income can be up to $4,103 without reducing the amount of your claim.

CLAIMS MADE BY MORE THAN ONE PERSON - If you and another person support the same dependant, you can split the claim for that dependant. However, the combined claim that you and the other person make cannot be more than the maximum amount allowed for that dependant.

TAX TIP
If your dependant qualifies for the disability amount, you may be able to claim all or part of that amount. See line 318 for details.

LINE 308 - CANADA OR QUEBEC PENSION PLAN CONTRIBUTIONS THROUGH EMPLOYMENT (for Deemed residents and Non-residents electing under section 217)

Enter the total of the amounts, in dollars and cents, shown in boxes 16 and 17 of your T4 or T4 Short slips. Do not enter more than the maximum of $969. If you contributed to the Canada Pension Plan (CPP) in 1997, and you contributed less than $969, you may have to pay a supplementary amount due to a rate increase for 1997. See line 309 for details. If you contributed only to the Quebec Pension Plan (QPP) in 1997, line 309 does not apply to you.

If you contributed more than $969, enter the excess amount on line 448 of your return. We will refund this amount to you, or use it to reduce your balance owing. However, if you have to file a return for the province of Quebec and contributed more than $969, you claim the excess amount on your Quebec provincial return.

In some cases, you may have an overpayment, even if you contributed less than $969. For example, in 1997, you may have turned 18 or 70, or received a CPP or QPP retirement or disability pension. If so, we will prorate your contributions, calculate your overpayment, and show it on your Notice of Assessment. If you would like to calculate your CPP overpayment, get Form T2204, Calculation of Employee Overpayment of 1997 Canada Pension Plan Contributions and 1997 Employment Insurance Premiums.

You may be able to make CPP contributions on certain employment income for which no contributions (or less than the maximum) were made. For more information, see "Making additional CPP contributions" on page 36.

EMPLOYMENT IN QUEBEC - If you contributed to the QPP in 1997 but lived outside Quebec on December 31, 1997, treat the amount as if you contributed it to the CPP. Attach to your return the Relevé 1 slip your employer sent to you.

TAX-EXEMPT EMPLOYMENT INCOME EARNED BY A REGISTERED INDIAN - If you are a registered Indian with tax-exempt employment income, and there is no amount shown in box 16 of your T4 or T4 Short slip, you may be able to contribute to the CPP on this income. See line 310 for details.

LINE 309 - SUPPLEMENTARY CANADA PENSION PLAN (CPP) CONTRIBUTION PAYABLE (for Deemed residents and Non-residents electing under section 217)

Individuals who earned more than $3,500 in employment income in 1997 can claim a credit for the supplementary CPP contribution they have to pay. This payment is required because the CPP contribution rate was increased to 3% part of the way through 1997.

This line does not apply to individuals who contributed only to the Quebec Pension Plan (QPP) in 1997, because the contribution rate for the QPP was 3% for all of 1997.

Complete the following chart to determine the amount you have to pay.

CPP CONTRIBUTION PAYABLE

Total of amounts in box 26 (or box 14 if box 26 is blank) of your T4 and T4 Short slips (maximum $35,800)   $ 1
Subtract basic exemption   - 3,500.00 2
Subtotal (if negative, enter "0")   $ 3
Multiply line 3 by 3% and enter the result on this line (maximum $969.00)   $ 4
Multiply line 3 by 2.925% and enter the result on this line (maximum $944.78) $ 5  
Total of amounts in boxes 16 and 17 of your T4 and T4 Short slips $ 6  
Enter the amount from line 5 or 6, whichever is more   - 7
Line 4 minus line 7 (maximum $24.22) if negative, enter "0"   $ 8

If you do not have an amount in box 17 of any of your T4 or T4 Short slips, enter the amount from line 8 on lines 309 and 424 of your return.

If you have an amount in box 17 of any of your T4 or T4 Short slips:

Multiply the total of all amounts in box 16 only of your slips by 2.564% and enter the result on this line (maximum $24.22) $ 9 ==========

Enter on lines 309 and 424 of your return the amount from either line 8 or line 9, whichever is less.

LINE 310 - CANADA OR QUEBEC PENSION PLAN CONTRIBUTIONS PAYABLE ON SELF- EMPLOYMENT AND OTHER EARNINGS (for Deemed residents)

You can claim an amount for the Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) contributions that you have to make on self- employment earnings and on limited or non-active partnership income.

If you were a member of a partnership, make sure you include only your share of the net profit or loss.

If you have both wages and self-employment earnings, the amount of CPP or QPP contributions that you have to make on your self-employment earnings will depend on how much you have already contributed to the CPP or QPP as an employee. You cannot use your net business losses to reduce the CPP or QPP contributions that you paid on your employment earnings.

MAKING ADDITIONAL CPP CONTRIBUTIONS

You may not have contributed to the CPP for certain income you earned through employment, or you may have contributed less than you were allowed. This can happen if any of the following applies. You:

To make more CPP contributions for 1997, get Form CPT20, Election to Pay Canada Pension Plan Contributions. Attach a completed copy to your return, or send Form CPT20 to us separately before May 1, 1999. This form lists the eligible employment income on which you can make more CPP contributions. If the total of the amounts on lines 308 and 309 is less than $969.00, you can contribute 6% on any part of the income on which you have not already made contributions. The 1997 income limit for which you can contribute to the CPP is $35,800. Making additional contributions may increase the pension you receive later.

Complete Schedule 8 to calculate your additional CPP contributions. Include them on lines 310 and 421.

MAKING OPTIONAL QPP CONTRIBUTIONS

Include on line 310 any optional QPP contributions you made on your Quebec provincial income tax return, if you filed one. Also, attach a completed Schedule 8 to show how you calculated the amount.

HOW TO CALCULATE YOUR CONTRIBUTIONS

Complete Schedule 8 to calculate your CPP or QPP contributions payable, and attach it to your return.

If you do not have to file a tax return for the province of Quebec, use the amounts on lines 135 to 143 and line 122 of your return. Enter on line 310 and line 421 the required contributions in dollars and cents.

If you have to complete a tax return for the province of Quebec, use the amounts on line 134, lines 156 to 160, and line 173 of your Quebec provincial return. Enter on line 310 the amount of the contributions in dollars and cents.

NOTE
In 1997, you may have turned 18 or 70, or received a CPP or QPP retirement or disability pension. If so, we will prorate your CPP or QPP contributions. We will calculate the correct amount and show it on your Notice of Assessment.

LINE 312 - EMPLOYMENT INSURANCE PREMIUMS (for Deemed residents and Non- residents electing under section 217)

Enter the total, in dollars and cents, of the amounts shown in box 18 of all your T4, T4 Short, and T4F slips. Do not enter more than $1,131.

If you contributed more than $1,131, enter the excess amount on line 450 of your return. We will refund this amount to you, or use it to reduce your balance owing.

In some cases, you may have overpaid your Employment Insurance (EI) premiums even if you contributed less than $1,131. If so, we will calculate your overpayment and show it on your Notice of Assessment.

If you would like to calculate your overpayment, get Form T2204, Calculation of Employee Overpayment of 1997 Canada Pension Plan Contributions and 1997 Employment Insurance Premiums.

For 1997, if the total of the EI insurable earnings shown in box 24 of all your T4 and T4 Short slips (or box 14 if box 24 is blank) and box 16 of your T4F slips is $2,000 or less, we will refund your total EI premiums to you or use the amount to reduce your balance owing. In this case, do not enter your total EI premiums on line 312. Instead, enter the amount on line 450.

If your total EI insurable earnings are more than $2,000 and less than $2,059, we will refund a part of your EI premiums to you or use the amount to reduce your balance owing. In this case, enter your total EI premiums on line 312. We will calculate your refund and show it on your Notice of Assessment. If you would like to calculate your refund yourself, get Form T2204.

LINE 314 - PENSION INCOME AMOUNT (for Deemed residents and Non- residents electing under section 217)

You may be able to claim up to $1,000, if you reported pension or annuity income on line 115 or line 129 of your return. Therefore, make sure you have reported your pension or annuity income on the correct lines of your return.

