RE:Curious for thoughts (except for Auburns) WillyGreen wrote: Typically share price goes down by the amount of the special. In our scenario $12 of the $15 is tax free but reduces your acb by the $12. Once you sell pou, ithe gain gets triggered. Why would anyone accept the dividend only to pound out the stock and pay the tax?
I am a buyer so interested to hear the other side of the equation. Open invitation to all sellers.
Mr Willesden Green
- ABC's of ACB's -
From time to time, scenarios unfold where shareholders see their ACB in a given security go negative.
For example, with POU, a person clever enough to buy during pandemic pricing at $1 per share now faces the prospect of negative ACB in 2025 after $12 capital distribution.
2020 ACB = $1
2025 ACB =
-$11 after capital distribution, CRA congratulates them with $11 capital gain
CRA is pleased to warn investors that the calendar year in which the ACB goes negative, when ACB is below zero, then CRA would deem that negative ACB as "capital gain" in the year transaction occurs.
I don't know the details of how POU will set this up,
maybe there will be a tax-free reinvestment option for the $12 capital distribution. Best to speak with IR/Executives prior to meeting and attend meeting in person if further clarification is required.
Worth hiring a damn good accountant who has plenty of experience with HNW investors.
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This also presents a very fortuitous opportunity of the charitable variety................................
Anyone sitting on massive capital gains can donate shares to charity of choice without paying capital gains tax.
Here's an example from CIBC:
https://www.cibc.com/content/dam/cibc-public-assets/personal-banking/smart-advice/tax-savings-tips/pdfs/gift-securities-en.pdf Gift publicly traded securities When you donate publicly traded securities you can claim the donation tax credit for the value of the securities on the date the charity receives them. In addition, if the publicly traded securities, mutual funds, or segregated funds have appreciated in value and there is an accrued gain, the tax on this gain is eliminated when you donate the securities directly to charity, rather than selling them and donating the proceeds.
Example Let’s consider Mark who wants to donate $100,000 to charity. He currently owns mutual funds that have a fair market value of $100,000 that he purchased many years ago for $20,000. He is in the top tax bracket in Ontario with a marginal tax rate of 53.53% and a donation tax credit rate of 50.4%. We assume Mark has less than $250,000 in capital gains for the year and therefore would include 50% of his capital gains in income.
If he sold the mutual funds first, and donated the sale proceeds, he would realize a capital gain of $80,000 and pay tax of about $21,412 on the gain. His net benefit, taking into account the value of the donation credit less the tax on the capital gain, would be about $28,988 (see Column A in Chart 2 below). If Mark donated the mutual fund units “in-kind” directly to charity instead of selling of them first, the capital gains tax would be eliminated. Since Mark would still be entitled to his full tax receipt for the $100,000 contributed, his net benefit would be $50,400 (see Column B in Chart 2), resulting in a savings of $21,412 being the entire capital gains tax he otherwise would have paid if he had sold the shares first, prior to making his donation.
Respectfully,
SH Grinch