Brookfield Office Properties Inc T.BPO.P.A

RE:RE:RE:RE:Pref Share Market Rising Today

[CanSiamCyp]

There is another twist to this particular ALA redemption ... of which I was not previously aware:

As we all know, preferred (and common) dividends receive the DTC in the hands of the individual investor ... thereby offsetting (at least partially) the corporate income tax paid by the issuing company prior to paying out the dividends.

HOWEVER ... if the total dividend payout by a company exceeds their taxable net income (i.e., profit) ... this would result in investors receiving more in credit than the issuing company paid in corporate tax. Therefore, any excess amount of dividend payout is subject to taxation at the corporate level to offset this distortion.

I was not previously aware of this, but it makes sense when you contemplate the tax equity aspect ... otherwise the government coffers would be losing revenue. ALA stipulated that, by substituting the higher rate bonds for the about-to-be-redeemed preferred shares, the corporation would have a net saving of approx. $10M.

FYI and cheers!