Investment Q&A

Q: Regarding purchases made on US exchanges….

a) If I purchase Canadian companies in my margin account on the NYSE in US dollars, will the dividends also be paid in US currency? What will the withholding measures be on those dividends?
b) If I purchase European companies on US exchanges, what will the withholding measures be on those European dividends? (Germany, France)

Q: I hold the US portion of my portfolio in my RRSP. It represents roughly 20% of my total investment. I do not need to convert to RRIF for another 5 years and at that time will be taking the minimum required.
I currently hold ZQQ; ZPAY; ZDY; ZWH; ZSP.
I am thinking of switching my holdings to the following in roughly equal amounts: ZPAY; VUN; ZSP; ZNQ; XSU.
The objective is to get better coverage of the total US market through XSU and VUN. Maintain coverage of S&P 500 through ZSP. For Tech switching to non hedged via ZNQ. ZPAY will still provide good income with perhaps some downside protection through its options strategy.
Your thoughts and recommendations of alternatives.
The rest of my portfolio in my Non-Registered account and TFSA follow a mixture of your 3 portfolios which by the way have provide me with a return of 12 - 15% in the past 6 plus years.

Q: Hi
Before I posted this question, I went through CMS archives and searched the questions bank here as well. As I didn't get any "hits" I thought of asking you folks.

I was recently told that establishing a Joint Partner Trust is a good way to go if one

a. wants to avoid probate fee even for the primary residence
b. to shelter probate and other fees for assets held in a private corporation
c. transfer wealth to future generations with certain amount of protection.
d. Arguably the best way to go forward if one's adult kids are in the US (through a Dynasty Trust)
Any thoughts about JPT? Especially for professionals who own a private holding company/corporation. If you think JPT is not the way to go, what would you suggest?

An article is begging to be written in CMS!
Many thanks.
Mano.

Q: Hello, are the distributions from ZWU taxed as a dividend or income? thank you.

Q: Hi 5i team,

I am considering using DLR and DLR.U to buy USD and avoid the higher fees the bank charges to convert CAD to USD. But is it worth the hassle in a non-registered account because you might have a capital gain (or loss) to declare when you file your tax return the following year?

Here is an example. If I were to buy US$10,000 today my bank would charge me C$12,756. 1 CAD = 0.7839 USD

If I buy 1000 shares of DLR @ C$12.69 (plus $9.95 commission) that would cost me C$12,699.95. Five minutes later I sell 1000 shares of DLR.U at US$10.07 (plus US$9.95 commission). The proceeds of disposition would be US$10,060.95.

So US$10,000 using DLR/DLR.U would equate to C$12,624.14. That saves me C$131.86 [12,756 – 12,624.14] compared to buying it directly using the bank’s exchange rate. That is about a 1% savings.

But because this is done in a non-registered account I would have to declare the sale of DLR.U when I file next year’s tax return. From what I know you can use the “average” exchange rate for that year as per CRA, or the exact rate on the day of the transaction. So if I use the exact rate (I am guessing it would be 0.7839 as that is what the bank would charge me) I would have a capital gain of approximately C$131 to declare and then have to pay tax on that gain. At 50% tax bracket, the tax would be ~$33. So the net savings are now ~C$98. Final savings are 0.78% of the transaction. If I use the CRA’s “average” exchange rate for 2021 I could have a gain or a loss depending on what that rate is.

I can see this works fine if you do this in a registered account like an RRSP as you don’t have to declare the gain on the currency exchange, but in a non-registered account this seems like a lot of effort for small savings, at least for US$10K. Perhaps it is worth the hassle if you are converting a much large amount like US$50K, or US$100K.

Am I missing something in my example?

Paul

Q: Hi Peter,
If you sell a stock in a TFSA or a RRSP account, you can purchase the same stock in a non-registered account the very next day and do not have to wait for the 30 day rule?

Q: Further to previous questions on BAMR

BAMR has an outline of the characteristics of BAMR which after review makes BAMR different that the previous Brookfield spinouts (i.e. BEPC and BIPC)

https://bamr.brookfield.com/stock-and-distributions/tax-information

BAMR is a Bermuda Corporation, not a Canadian Corporation
BAMR is considered a foreign holding requiring reporting under T-1135
BAMR dividends are NOT Canadian Eligible Dividends

This information was not well presented during the initial spin out and came as a bit of surprise to me after review.

Thanks

Q: I was given TOI shares for owning CSU. I am not selling, but when I do , what is the capital gain on the shares? Is it 100% because they were free? My bank shows them as all gain.

