Investment Q&A

Q: Hi still hold all 4 of these stocks but would like to consolidate them, the BIP shares are in an RRSP of BEP in a non-registered account which is more income oriented. I am mainly concerned with which have more growth.
Thx
Nancy

Q: I have owned BIP.UN for four years and have a 76% unrealized capital gain. I also have a small amount of BIPC as a result of the recent spin off which has a 78% unrealized gain. I do not want to own both as they are essentially the same and BIPC represents only 0.3% of my portfolio. The plan is to amalgamate by selling one and using the proceeds to buy more of the other.

The question is which one to sell? This is in an unregistered account. Which of these two do you favour in an unregistered account? A sale of BIP.UN will result in a greater immediate tax liability than BIPC but the tax will have to be paid at some point anyway and it might be a good idea to decide, at this time, which is the best one for me to own going forward. I know the premium on BIPC is expected to decrease but so for it has not. In fact, over the past 8 months BIPC has increased approximately 78% while BIP.UN has decreased 6%. Over this time, BIPC has increased in market value approximately the same percentage as BIP.UN has over the past 4 years.

Q: I hold BIP.UN in a registered account. When BIPC was created I decided to keep BIP.UN but it is looking like I don't understand the corporate structure. Typically with a unit trust or a partnership the unit holder pays the tax on the income whereas the tax is paid within a corporation so dividends are "after-tax". Since the amount of the distributions are the same for the two entities I figured that BIP.UN would be better off because it didn't have to pay all the tax on its income. By my rough calculations: since the split BIP.UN is up about 20% whereas BIPC is up about 80%. What did I miss?
Thanks for your insight.
Ian

Q: I own both BIPC and BEPC and have done very well thanks to your recommendations. You have indicated lately in some of your answers that BAM.A is very attractive at these prices. Is it too much Brookfield to take the profits in my two holdings and purchase BAM.A.

Thanks for your continued guidance throughout this turbulent year.

Dave.

Q: BIPC trading today was about 7x the average daily amount . Was this in anticipation of the Federal budget?
Thanks

Q: Received these in the spin out from the units. Brookfield units are long term; held in my RRSP. ( turning into RIF in 2022 ). Considering the premium on the corps, would you sell and reinvest back into the units?
Thanks, Derek

Q: I don't know how to derive an estimate for the fair value of the difference in share prices for the above Brookfield companies. Since the date of their respective share distributions, BEPC and BIPC have outperformed their economically equivalent LP unit prices by 30% and 39% respectively. When are the price premiums too big to account for the differences in tax treatment and investor access?

Q: You recently responded to a question regarding the ACB of BEPC shares.
Could you please provide similar info. with respect to the ACB of BIPC shares and the revised ACB of BIP.UN units. Thanks Brian

Q: I recently purchased BIPC in my non registered account anticipating a dividend. I checked my transactions on this account last night and to my surprise I found that it paid interest. Can you help me clarify on what is correct.

Q: Hello,
Over the years, I've accumulated a significant amount of BIP.UN in an RRSP account, with the intention of holding it for the income generated over the long term. Since the Mar 31 split, shares of BIPC are up around 50% while BIP.UN is up around 28%.

Does it make sense to cash in this gain, sell the BIPC and use the proceeds to buy BIP.UN, thus adding some "extra" income generating units? Would also make tracking a little simpler.

Any other factors to consider?

Thanks for your time,
Roman

Q: Retired, dividend income investor. Currently own AQN, FTS and TRP. If I wanted to add a 4th name (with a focus on renewables), what would you recommend? It would be mostly in a taxable account, with possibly some in a TFSA account. Or if AQN and FTS are enough names, should I just add funds to them? If AQN-FTS are not enough names, would you consider BEPC or BIPC? I like utilizing the dividend tax credit.
Thanks for your help...Steve

Q: The Brookfield suite over the years has been a comfortable place to grow but it has a way of taking over ( combined 4 holdings has grown to 17% ) .

BIP.UN is my 3rd biggest holding , BEP.UN is my 13th biggest holding .
BIPC is my 23rd and BEPC is my 30th weight position . I own 50 stocks .
My RIF begins next year so I will have to cull somewhere and draw income.

