By: Charles in Vancouver
Arthur: ROC can create the illusion that a company or fund is earning money for you when really they’re just giving your own money back. Any time they make a ROC distribution it’s going to ding the...
View ArticleBy: Jewels (from MTL)
Thanks for the post FT. I’ve always wondered what the difference was with income trusts and dividends. Now I know it’s a lot more complicated than I thought. I guess those will be for my RRSP’s or TFSA...
View ArticleBy: Patch
Never knew I had to track those different streams of income…screw that, into the TFSA you go!
View ArticleBy: Mark
Does anybody know the tax structure for dividends in Canada? 50% of your capital gains are taxed at your marginal rate if I am correct. How would dividend taxation compare to this? Thanks in advance
View ArticleBy: Traciatim
I think Frog of Finance is correct: return of capital not taxable reduces adjusted cost basis (ACB) of units the reduced ACB results in higher capital gain (or lower capital loss) when units are sold...
View ArticleBy: LongTime Smither
Thank you for this article. Your argument is mostly correct, but there is one small flaw to your thought process about not investing in IT’s outside of a RRSP or TFSA. To say not to invest in IT’s...
View ArticleBy: Tax Resource
With respect to return of capital (ROC). The payment automatically reduces the adjusted cost base of the trust unit. When you sell the units in the future, you will have a higher capital gain. However,...
View ArticleBy: CanadianFinance
I plan to use my TFSA room for income trusts starting next year and going forward. This first year I’m going to finally setup an emergency fund.
View ArticleBy: 7
Wait… I’m confused… I thought the distributions from income trusts aren’t taxed. According to: http://en.wikipedia.org/wiki/Income_trust “the trust structure avoids any possible double taxation that...
View ArticleBy: FrugalTrader
7, the trust itself pays very little or no tax. However, the government has to get their tax dollars somewhere along the line, which means if the trust isn’t paying the tax, the investor is.
View ArticleBy: Narajin
I don’t get how return of capital will affect my ROC? Can anyone clarify that (maybe with an example)?
View ArticleBy: FrugalTrader
Narajin, here is some more info on ROC: http://www.milliondollarjourney.com/how-return-of-capital-works.htm
View ArticleBy: Narajin
So the way I see it is ROC is deducted on the cost of investment. But you can reinvest the ROC right away and that wouldn’t lower your adjust cost base. Would that work?
View ArticleBy: Paul
Hey guys, I liked the discussion regarding Income trust, as I was looking for some advise on getting my taxation done for 2009. I had invested in some income trust companies in 2009 and sold some of...
View ArticleBy: FrugalTrader
Paul, if your income trusts were held in a non-reg account, then you should receive a T5 from your broker indicating the total amount of distributions you received. However, you’ll have to track your...
View ArticleBy: Paul
Hey, Thats what i thought as well. However when add up all the distributions that received for the year (taxable and trust) my T5 excludes the trust dividend and only includes taxable dividend. Don’t...
View ArticleBy: FrugalTrader
Paul, typically income trust distributions are mostly return of capital and interest. Only interest would be reported on a T5.
View ArticleBy: Robert L.
I have a few income trusts (mostly related to the energy sector, CPG, KEY.UN, IPL.UN, ENF.UN, NAE.UN) within my RRSP, so I don’t have to keep track of anything with respect to taxation right now. I...
View ArticleBy: FrugalTrader
Robert, when the income trusts convert to corps, they will most likely distribute “dividends”. If dividends are held within an RRSP, you will not be able to take advantage of the dividend tax credit....
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