NOTE
Only pension or annuity income you report on lines 115 or 129 qualifies for the pension income amount. Therefore, amounts such as Old Age Security benefits, Canada Pension Plan benefits, Quebec Pension Plan benefits, Saskatchewan Pension Plan payments, death benefits, and retiring allowances do not qualify.

Use the following chart to calculate your claim.

PENSION INCOME AMOUNT

Amount from line 115 of your return $ 1
Annuity payments from line 129 of your return (box 16 of your T4RSP slip) only if you were 65 or older on December 31, 1997, or you received the payments because of the death of your spouse + 2
Line 1 plus line 2 $ 3
Foreign pension income included on line 115 and deducted on line 256 $ 4
Income from a U.S. individual retirement account included on line 115 + 5
Foreign pension income included on line 115 and deducted on line 256 $ 4
Foreign pension income included on line 115 and deducted on line 256 $ 4
Line 4 plus line 5 - 6
Line 3 minus line 6 $ 7

Enter on line 314 of your return, $1,000 or the amount from line 7, whichever is less.

TAX TIP
If you do not need all of your pension income amount to reduce your federal income tax to zero, you can transfer any unused amount to your spouse.

You may be able to claim all or part of your spouse's pension income amount. See line 326 for details.

LINE 316 - DISABILITY AMOUNT (for Deemed residents, Non-residents and Non-residents electing under section 217)

You may be able to claim a disability amount of $4,233 if your doctor or optometrist certifies both of the following:

Under proposed changes, an audiologist can make the above certification starting February 19, 1997, for a hearing impairment if the above two conditions apply.

You may be markedly restricted in a basic activity of daily living if either:

To qualify for the disability amount, your ability to perform an activity of daily living has to be markedly restricted all or almost all of the time. If you are markedly restricted occasionally or part of the time, you do not qualify for this tax credit.

NOTE
If you receive a disability benefit (such as CPP or QPP disability benefits) it does not necessarily mean that you are eligible to claim this credit.

TAX TIP
If you or anyone else paid for an attendant or for care in a nursing home or other establishment because of your impairment, it may be more beneficial to claim the amounts paid as medical expenses instead of the disability amount. In some circumstances, both amounts may be claimed. See "Care by an attendant, or care in a nursing home, school, institution, or other establishment" on page 41 for more information.

HOW TO CLAIM

We will accept a photocopy of your Form T2201 only if the signature of your doctor, optometrist, or audiologist is an original, not a photocopy. For more information, get the guide called Information Concerning People with Disabilities. The guide also contains Form T2201.

If you are making a new application for this amount, we will now review your claim before we assess your return to determine whether you are eligible. Once we approve your claim, you will be able to claim this amount, as long as your circumstances do not change.

TAX TIP
If you do not need all of your disability amount to reduce your federal income tax to zero, you can transfer any unused amount to your spouse (see line 326) or another supporting person (see line 318).

You may be able to claim all or part of your spouse's (see line 326) or other dependant's (see line 318) disability amount.

LINE 318 - DISABILITY AMOUNT TRANSFERRED FROM A DEPENDANT OTHER THAN YOUR SPOUSE (for Deemed residents, Non-residents and Non-residents electing under section 217)

If you have a dependant who can claim the disability amount (see line 316) you may be able to claim all or part of this amount. You can claim the unused part of the disability amount for your dependant who lived in Canada or who was a deemed resident of Canada at any time in 1997 if any of the following applies:

If you can deduct support payments you made for your child, or you are required to make non-deductible child support payments for that child, you cannot claim a disability amount for your child. However, if you separated in 1997 due to a breakdown in your relationship, some special rules apply. For details, get the pamphlet called Support Payments.

TAX TIP
If you or anyone else paid for an attendant or for care in a nursing home or other establishment because of your dependant's impairment, it may be more beneficial to claim the amounts paid as medical expenses instead of the disability amount. In some circumstances, both amounts may be claimed. See "Care by an attendant, or care in a nursing home, school, institution, or other establishment" on page 41 for more information.

HOW TO CLAIM

UNUSED PART OF DEPENDANT'S DISABILITY AMOUNT

Dependant's disability amount $ 4,233.00 1
Total of amounts your dependant can claim on lines 300 to 314 + 2
Line 1 plus line 2 $ 3
Dependant's taxable income (line 260) - 4
Line 3 minus line 4 (if negative, enter "0") $ 5

Enter on line 318 of your return $4,233 or the amount from line 5, whichever is less.

If more than one person is making a claim for the same dependant, attach a note to your return including the name and social insurance number of anyone else making a claim. The total claimed for that dependant cannot be more than the amount on line 5 or $4,233, whichever is less.

You can claim this credit only if the spouse of the person with a disability is not already claiming the disability tax credit or any other non-refundable tax credit (other than medical expenses) for the person with a disability, and you supported that person.

LINE 323 - TUITION AND EDUCATION AMOUNTS (for Deemed residents, Non- residents and Non-residents electing under section 217)

You now claim your tuition and education amounts on this line. Complete Schedule 11, Tuition and Education Amounts, which includes lines 320 (Eligible tuition fees paid for 1997) and 322 (Education amount).

ELIGIBLE TUITION FEES

You can claim, on your 1997 return, the tuition fees paid for courses you took in 1997. You cannot claim other expenses, such as books, or board and lodging.

To qualify, the total tuition fees you paid for the year to any one educational institution had to be more than $100. You can claim tuition fees paid to any of the following:

DEEMED RESIDENTS - The above-mentioned educational institutions do not have to be located in Canada.

Under proposed changes, you can now claim fees, such as athletic and health services fees, paid in addition to your tuition for post- secondary courses. You can claim these fees if all full-time students had to pay them and you had a full-time course load, or if all part- time students had to pay them and you had a part-time course load. You cannot claim student association fees or the cost of goods of enduring value, such as equipment.

If your employer or your parent's employer paid your tuition fees, you can only claim them if the amount paid is included in your income or your parent's income. If your tuition fees are paid by a federal or provincial job training program, and no related amount is included in your income, the fees do not qualify for this credit.

Under proposed changes, if your fees are paid (or you are entitled to be reimbursed for them) under a federal program to assist athletes, you cannot claim the fees unless the payment or reimbursement has been included in your income.

FORMS

You can get these forms from the International Tax Services Office. You can also get Form TL11B from your flying school or club.

EDUCATION AMOUNT

Under proposed changes, you can claim $150 for each whole or part month in 1997 that you were enrolled in a qualifying educational program.

In most cases, you have to be enrolled as a full-time student. You must have a Form T2202, Education Amount Certificate for Full-Time and Part-Time Students, or Form T2202A, Tuition and Education Amounts Certificate, completed by your educational institution, that confirms the period you were enrolled in a qualifying program.

You cannot claim the education amount for a program if any of the following applies. You:

NOTE
An allowance, benefit, grant, or reimbursement does not include any scholarship, fellowship, bursary, or prize you received, or any benefit you received under the Canada Student Financial Assistance Act, Canada Student Loans Act, or An Act respecting financial assistance for students of the Province of Quebec.

PART-TIME STUDENTS

If you are enrolled in a qualifying program but can only attend part- time because of a mental or physical impairment, you can claim an education amount. You have to complete Form T2202, Education Amount Certificate for Full-Time and Part-Time Students, to make your claim as a part-time student.

HOW TO CLAIM

Complete Schedule 11, Tuition and Education Amounts, to make your claim, and enter the result on line 323 of your return. You have to claim your tuition and education amounts first, even if someone else paid your fees.

TAX TIP
If you do not need all of your tuition and education amounts to reduce your federal income tax to zero, you may be able to transfer any unused amount to your spouse (see line 326) or to your or your spouse's parent or grandparent (see line 324).

You may be able to claim all or part of your spouse's (see line 326) or other dependant's (see line 324) tuition and education amounts.

Under proposed changes, if you do not need to use all of your tuition and education amounts (and you do not transfer them to your spouse or to your or your spouse's parent or grandparent) in the year, you can carry forward the unused part and claim it in a future year. However, if you carry forward an amount, you will not be able to transfer it to anyone in a later year. Complete Schedule 11 to calculate the carry- forward amount.