1. You seem to prefer BIP over BEP :
2: You prefer the “C” stocks in non-registered accounts (To benefit from CDN dividend )
3. You prefer “.UN” stocks in the registered accounts to avoid US withholding taxes.

To restructure things involves declaring substantial capital gains ... Does it make sense to switch things around ?

I thank you for causing me wealth management problems like this.

Q: In your opinion which one would offer the best return over the next 5 years?

Q: Hello 5i Team
Publish as needed or as a start to a blog entry.
I performed a simplified after tax analysis of BEP.UN vs BEPC and BIP.UN vs BIPC.
Basis of Calculation
I used the 2019 distribution and related tax information from Brookfield website for BEP.UN and BIP.UN in Canadian dollars. I used the highest marginal tax bracket for Alberta for taxation rates.
BEP.UN / BIP.UN receive T-5013 tax form
BEPC / BIPC receive T-5 tax form
Results
BEP.UN you will receive 71.4% of income after tax if you assume ROC taxed each year (taxation of ROC is deferred until you sell the units and results in capital gains tax).
BIP.UN you will receive 82.1 % of income after tax if you defer ROC tax each year.
BEPC you will receive 68.3 % of income after tax.
BIP.UN you will receive 60.2 % of income after tax if you assume ROC taxed each year (taxation of ROC is deferred until you sell the units and results in capital gains tax).
BIP.UN you will receive 67.7 % of income after tax if you defer ROC tax each year.
BIPC you will receive 68.3 % of income after tax.
Going forward, BEP.UN will probably receive more foreign income (as a result of the Terraform merger) and will pay a higher overall tax rate.
BEP.UN and BIP.UN allow deferral of income tax due to Return of Capital, however this complicates an individual’s tax return when held in a taxable account.
It is difficult to truly estimate the taxes payable on BEP.UN / BIP.UN as the allocation to various tax components is not known until March of the following year. If ROC drops significantly (from 30 – 40 % of total income), the overall tax paid will increase. With BEPC/BIPC the tax percentage is known as BEPC/BIPC issue “eligible dividends” and no ROC is assumed.
All things being equal, I think it is best to hold BEP.UN / BIP.UN in a RRSP / TFSA where the slightly higher distribution yield, if re-invested in units, will result in a higher total return. In a taxable account it is probably best to hold BEPC / BIPC to avoid the headaches of tracking Return of Capital and the inclusion of a T-5013 form in an individual’s income tax form.
Each person’s results will vary as a result of province residence and marginal tax rates (13 province/territories x 5 tax brackets = 65 potential different tax rates).
Thanks

Q: Hello Peter, I am intrigued after reading that a Canadian can earn about $50,000 per year of dividend income without paying any income tax. I know about your income portfolio of course, but with a view to maximizing just Canadian eligible dividend income, what would you think of the following portfolio of 14 stocks. Equal weighted, the stocks would yield 5.3%. (Disregard lack of market diversification; this can be achieved in one’s registered accounts.) Also, if one wanted to pare down the list to 10, which 4 would you delete?
BCE, CM, ENB, FTS, CNQ, AQN, CPD, FSZ, MG, KBL, POW, ALA, BIPC and NTR. Thanks!

Q: Hi Peter and 5i team,

I currently have BIPC and BEPC shares in my TFSA account, and I expect to hold them for the long term. Is it worth paying a transfer fee to move those shares to my CAD non-registered account in order to be able to recover any US taxes paid on dividends.

Many thanks for your opinion on this matter.

Q: Exchanging the BIPC shares for the BIP.UN shares - there was an article by John Heinzl in the Globe stating that the BIPC shares are worth a few dollars more so if you exchanged them you would be losing a few dollars a shares because the BIP.UN shares are worth less. There are many questions out there concerning this and so I tried the search column at 5i that hopefully someone else wrote in about it - could you clarify John Heinzl's position on this? Thank you,
Dennis

Q: Hi 5i Team:

I have owned 1300 shares of BEP.un for a number of years and having a good gain. I also, own 300 BIPC for a short while with a small loss. Is there any advantage to buy more BIPC now. I don't really need the monthly income. Thank you.

L

Q: They's issues shares and the funds are not going to the company. Who's the seller?

John

Q: I have 3.0 % in BIP.UN.CA and .73 % of BIPC.T. Wondering if I should have a position in both. Both are held in a Registered fund. No tax issues. Your comments.