Q: Hi Team,

I have owned IPL for 18 years now and have incurred a loss over that period. Regarding the purchase of this company by Brookfield Infrastructure; if I accept their offer (cash/stock etc.) am I still able to claim my loss as a capital loss even though in my mind no real disposition has taken place? I cannot find succinct enough information on this in order to make my decision.

Thank you so much,
Dean

Q: I would like to own some simple diversified US equity both in my RRSP and a non registered account.

#1.currency exchange aside does it matter TAX-WISE (dividend withholding tax) which one is in the RRSP

#2. considering currency exchange costs, do you recommend going with VOO or sticking to VFV in a non registered account. (factors to consider , amount invested will likely be upwards of 100 000 and long term hold)

thanks

Ernie

Q: I seek clarification please to your response dated July 29, 2021 about converting my father’s RRSP to a RRIF. You wrote:

“ #1 Essentially, yes. The tax liability is the same, but the benefit comes from more money in the account left to compound (as less $$ comes out initially).”

However , if securities are left to compound, once funds are withdrawn, the additional capital gains accrued would be taxed in full. But if the capital gains are accrued in a taxable account, only half of such gains would be taxable ( and only 50% of capital losses would be allowed). Is this correct? If yes, the advantage you mentioned of funds left to compound in the RRIF needs to be offset by the fact that incremental net capital gains in the RRIF are fully taxed on withdrawal (or death). Is this not likely to offset the advantage you mentioned? Is it also correct that dividends on a Canadian company do not get the benefit of the dividend tax credit if held in any registered account, including a RRIF?

I apologize if my understanding of your July 29 response is flawed. I trust you will understand why I seek clarification before I make an error on a parent’s savings. Thank you so much.

Q: Hi 5i team, Any thing wrong with QR to cause a big drop. Thanks.

Q: I hold wpt in an unregistered account with a 60% gain. What will happen to my shares when Blackstone acquires them? I'm trying to avoid capital gains.
Thanks,
Andrea

Q: Why the strong differences in type of assets (cash) held between ZPAY and ZWC? Are they not trying to do much the same thing?
And would you remind me of the tax implications on ZPAY dividends when held in a RIF
With thanks

Q: Your assessment of this Algonquin Power US$security is very much appreciated, particularly as to suitability for a registered account.
Thank you!

Q: Hello friends,

I own IPL:CA in my RRSP account and, since I like BIP, I would like to continue with them.

As we know, the offer is $CAD 20 or 0.25 of a BIPC:CA share subject to proration.

However, there is a fairly large price differential between BIP:US/BIP.UN:CA and BIPC:US/BIPC:CA and I would like to take advantage of that.

My plan is to tender for cash and then buy BIP:US/BIP.UN:CA.

Is there any tax impact on holding BIP:US/BIP.UN:CA (a Bermuda LP) vs holding BIPC:US/BIPC:CA (a Canadian corp) in an RRSP account e.g. withheld taxes?

Does my plan make sense?

Thank you for your valuable advice.

Q: In July, 2022, when my mortgage is due for renewal (with $90,00 left), say if I refinance for 80% of the value of the condo (about $240,000), would the new mortgage money be tax deductible while still not deducting the carry over amount (about $90,000). In this case $240,000 minus $90,000 would be deductible, with an ongoing ratio of $240,000/$90,000 or 266.67% of every future payment of interest, until the mortgage is paid off.

I realise this is a question for an accountant, but was wondering if you would know?

Q: Hi Peter
In 2020, 70% of Q3 and Q4 distribution is marked as “Trust Income”. If held in a taxable account, what is the tax implication of this component? Is it treated as dividend or interest income?

https://www.alarisequitypartners.com/upload/media_element/attachments/412/Tax%20split%20of%20distributions%202020.pdf

Q: I have a follow-up question on TTE. As a French company that trades in the U.S. what would the withholding tax be in a non-registered Canadian account?

Thank-you.

Q: I will soon start to withdraw from my RRSP and I am looking for tax saving ideas. I don’t like the idea that if I was hit by a bus tomorrow (aside from negative outcome for me) that my RRSP would be taxed at 53.53% and my dependents would be left with less than my hard-earned savings. I need your advice and yes I will look both ways before crossing the street. I recently listened to an audio by Allan Schieman where he suggests flow-through shares as a tax saving option. It seems like an interesting idea with some risk. I searched and found a Maple Leaf Fund managed by Craig Porter in BC. I suspect there are many pitfalls here, and I seek your advice and input on two questions i.e, 1. are there any reasonable/recommended flow-through share investment vehicles to help save taxes and 2. How else can I reduce RRSP withdrawal taxes? Please deduct as many questions you see fit. Thanks for your valuable advice.