TAX TIP
If you are transferring an amount to another person, do not transfer more than the person needs to reduce his or her federal income tax to zero, so you can carry forward more of your amounts to use in a later year.

RECEIPTS - Do not include your receipts or forms (other than Schedule 11) with your return. However, you have to keep them in case we ask to see them.

LINE 324 - TUITION AND EDUCATION AMOUNTS TRANSFERRED FROM A CHILD (for Deemed residents, Non-residents and Non-residents electing under section 217)

A student who does not need to claim all of his or her tuition and education amounts (line 323) to reduce his or her federal income tax to zero may be able to transfer the unused part to you if you are a parent or grandparent of that student or of that student's spouse. The maximum amount that can be transferred by each student is $5,000 minus the amount the student needs, even if there is still an unused part.

HOW TO CLAIM

To calculate the transfer amount and to designate you as the parent or grandparent who can claim this amount, the student has to complete Form T2202, Education Amount Certificate for Full-Time and Part-Time Students, or Form T2202A, Tuition and Education Amounts Certificate. If the tuition fees being transferred to you are not shown on the student's Form T2202 or T2202A, you should have a copy of the student's official tuition fees receipt.

STUDENT WITH A SPOUSE - If a student's spouse claims amounts on lines 303 or 326 for the student, you cannot claim the tuition and education amounts transfer. However, the student can designate that the spouse claim the transfer on line 326.

STUDENT CLAIMED AS A DEPENDANT - A parent or grandparent who claims the student as a dependant on line 305 or 306 is the only person who can claim the tuition and education amounts transferred from the student.

STUDENT NOT CLAIMED AS A DEPENDANT - The student has to choose the parent or grandparent who can claim the tuition and education amounts transfer. Only one person can claim the transfer from the student.

RECEIPTS - Do not include the student's forms or official tuition fees receipt with your return. However, you have to keep them in case we ask to see them.

LINE 326 - AMOUNTS TRANSFERRED FROM YOUR SPOUSE (for Deemed residents, Non-residents and Non-residents electing under section 217)

Your spouse (as defined on page 12) can transfer to you any part of the following amounts that he or she qualifies for but does not need to reduce his or her federal income tax to zero:

NOTE
Your spouse cannot transfer any unused amounts to you if you were separated because of a breakdown in your relationship for a period of 90 days or more that included December 31, 1997.

Use Schedule 2 to calculate your claim and attach a completed copy to your return. Be sure to show, in the Identification area on page 1 of your return, your marital status and your spouse's name and social insurance number or temporary taxation number.

RECEIPTS - Attach to your return your spouse's Form T2201, Disability Tax Credit Certificate. If you were (or your spouse was) allowed a disability amount in a previous taxation year for your spouse's condition, and your spouse still met the eligibility requirements in 1997, you can claim the disability amount without sending us another Form T2201. However, you have to send us a new one if the period stated on the certificate ended in 1996 or earlier.

Do not include any receipts or forms (other than Schedule 2) for your spouse's tuition or education amounts with your return. However, you have to keep them in case we ask to see them.

LINE 330 - MEDICAL EXPENSES (for Deemed residents, Non-residents and Non-residents electing under section 217)

You can claim medical expenses that were paid for any of the following persons:

NOTE
If you claim medical expenses for a dependant, other than your spouse, whose net world income is more than $6,456, see line 331 for more details.

Under proposed changes, there is a new, refundable tax credit for working individuals with low incomes and high medical expenses. See line 452 for more details.

You can claim medical expenses paid in any 12-month period ending in 1997 and not claimed in 1996. Generally, you can claim all amounts paid, even if they were not paid in Canada.

Your total expenses have to be more than either $1,614 or 3% of your net income (line 236), whichever is less.

TAX TIP
It may be better for the spouse with the lower income to claim the allowable medical expenses. Compare your credit with the credit your spouse would be allowed. You can make whichever claim you prefer.

ALLOWABLE MEDICAL EXPENSES

The following are some examples of medical expenses you can claim:

Under proposed changes, you also can claim the following amounts:

For more examples of allowable medical expenses, call our T.I.P.S. (Info-Tax) service. See the T.I.P.S. information at the end of this guide.

TRAVEL EXPENSES - If medical treatment is not available locally, you may be able to claim the cost of travelling to get the treatment somewhere else. Attach to your return your receipts and a statement listing your travel expenses.

REIMBURSEMENT OF AN ALLOWABLE MEDICAL OR DENTAL EXPENSE - You cannot claim the part of an expense for which you have been or can be reimbursed. However, you can claim all of the expense if the reimbursement is included in your income, such as a benefit shown on a T4 slip, and you did not deduct the reimbursement anywhere else on your return.

EXAMPLE
André was in the hospital while on a business trip to Mexico. He paid $2,800 in Canadian dollars for allowable medical expenses, which are generally not limited to those paid in Canada. He was reimbursed for $1,500 of these expenses by his employer's health care plan. This was included on his T4 slip. Therefore, André can claim the full $2,800.

CARE BY AN ATTENDANT, OR CARE IN A NURSING HOME, SCHOOL, INSTITUTION, OR OTHER ESTABLISHMENT

You may have paid for care by an attendant or care in an establishment for a person (including yourself) for whom you are claiming medical expenses. If so, you may be able to make one of the following claims:

NOTE
If the person qualifies for the disability amount (see line 316) Form T2201, Disability Tax Credit Certificate, can be used in place of a letter for any of the above claims.

PERSONS WHO QUALIFY FOR THE DISABILITY AMOUNT (LINE 316)

A doctor (or, for sight impairments, an optometrist) may certify that a person has a severe and prolonged mental or physical impairment that markedly restricts any of the person's basic activities of daily living.

Under proposed changes, an audiologist can make the above certification starting February 19, 1997, for a hearing impairment if the above conditions apply.

If the doctor, optometrist, or audiologist has properly completed a Form T2201, Disability Tax Credit Certificate, for the person, and the form has been submitted to us, you can make one of the following claims, but not both (compare them to determine which claim is better):

Under proposed changes, if you claim $10,000 ($20,000 in the year of death) or less that you paid for care by an attendant, you also can claim the disability amount for that person. See the next paragraph.

Under proposed changes, you cannot claim as a medical expense more than $10,000 ($20,000 in the year of death) that you paid for part-time care by an attendant. However, you still can claim the disability amount.

Under proposed changes, if you do not claim amounts paid for child care expenses (line 214), attendant care expenses (line 215), or care in a nursing home, school, institution, or other establishment as a medical expense for the person, you can claim $10,000 ($20,000 in the year of death) or less that you paid for care by an attendant as a medical expense, and also claim the disability amount (line 316 or 318) for that person.

HOW TO CLAIM

Calculate your allowable medical expenses as follows:

The following example explains how to calculate your claim.

EXAMPLE
Carol's only dependant is her husband. She has reviewed their medical bills and decided that the 12-month period ending in 1997 for which she will claim expenses is July 1, 1996, through June 30, 1997. The total of their allowable expenses for that period is $1,842, which she enters on line 330.

Her net income on line 236 of her return is $32,000. She calculates 3% of that amount as $960. Because that amount is less than $1,614, she enters $960 on the line below line 330, and subtracts that amount from $1,842. The result is $882, which she enters on line 332.

RECEIPTS - Attach your receipts to your return. Any receipts for attendant care paid to an individual should show the individual's name and social insurance number.

For claims where it is required, also attach a properly completed and certified Form T2201, unless a disability amount was allowed for the person in a previous taxation year and the person still met the eligibility requirements in 1997.

For more information on medical expenses, get Interpretation Bulletin IT-519, Medical Expense and Disability Tax Credits and Attendant Care Expense Deduction.

LINE 331 - MEDICAL EXPENSES ADJUSTMENT (for Deemed residents, Non- residents and Non-residents electing under section 217)

If you claimed medical expenses for a dependant (other than your spouse) whose net world income was more than $6,456, you have to reduce your medical expenses.

