Alaris Royalty Corp ALARF

RE:RE:Today's news...

[Rakaposhi]

CanSiamCyp wrote:

Rakaposhi wrote:

Does this not mean our distributions will become taxable and will no longer be considered eligible?

Rakaposhi:

It is complicated for sure, but impossible to tell at this point what the impact will be!

The major difference is that Corporations pay eligible dividends whereas Income Trusts "flow through" their income/revenue stream to the unitholders with the same characterization as they receive the income. Income Trusts (like REITs, for example) can also flow through Capital Gains and Return of Capital to unitholders whereas Corporations cannot. So depending on how thei income/revenue stream is structured it could be positive, negative or essentially neutral from a taxation point of view. Impossible to tell at this point!

Examples of other flow through entities during the 2019 tax year:

BEP.UN (an LP but still a flow through): 45% Return of Capital, 53% Eligible Dividends

EIT.UN (essentially an income trust): 88% RoC, 10% Capital Gain, 2% Eligible Dividends

I hope that Alaris management will shed some light on the anticipated tax consequences for shareholders/unitholders as a result of the conversion - so that we are able to cast "informed" votes!

Note that I am not endorsing or opposing any proposed restructuring. Just providing examples of the taxation characteristics of similar "flow through" entities trading on the TSX.

Cheers!

Thanks CanSiamCyp,

I hold a number of .UN stocks that are (or were) flow throughs of eligibles only. IPL.UN comes to mind. However, it seems AD is banking on the fact it's small retail holders are keeping AD in tax deferred accounts. For those who don't hold it tax deferred or in a corp, the changes are unlikely to be neutral. Even more so that with a change to a unit trust structure, a deemed disposition will be triggered. For those lucky enough to have made a captial gain on this, they can defer the tax due with a rollover. In IPL's case, it saved a house-sized tax bill. But in AD's case, I have yet to look into the impact for me and the Corp. Does it mean I get unit trusts at a lower market price than my ACB? For sure... but what I do with the losses then? I don't need more losses to carry forward .. LOL. I may just dump the whole thing when it gets closer to break even for me. It's been an uncomfortable investment the last few years and unlike EIF, AD has not been able to correct some of its missteps over the last while.