To calculate your adjustment, subtract the basic personal amount ($6,456) from the dependant's net world income (line 236 of his or her return) or the amount that would be the dependant's net world income if he or she completed a return. Multiply the result by 4. Complete this calculation for each dependant for whom you claimed medical expenses. Add all the amounts together, and enter the total on line 331 of your return.

TAX TIP
If the medical expenses adjustment you calculate for a dependant is more than the medical expenses you claimed for that dependant, it is not to your benefit to claim the medical expenses for that dependant.

LINE 335 (for Deemed residents, Non-residents and Non-residents electing under section 217)

If the amount on line 335 equals, or is more than, the amount on line 260, and is less than $29,591, enter "0" on line 420, and complete the rest of your return. In any other case, see line 338.

LINE 338 (for Deemed residents, Non-residents and Non-residents electing under section 217)

DEEMED RESIDENTS - To calculate your non-refundable tax credits, multiply the amount on line 335 by 17%. If you are not claiming charitable donations or government, cultural, or ecological gifts, enter the amount from line 338 on line 350 and go to "Refund or Balance owing" on page 43.

NON-RESIDENTS AND NON-RESIDENTS ELECTING UNDER SECTION 217 - To calculate your non-refundable tax credits, multiply the amount on line 335 by 17%. If you are not claiming charitable donations or government, cultural, or ecological gifts, enter the amount from line 338 on line 350. Then, complete Schedule 12, Statement of World Income, and Schedule 13, Allowable Amount of Non-Refundable Tax Credits, and go to "Refund or Balance Owing" on page 43.

LINE 349 - DONATIONS AND GIFTS

Enter your claim for charitable donations and government, cultural, and ecological gifts from the calculation on Schedule 9, which includes lines 340 (Allowable charitable donations and government gifts) and 342 (Cultural and ecological gifts).

ALLOWABLE CHARITABLE DONATIONS AND GOVERNMENT GIFTS

MAXIMUM YOU CAN CLAIM

You can claim whichever of the following is less:

Under proposed changes, the above amount includes gifts to Canada, a province, or a territory made in 1997 after February 18, 1997, other than those agreed to in writing before February 19, 1997. Include unclaimed gifts to Canada, a province, or a territory made before February 19, 1997, (or made in 1997 after February 18, 1997, if they were agreed to in writing before February 19, 1997) with your claim for "Cultural and ecological gifts" (see page 43). For the year a person dies and the preceding year, this limit is 100% of the person's net income.

TAX TIP
You can claim donations that your spouse made as long as your spouse does not claim them.

NOTE
If you are a member of a religious order and you have taken a vow of perpetual poverty, claim your deduction on line 256 of your return.

QUALIFIED DONEES

Only amounts you gave to the following qualify:

NOTE
You may want to make a MONETARY gift directly to the federal Debt Servicing and Reduction Account. If so, make it payable to the Receiver General and send it to: Place du Portage, Phase III, 11 Laurier Street, Hull QC K1A 0S5. Include a note asking that we apply your gift to this account. Public Works and Government Services Canada will send you a tax receipt. All such gifts will only be used to service the public debt.

DONATIONS OF NON-QUALIFYING SECURITIES
Under proposed changes, if you made a charitable donation of a non- qualifying security, you may not be able to claim a credit for the donation. For details, get the pamphlet called Gifts and Income Tax.

DONATIONS TO U.S. CHARITIES
If you are including U.S. income on your Canadian return, you can claim any donations to U.S. charities that would be allowed on a U.S. return.

Under proposed changes, the limit on the donations you can claim has been increased to 75% of the net U.S. income you report on your Canadian return.

CARRYING FORWARD DONATIONS

You do not have to claim on your 1997 return the charitable donations you made in 1997. You can carry them forward for up to five years, as long as you only claim them once.

CULTURAL AND ECOLOGICAL GIFTS

Enter the total of the following three amounts:

You may have to report any capital gain or loss on property that you donated. For details, see the income tax guide called Capital Gains.

Under proposed changes, if you donated a restriction (servitude, easement, or covenant) in respect of such land, the amount of the donation will be either the fair market value (FMV) of the restriction, or the reduction of the land's FMV caused by the restriction, whichever is more.

Unlike other donations, your claim for these types of gifts is not limited to the percentage specified for charitable donations and government gifts. You can choose the part of your donations you want to claim in 1997, and you can carry forward any unused part for up to five years. For more information, get the pamphlet called Gifts and Income Tax.

HOW TO CLAIM

You can claim a federal tax credit of 17% of the first $200 of your donations and gifts, and 29% of the balance. A credit for these donations and gifts can also reduce your provincial or territorial tax, any federal, provincial, or territorial surtaxes, plus your surtax for non-residents and deemed residents of Canada.

Complete Schedule 9, Donations and Gifts, to make your claim. Enter the result on line 349.

RECEIPTS - Attach to your return Schedule 9 and your official receipts, showing either your name or your spouse's name. You do not have to attach receipts for amounts shown in box 46 of your T4, T4 Short, or T4A slips, in box 36 of your T3 slips, in box 34 of your T5013 slips, or on financial statements showing an amount a partnership allocated to you.

You may have included with a previous return a receipt for a donation you are claiming for 1997. If so, attach a note indicating with which return you submitted the receipt.

We will not accept as proof of payment cancelled cheques, photocopies (unless the issuer certifies them to be true copies), credit card slips, pledge forms, or stubs.

If you need more details on donations and gifts, get Interpretation Bulletin IT-110, Gifts and Official Donation Receipts.

REFUND OR BALANCE OWING

Generally, the tax you have to pay is based on your taxable income (line 260). Use Schedule 1, Federal Tax Calculation, to determine your federal income tax, your federal non-resident and deemed resident surtax, and your federal individual surtax. For details, see "Schedule 1, Federal Tax Calculation," on page 48.

MINIMUM TAX

Read the following information to determine if minimum tax applies to you, and if you will need to complete Form T691, Calculation of Minimum Tax.

Minimum tax limits the tax advantage you can receive in a year from certain incentives. You have to pay minimum tax if it is more than the federal tax you calculate in the usual manner.

When calculating your taxable income for this tax, which does not apply to a person who died in 1997, you are allowed a basic exempt amount of $40,000.

Below are the most common situations that may make you have to pay minimum tax:

A. You claimed any of the following tax credits:

B. You reported a taxable capital gain on line 127.

C. You claimed any of the following:

In most cases, you can determine whether you have to pay this tax by totalling the deductions mentioned in paragraph C above and one-third of the taxable capital gain amount on line 199 of Schedule 3. If the total is $40,000 or less, you probably do not have to pay minimum tax. If the total is more than $40,000, you may have to pay this tax.

To calculate if you have to pay minimum tax, use Form T691, Calculation of Minimum Tax.

EXAMPLE
Sergio claimed a deduction in 1997 for transferring $50,000 of his retiring allowance to his RRSP. Because this deduction is more than $40,000, Sergio may have to pay minimum tax. To find out, he should complete Form T691, Calculation of Minimum Tax.

TAX TIP
If you paid minimum tax on any of your 1990 to 1996 tax returns, but you do not have to pay minimum tax for 1997, you may be able to claim a credit against your 1997 taxes for all or part of the minimum tax you paid in those years. See "Line 427 - Minimum tax carry-over" on page 49 for details.

LINES 409 AND 410 - FEDERAL POLITICAL CONTRIBUTION TAX CREDIT (for Deemed residents)

Enter on line 409 the total you contributed during 1997 to a registered federal political party or a candidate for election to the House of Commons. Use the following chart to calculate your credit. However, if your total political contributions are $1,150 or more, enter $500 on line 410.

FEDERAL POLITICAL CONTRIBUTION TAX CREDIT

If your total federal contribution is $100 or less:

Your total contribution $     x 75 % =   $      1

Enter the amount on line 1 on line 410 of your return.

If your total federal contribution is more than $100 but not more than $550:

Your total contribution $
On the first   - 100.00  the credit is   $  75.002   
On the rest   $      x 50 % =  +      3
Line 2 plus line 3   $      4

Enter the amount on line 4 on line 410 of your return.

If your total federal contribution is more than $550:

Your total contribution $      
On the first   - 550.00  the credit is  $ 300.00  5
On the rest   $      x 33.33 % =  +   6
Line 5 plus line 6      $      7

Enter on line 410 of your return $500 or the amount from line 7, whichever is less.

RECEIPTS - Attach to your return your official receipts. You do not have to attach receipts for amounts shown in box 36 of your T5013 slips, or on financial statements showing an amount a partnership allocated to you.

LINE 412 - INVESTMENT TAX CREDIT (for Deemed residents and Non- residents electing under section 217)

You may be eligible for this credit if any of the following applies. You:

HOW TO CLAIM

Attach to your return a completed copy of Form T2038(IND), Investment Tax Credit (Individuals) 1996 and Subsequent Years. For more information on the investment tax credit, get one of the following income tax guides: Farming Income, Farming Income and NISA, or Fishing Income. All three guides also contain Form T2038(IND).

Under proposed changes, there is a time limit to complete and submit Form T2038(IND) for a qualifying expenditure. To be able to claim a credit for such an expenditure, you have to send the completed form to us no later than 12 months after the due date of your return for the year the expenditure arises.

TAX TIP
You may be able to reduce your federal individual surtax by any unclaimed investment tax credit, or claim a refund of your unused investment tax credit. For details, see lines 419 and 454.

LINES 413 AND 414 - LABOUR-SPONSORED FUNDS TAX CREDIT (for Deemed residents, Non-residents and Non-residents electing under section 217)

You may be able to claim a credit if you became the first registered holder of (acquired, or irrevocably subscribed to and paid for) an approved share of the capital stock of a prescribed labour-sponsored venture capital corporation at any time from January 1, 1997, to March 1, 1998.

If you became the first registered holder of an approved share from January 1, 1997, to March 1, 1997, and claimed the credit for it on your 1996 return, you cannot claim a credit for that share on your 1997 return.

If you became the first registered holder of an approved share from January 1, 1998, to March 1, 1998, you can claim a credit for that share either on your 1997 return or on your 1998 return, but not both.

Enter your net cost on line 413. Net cost is the amount you paid for your shares, minus any government assistance, other than federal or provincial tax credits on the shares. Enter the amount of the credit on line 414. The allowable credit cannot be more than 15% of the net cost, to a maximum of $525.

RECEIPTS - Attach to your return either a T5006 slip, Statement of Registered Labour-Sponsored Venture Capital Corporation Class A Shares, or an official provincial slip.

LINE 419 - FEDERAL INDIVIDUAL SURTAX (Deemed residents, Non-residents and Non-residents electing under section 217)

You have to pay a federal individual surtax of 3% of your basic federal tax after deducting any federal forward-averaging tax credit you are entitled to claim on your 1997 return. If your basic federal tax, minus your federal forward-averaging tax credit, is more than $12,500, you have to pay an extra surtax of 5% (for a total of 8%) on the amount over $12,500. Use Schedule 1 to calculate your federal individual surtax.

TAX TIP
If you can claim a foreign tax credit or investment tax credit, you may be able to use the unclaimed part of these credits to reduce the federal individual surtax you have to pay. For details, get Form T2209, Calculation of Federal Foreign Tax Credits, and Form T2038(IND), Investment Tax Credit (Individuals) 1996 and Subsequent Years.

LINE 421 - CANADA PENSION PLAN CONTRIBUTIONS PAYABLE ON SELF-EMPLOYMENT AND OTHER EARNINGS (for Deemed residents)

Enter the Canada Pension Plan contributions you have to pay, from line 310 of your return.

If you have to complete a tax return for the province of Quebec, this line does not apply to you. You will enter on your Quebec provincial return the Quebec Pension Plan contributions you have to pay.

LINE 422 - SOCIAL BENEFITS REPAYMENT (for Deemed residents and Non- residents electing under section 217)

Enter the amount of social benefits you have to repay, from line 235 of your return.

NON-RESIDENTS ELECTING UNDER SECTION 217 - Enter only the amount of your Employment Insurance (EI) benefits repayment as calculated on the charts included with your T4E slip. Do not enter the amount of your Old Age Security pension or net federal supplements repayment.

LINE 424 - SUPPLEMENTARY CANADA PENSION PLAN (CPP) CONTRIBUTION PAYABLE (for Deemed residents and Non-residents electing under section 217)

Enter the CPP contribution you have to pay, as calculated under line 309 in this guide and claimed on line 309 of your return.

LINE 428 - PROVINCIAL OR TERRITORIAL TAX (for Deemed residents and Non- residents electing under section 217)

DEEMED RESIDENTS - This line applies to you only if you had income from a business with a permanent establishment in a province or territory in Canada in 1997. If this is your situation, complete Form T2203, Calculation of Tax for 1997 - Multiple Jurisdictions, to calculate the provincial or territorial tax you have to pay (except for Quebec tax) on this income. Attach a copy of the form to your return.

NON-RESIDENTS ELECTING UNDER SECTION 217 - This line applies to you only if you had income from employment in Canada in 1997, or from a business with a permanent establishment in a province or territory in Canada in 1997. If this is your situation, complete Form T2203, Calculation of Tax for 1997 - Multiple Jurisdictions, to calculate the provincial or territorial tax you have to pay (except for Quebec tax) on this income. Attach a copy of the form to your return.

LINE 437 - TOTAL INCOME TAX DEDUCTED (for Deemed residents, Non- residents and Non-residents electing under section 217)

Enter the total of the amounts shown in the "Income tax deducted" box from all of your information slips.

If you have to file a return for the province of Quebec, do not include any Quebec provincial income tax on this return.

If you do not have to file a return for the province of Quebec but you had Quebec provincial income tax withheld from your income, attach to your return your provincial information slip. Include these amounts on this line.

NOTE
If you paid foreign taxes, you have to complete Method B of Schedule 1, Federal Tax Calculation, to claim your foreign tax credit.

NON-RESIDENTS ELECTING UNDER SECTION 217 - If you received Old Age Security benefits in 1997, include the amount of non-resident tax shown in box 17 of your NR4-OAS slip. Do not include the amount of recovery tax shown in box 27 of the slip.

LINE 438 - TAX TRANSFER FOR RESIDENTS OF QUEBEC (for Deemed residents and Non-resident electing under section 217)

If you have to file a tax return for the province of Quebec and during 1997 you earned income, such as employment income, outside Quebec, tax may have been deducted for a province or territory other than Quebec. You can transfer, to the Province of Quebec, up to 45% of the income tax deducted on information slips issued to you by payers outside Quebec.

Enter the amount you want to transfer (up to the maximum) on line 438 of this return and on line 454 of your Quebec provincial return. If the taxable income on your provincial return is zero, no transfer is necessary.

LINE 440 - REFUNDABLE QUEBEC ABATEMENT (For Deemed residents, Non- residents and Non-residents electing under section 217)

The Quebec abatement is provided under the federal-provincial fiscal arrangement, in place of direct cost-sharing by the federal government.

It reduces your federal income tax, and may even give you a refund.

If you have to file a 1997 return for the province of Quebec, and you did not have a business with a permanent establishment outside Quebec, your refundable Quebec abatement is 16.5% of the amount on either line C or line F of Schedule 1, whichever applies.

If you have to file a 1997 return for the province of Quebec and you had a business with a permanent establishment in Quebec, use Form T2203, Calculation of Tax for 1997 - Multiple Jurisdictions, to calculate your abatement.

LINE 448 - CANADA PENSION PLAN OVERPAYMENT (for Deemed residents and Non-residents electing under section 217)

If you contributed more than you had to, as explained at line 308, enter the difference on line 448. We will refund the excess contributions to you, or use them to reduce your balance owing. If you have to complete a tax return for the province of Quebec, this line does not apply to you. Claim the excess amount on your Quebec provincial return.

LINE 450 - EMPLOYMENT INSURANCE OVERPAYMENT (For Deemed residents and Non-residents electing under section 217)

If you contributed more than you had to, as explained at line 312, enter the difference on line 450. We will refund the excess amount to you or use it to reduce your balance owing.

NOTE
If you had to repay some of the Employment Insurance benefits you received, do not claim the repayment on this line. See line 232 for details on how to claim a deduction for the benefits you repaid.

LINE 452 - REFUNDABLE MEDICAL EXPENSE SUPPLEMENT (for Deemed residents)

Under proposed changes, you may be able to claim up to $500 for this new refundable tax credit if you have an amount at line 332, and all of the following apply. You:

In addition, the total of the following two amounts has to be $2,500 or more: You cannot claim this credit if the total of your net income (line 236) and your spouse's net income (if your spouse lived with you at the end of 1997, line 236 of your spouse's return, or the amount that would be your spouse's net income if your spouse completed a return) is $26,069 or more.

Complete Schedule 10, Refundable Medical Expense Supplement, and attach it to your return. You can claim both this credit and the amount for medical expenses on line 330 for the same expenses.

LINE 454 - REFUND OF INVESTMENT TAX CREDIT (for Deemed residents and Non-residents electing under section 217)

If you are eligible for an investment tax credit (line 412), based on expenditures made in 1997, you may be able to claim a refund of your unused investment tax credit.

Calculate the refundable part of your investment tax credit on Form T2038(IND), Investment Tax Credit (Individuals) 1996 and Subsequent Years. Attach a completed copy of the form to your return.

The refund you claim reduces the amount of credit available to you for other years.

LINE 456 - PART XII.2 TRUST TAX CREDIT (for Deemed residents)

Enter the amount shown in box 38 of your T3 slip.

LINE 457 - EMPLOYEE AND PARTNER GST/HST REBATE (for Deemed residents and Non-residents electing under section 217)

If you deducted expenses from your income as an employee (lines 212 or 229) or as a partner (lines 135 to 143), you may be eligible for a rebate of the GST/HST you paid on those expenses.

Generally, you can claim a rebate of the GST/HST you paid if either of the following applies:

To claim this rebate, get the publication called Guide and Form for Employee and Partner GST/HST Rebate. The guide lists the expenses that qualify. It also includes Form GST 370, Employee and Partner GST/HST Rebate, which you need to make your claim. Attach a completed copy of this form to your return, and enter on line 457 the rebate you are claiming.

NOTE
Generally, you have to include in income any rebate you receive, on the return for the year in which you receive it. For example, you may claim a rebate on your 1997 return. If we allow your claim, and assess that return in 1998, you have to report the rebate on your 1998 return.

You may have received a GST/HST rebate in 1997. If you did and you are an employee, see line 104. If you are a partner, contact the International Tax Services Office.

LINE 476 - TAX PAID BY INSTALMENTS (for Deemed residents, Non-residents and Non-residents electing under section 217)

Enter the total instalment payments you made for your 1997 taxes. We will be able to process your return faster if you correctly enter the instalment payments you made for 1997.

In February 1998, we will issue you either Form INNS1, Instalment Reminder, or Form INNS2, Instalment Payment Summary, that shows your total 1997 instalment payments that we have on record. If you made an instalment payment for your 1997 taxes that does not appear on this reminder or summary, also include that amount on line 476.

NON-RESIDENTS AND NON-RESIDENTS ELECTING UNDER SECTION 217 - If you disposed of taxable Canadian property in 1997, enter the amount of tax withheld on the disposition.

LINE 478 - FORWARD-AVERAGING TAX CREDIT (for Deemed residents)

If you are withdrawing some of your forward-averaging amount on line 237, enter on line 478 the total forward-averaging tax credit from Form T581, Forward Averaging Tax Credit. See line 237 for details.

LINES 484 AND 485 - REFUND OR BALANCE OWING (for Deemed residents, Non- residents and Non-residents electing under section 217)

Your refund or balance owing is the difference between your total payable (line 435) and your total credits (line 482).

If your total payable (line 435) is less than your total credits (line 482), enter the difference on line 484. This amount is your refund.

If your total payable (line 435) is more than your total credits (line 482), enter the difference on line 485. This amount is your balance owing.

If the difference is less than $2, you do not have to make a payment and you will not receive a refund.

LINE 484 - REFUND (for Deemed residents, Non-residents and Non- residents electing under section 217)

If you are expecting a refund for 1997, but our records show that you owe an amount, or are about to owe an amount for another year, we may keep some or all of your refund and apply it against the amount you owe.

We may also have to apply your income tax refund against certain outstanding government debts, such as Canada Student Loans, Employment Insurance benefit overpayments, Immigration loans, and training allowance overpayments. We may also apply your refund to satisfy a garnishment order under the Family Orders and Agreements Enforcement Assistance Act.

NOTE
You cannot transfer your refund to pay another person's balance owing.

DIRECT DEPOSIT

You can have your income tax refund, as well as your GST/HST credit and Child Tax Benefit payments (including any related provincial benefits) deposited directly into your account at a financial institution in Canada.

To START direct deposit, or to CHANGE information you already gave us, complete the Direct Deposit Request on page 4 of your return. You do not have to complete this area if you already have direct deposit service and the information you already gave us has not changed. YOUR

DIRECT DEPOSIT REQUEST WILL STAY IN EFFECT UNTIL YOU CHANGE THE INFORMATION OR CANCEL THE SERVICE.

If you are changing the account into which we deposit a payment, DO NOT CLOSE THE OLD ACCOUNT BEFORE WE DEPOSIT THE PAYMENT INTO THE NEW ACCOUNT. If your financial institution advises us that you have a new account, we may deposit your payments into the new account. If we cannot deposit a payment into your account, we will mail a cheque to you at the address we have on file.

If you want your Child Tax Benefit payments deposited into a different account, you will have to send us a completed Form T1-DD(1), Direct Deposit Request - Individuals. You can send it with your return or separately.

If you need help to complete the information on page 4 of your return, or to cancel direct deposit service for one or more of these payments, contact the International Tax Services Office.

LINE 485 - BALANCE OWING (for Deemed residents, Non-residents and Non- residents electing under section 217)

Attach TO THE FRONT OF YOUR RETURN a cheque or money order made out to the Receiver General. Do not mail cash. To help us credit your payment properly, please write your social insurance number or temporary taxation number on the BACK of your cheque or money order. Enter the amount of your payment on line 486.

Note
Another person's refund cannot be transferred to pay your balance owing.

Starting April 1, 1998, if you make a payment with a cheque that your financial institution does not honour, we may charge you a fee. Generally, this fee will be $15 for each returned cheque.

MAKING A PAYMENT ARRANGEMENT - If you cannot pay your balance owing on or before April 30, 1998, you can make a mutually acceptable payment arrangement by contacting the International Tax Services Office. We will still charge daily compound interest on any outstanding balance starting May 1, 1998, until you pay it in full.

TAX TIP
Even if you cannot pay all of your balance owing right away, you should still file your return on time. Then you will not have to pay a penalty for filing your return after the due date. See "What are the penalties if you file your return late?" on page 9 for details.

SCHEDULE 1, FEDERAL TAX CALCULATION

You can use either of the two methods (Method A or Method B) on Schedule 1 to calculate your federal tax. If you have a straightforward tax situation, use Method A. Otherwise, use Method B.

If you have to pay minimum tax, or if you are claiming an overseas employment tax credit, see either Form T691, Calculation of Minimum Tax, or Form T626, Overseas Employment Tax Credit Calculation, whichever applies, before completing Schedule 1.

METHOD A

LINE 445 - SECTION 217 TAX ADJUSTMENT (for Non-residents electing under section 217)

This adjustment may apply to you if you are electing under section 217.

If you are using Method A on Schedule 1, complete the chart below to calculate your adjustment.

SECTION 217 TAX ADJUSTMENT

Amount from line 16 of Schedule 12 $ 1
Amount from line 260 of your return 2
Line 1 minus line 2 (if negative, enter "0") $ 3
Amount from line A on Schedule 1 x 4
Multiply the amount on line 3 by the amount on line 4 $ 5
Enter the amount from line 1 / 6
Divide the amount on line 5 by the amount on line 6 $ 7

Enter the amount from line 7 on line 445 of Method A on Schedule 1.

NOTE
If you are claiming an investment tax credit or a labour-sponsored funds tax credit, the above calculation may change. If this is your situation, contact the International Tax Services Office for the special rules that apply.

LINE D - SURTAX FOR NON-RESIDENTS AND DEEMED RESIDENTS OF CANADA (for Deemed residents, Non-residents and Non-residents electing under section 217)

You pay this tax instead of a provincial or territorial tax. If you did not have a business with a permanent establishment in Canada, use Schedule 1 to calculate this surtax for non-residents and deemed residents of Canada.

If you had income from a business with a permanent establishment in Canada, you have to pay provincial or territorial tax on that income. Use Form T2203, Calculation of Tax for 1997 - Multiple Jurisdictions, to calculate your provincial or territorial tax (except Quebec). Attach a copy of the form to your return.

METHOD B

LINE 423 - TAX ADJUSTMENTS (for Deemed residents, Non-residents and Non-residents electing under section 217)

You may be allowed a tax adjustment if you reported either of the following:

If either of these situations applies to you, we will use this line to record any tax adjustment you are allowed.

LINE 425 - FEDERAL DIVIDEND TAX CREDIT (for Deemed residents)

If you reported dividends on line 120, enter the dividend tax credit on line 425 of Schedule 1. This amount is the total of the dividend tax credits from taxable Canadian corporations shown on the dividend information slips. If you did not receive dividend information slips, the dividend tax credit is 13.33% of the taxable amount of dividends from taxable Canadian corporations (see line 120).

NOTE
Foreign dividends do not qualify for this credit.

LINE 427 - MINIMUM TAX CARRY-OVER (for Deemed residents, Non-residents and Non-residents electing under section 217)

If you paid minimum tax on any of your 1990 to 1996 tax returns, but you do not have to pay minimum tax for 1997, you may be able to claim a credit against your 1997 taxes for all or part of the minimum tax you paid in those years. To calculate your claim, complete Parts 1, 2, and 8 of Form T691, Calculation of Minimum Tax. Attach to your return a completed copy of the form.

LINE 445 - SECTION 217 TAX ADJUSTMENT (for Non-residents electing under section 217)

This adjustment may apply to you if you are electing under section 217.

If you are using Method B on Schedule 1, complete the chart below to calculate your adjustment.

SECTION 217 TAX ADJUSTMENT

Amount from line 16 of Schedule 12 $ 1
Amount from line 260 of your return - 2
Line 1 minus line 2 (if negative, enter "0") $ 3
Amount from line 26 on Schedule 1 x 4
Multiply the amount on line 3 by the amount on line 4 $ 5
Enter the amount from line 1 / 6
Divide the amount on line 5 by the amount on line 6 $ 7

Enter the amount from line 7 on line 445 of Method B on Schedule 1.

NOTE
If you are claiming a federal foreign tax credit, an investment tax credit, or a labour-sponsored funds tax credit, the above calculation may change. If this is your situation, contact the International Tax Services Office for the special rules that apply.

LINE 429 - BASIC FEDERAL TAX (for Deemed residents, Non-residents and Non-residents electing under section 217)

Your basic federal tax is a subtotal you use for certain calculations. For example, the federal individual surtax is generally a percentage of your basic federal tax.

OVERSEAS EMPLOYMENT TAX CREDIT - To make your claim, use Form T626, Overseas Employment Tax Credit Calculation. Enter the result of the calculation on line 429 of Schedule 1. For details, get Interpretation Bulletin IT-497, Overseas Employment Tax Credit, and Form T626.

LINE G - SURTAX FOR NON-RESIDENTS AND DEEMED RESIDENTS OF CANADA (for Deemed residents, Non-residents and Non-residents electing under section 217)

You pay this tax instead of a provincial or territorial tax.

If you did not have a business with a permanent establishment in Canada, use Schedule 1 to calculate this surtax for non-residents and deemed residents of Canada.

If you had income from a business with a permanent establishment in Canada, you have to pay provincial or territorial tax on that income. Use Form T2203, Calculation of Tax for 1997 - Multiple Jurisdictions, to calculate your provincial or territorial tax (except Quebec). Attach a copy of the form to your return.

LINES 431 AND 433 - FEDERAL FOREIGN TAX CREDIT (for Deemed residents, Non-residents and Non-residents electing under section 217)

This credit is for foreign income or profits taxes you paid on income you received from outside Canada and reported on your Canadian tax return. Certain tax treaties with other countries may affect whether you are eligible for this credit.

NOTE
You may have deducted an amount on line 256 for income that is not taxable in Canada under a tax treaty. In that case, do not include that income, or any tax withheld on that income, in your foreign tax credit calculation.

If the total tax you paid to all foreign countries is more than $200, you have to do a separate calculation for each country for which you claim a foreign tax credit.

You also have to do a separate calculation for business income taxes and non-business income taxes paid to each foreign country. You can carry unclaimed foreign business income taxes back three years and forward seven years.

In most cases, the foreign tax credit you can claim for each foreign country is whichever of the following two amounts is lower:

NOTE
If you paid tax on income from foreign property (other than real property), your foreign tax credit cannot be more than 15% of your net income from that property. However, you can deduct on line 232 the part of the foreign taxes you paid over 15%.

For details on how to calculate your claim, get Interpretation Bulletin IT-270, Foreign Tax Credit.

NON-RESIDENTS AND NON-RESIDENTS ELECTING UNDER SECTION 217 - If you were a former resident of Canada who disposed of taxable Canadian property in 1997, you may be able to claim a foreign tax credit. Contact the International Tax Services Office for the special rules that may apply to you.

HOW TO CLAIM

TAX TIP
Your federal foreign tax credit on non-business income may be less than the tax you paid to a foreign country. If so, and you do not have to file a tax return for the province of Quebec, you may be able to claim a provincial or territorial foreign tax credit. Get Form T2036, Calculation of Provincial Foreign Tax Credit, to help you calculate the credit. Attach a completed copy of the form to your return.

Also, you may be able to claim a deduction on line 232. You can claim the amount of net foreign taxes you paid for which you have not received a federal, provincial, or territorial foreign tax credit. This does not include certain taxes you paid, such as those on amounts you could have deducted under a tax treaty on line 256. For details, get Interpretation Bulletin IT-506, Foreign Income Taxes as a Deduction From Income.

FEDERAL LOGGING TAX CREDIT (for Deemed residents and Non-residents electing under section 217)

If you paid logging tax to a province for logging operations you performed in the province, you may be able to claim a logging tax credit. To calculate your credit, use whichever of the following two amounts is less for each province in which you had a logging operation:

Your allowable credit is the total of the credits for the year for all provinces, up to 6.67% of your taxable income (line 260) not including any amounts on lines 208, 209, 214, 215, 219, and 220.

There is no line on the return to claim your tax credit. Therefore, you should write "federal logging tax credit" and your allowable credit below line 30 in Method B on Schedule 1. Subtract your allowable credit from the amount on line 30, and enter the result on line 406 of your return (if negative, enter "0").

LINE 464 - ADDITIONAL FEDERAL FOREIGN TAX CREDIT (for Deemed residents)

If you claimed a foreign tax credit, you may be able to claim an additional federal foreign tax credit. Use Part 2 of Form T2209, Calculation of Federal Foreign Tax Credits, to calculate this credit.

LINE 468 - ADDITIONAL INVESTMENT TAX CREDIT (for Deemed residents and Non-residents electing under section 217)

You may also be able to reduce your individual surtax by part of the unused investment tax credit you earned for 1997. See Form T2038(IND), Investment Tax Credit (Individuals) 1996 and Subsequent Years, for details.

YOUR OPINION COUNTS!

We review our publications every year. If you have any comments or suggestions that would help us improve them, we would like to hear from you. Please send your comments on our publications to:

Client Services Directorate
Revenue Canada
400 Cumberland Street
Ottawa ON K1A 0L5
CANADA

ELECTING UNDER SECTION 21

WHAT IS A SECTION 217 ELECTION?

Canadian payers are required to withhold non-resident tax on certain types of income paid to you as a non-resident of Canada. This tax withheld is usually your final tax obligation to Canada on the income.

However, section 217 of the Canadian Income Tax Act allows you the option of sending an income tax return (referred to as a section 217 return) to us to report the types of Canadian-source income listed below. By doing this, you may be able to pay tax on this income at the same rate as a resident of Canada.

You claim the non-resident tax withheld as a credit on the section 217 return. If this tax withheld is more than the amount you have to pay, we will refund the difference to you.

Choosing to send us this income tax return is called making a section 217 election.

DOES SECTION 217 APPLY TO YOU?

You have to send us a section 217 return for 1997 if you submitted Form NR5, Application by a Non-Resident of Canada for a Reduction in the Amount of Non-Resident Tax Required to be Withheld, to us for 1997 and we approved it.

You have the option of sending us a section 217 return for 1997 if you did not submit Form NR5 to us for 1997, you were a non-resident of Canada at any time in 1997, and you received any of the following types of Canadian-source income:

Under proposed changes to the Canada-U.S tax treaty, Old Age Security pension, net federal supplements, and Canada Pension Plan or Quebec Pension Plan benefits paid to a resident of the U.S. will be taxed only in the U.S.

Accordingly, if you are a resident of the U.S., your election under section 217 may change once the Canadian and U.S. governments approve the changes. Further information will be available at that time. Once approved, the changes will be retroactive to January 1996.

WHEN IS A SECTION 217 RETURN DUE?

Your 1997 section 217 return is due on or before June 30, 1998. If you file it after this date, your election is not valid.

However, if you are including on the return Canadian-source business or employment income, or taxable capital gains from disposing of taxable Canadian property and you have a balance owing, you have to pay the balance owing by April 30, 1998, to avoid interest charges and a late- filing penalty.

COMPLETING YOUR SECTION 217 RETURN

Use the income tax return included in this guide. Write "Section 217" at the top of page 1 of the return and complete the remainder of the return as follows:

IDENTIFICATION

Complete the identification area as explained on page 12.

INCOME

Include the following income on your return:

DEDUCTIONS

Claim the deductions on lines 207 to 256 of your return that apply to you.

NON-REFUNDABLE TAX CREDITS

Complete this area of the return following the instructions that start on page 32.

Then, complete Schedule 12, Statement of World Income, and Schedule 13, Allowable Amount of Non-Refundable Tax Credits, to determine the amount of non-refundable tax credits to enter on line 14 (or line 22, whichever applies) of Schedule 1, Federal Tax Calculation. You will find these schedules included in this guide.

Be sure to attach Schedule 12, Statement of World Income, to your return. We cannot allow non-refundable tax credits without a completed Schedule 12.

REFUND OR BALANCE OWING

Complete Schedule 1, Federal Tax Calculation, to calculate your federal tax payable.

In "Part 1 - Taxable income" on Schedule 1, enter the greater of the following two amounts:

Complete the "Federal tax" and "Federal individual surtax" areas of Schedule 1. For more information, see the section called "Schedule 1, Federal Tax Calculation" on page 48.

On line 437 of your return, enter the non-resident tax withheld on your section 217 income, as well as tax withheld on other Canadian-source income you report on the return.

Be sure to attach your information slips to your return.

As long as you file your section 217 return on time, we will refund any taxes withheld that are more than the amounts you owe.

NOTES

TAX INFORMATION PHONE SERVICE (T.I.P.S.)

T.I.P.S. is an automated telephone service that provides you with general and personal tax information. T.I.P.S. offers the five services listed below:

  1. TELEREFUND - tells you the status of your 1997 refund. This service is available from February to September.
  2. GOODS AND SERVICES TAX/HARMONIZED SALES TAX (GST/HST) CREDIT - tells you if you are eligible for the GST/HST credit and the date you can expect to receive your payment. This service is available for five weeks each time GST/HST credit payments are issued.
  3. REGISTERED RETIREMENT SAVINGS PLAN (RRSP) DEDUCTION LIMIT - gives the amount of RRSP contributions you may deduct for 1997 and, if it applies, any undeducted amounts available for you to claim on your 1997 return. This service is available from September to the end of April.
  4. BULLETIN BOARD - contains recent information that may be of concern or interest to you.
  5. INFO-TAX - gives recorded tax information. For a list of topics, see the chart below. This service is available from mid-January to the end of June.

TELEREFUND, GST/HST CREDIT, AND RRSP ARE AVAILABLE:

Weekdays from 7:00 a.m. to 11:00 p.m.
Saturdays from 8:00 a.m. to 4:00 p.m. and
Sundays from 8:00 a.m. to 1:00 p.m.

BULLETIN BOARD AND INFO-TAX ARE AVAILABLE:

24 hours a day, 7 days a week

HOW TO USE T.I.P.S.

Call the T.I.P.S. number under "Revenue Canada" in the "Government of Canada" section of your telephone book. Select the language you want to use, either "1" for English or "0" for French. Next, select the service you want to use:

For TELEREFUND, GST/HST CREDIT, and RRSP information, we will ask you to provide your social insurance number, as well as your month and year of birth. We will also ask you to state the total income you entered on line 150 of your return, so be sure to keep your working copy handy. If you call ON OR BEFORE APRIL 30, you will need the amount you entered on LINE 150 OF YOUR 1996 RETURN. If you call ON OR AFTER MAY 1, you will need the amount you entered on LINE 150 OF YOUR 1997 RETURN.

INFO-TAX MESSAGE NUMBERS AND TOPICS

121 Interest income
126 Rental income
127 Capital gains
128 Support payments received
130 Other income
147 Non-taxable income
208 RRSP deduction
214 Child care expenses
215 Attendant care expenses
219 Moving expenses
220 Support payments
221 Carrying charges or interest expenses
229 Other employment expenses
232 Other deductions
254 Capital gains deduction
255 Northern residents deductions
301 Age amount
303 Spousal amount
305 Equivalent-to-spouse amount
306 Amounts for infirm dependants age 18 or older
314 Pension income amount
316 Disability amount
323 Tuition and education amounts
324 Transferring tuition and education amounts
326 Transferring amounts from your spouse
330 Medical expenses
349 Donations and gifts
448 GST/HST credit
449 Child Tax Benefit
601 Electronic filing (EFILE)
602 Filing or making changes to a previous year's return
603 Your appeal rights
604 Voluntary disclosures
605 Authorizing representatives
606 Refunds
607 TELEFILE
609 Exchange rates
610 Do you have to file a return?
611 Missing information
612 Newcomers to Canada
630 Special services
631 Services for disabled persons
655 Home Buyers' Plan
702 Instalment payments
703 Making payment arrangements
705 Interest on unpaid taxes
706 Late-filing penalties
707 Interest rate

882 Direct deposit
883 Problem Resolution Program
899 Info-Tax survey
999 Main Menu

INTERNATIONAL TAX SERVICES OFFICE

International Tax Services Office
Revenue Canada
2204 Walkley Road
Ottawa ON K1A 1A8
CANADA

REGULAR HOURS OF SERVICE

Monday to Friday (holidays excluded)
8:15 a.m. to 5:00 p.m. (Eastern Time)

EXTENDED HOURS OF TELEPHONE SERVICE

February 23, 1998, through April 30, 1998
Monday to Thursday (holidays excluded): 8:15 a.m. to 9:00 p.m. (Eastern Time)

Calls from the Ottawa area - 952-3741
Calls from Canada and the U.S. - 1-800-267-5177
Calls from outside Canada and the U.S. - (613) 952-3741
We accept collect calls.

T.I.P.S. AUTOMATED PHONE SERVICE

Calls from anywhere in Canada (Mountain Time) - 1-800-232-7254
Calls from outside Canada (Eastern Time) - (613) 957-7834
You will be charged for any long distance calls.

Please call the numbers listed above first. If you need more help, you can call:

Assistant Director, Enquiries and Adjustments - (613) 526-6452
Problem Resolution Program - (613) 952-3502/1-800-661-4985 Director
(613) 526-6477
Assistant Director, Returns Processing - (613) 954-4113
Assistant Director, Non-Resident Withholding Accounts - (613) 526-6584

Fax number - (613) 941-2505

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