d_teller

Canadian Energy Trusts: The Best Long Term Income and Dollar Hedge?

To socphd71:

I believe the limit on 1040 foreign tax credits (without filing form 1116) is $400.00 U.S. ...but you could check the irs.gov site and the directions for the Fed Pub 17 (the summary guide to the 1040), which means in a taxable account you probably could receive >$2650.00 in Cdn dividends, before filling out form 1116.

Unless you buy your Cdn Trust securities from the issuer directly, all the required info will be on the 1099 that a brokerage sends...the dates and $ for purchases, sales, dividends, any non-taxable returns of capital...with the exception of any Publicly Traded Partnerhips, such as PGH, which send a fairly detailed K-1 form directly, and not via a 1099 (the brokerage doesn't send any K-1s), and that can come as late as March 30th.

Nearly all the CanRoys' dividends are qualified, and for U.S. investors, many of the Cdn REITs also issue qualified dividends. One thing to watch for ---in a taxable account---are "Stapled Units' which pay interest on a bond plus dividends (these also are known as EIS', etc.) and are common in the U.S and overseas...for taxable accounts, the portion of the distribution that is from the bond interest is not qualified for the reduced 15% rate.

High-Yield Canadian Royalty Trusts: What's the Catch?

A lot of confusion here --- Some of the correspondents are Canadian, and some are U.S. tax filers....tax credits are for taxable accounts in the U.S. Up to $400 of foreign taxes withheld by countries that have tax-treaties with the U.S. are simple to report on a 1040. Larger amounts need 1116 filled out, it's detailed, but not difficult.

PGH is going to be a problem if it's still being held in a U.S.tax-sheltered account. PennGrowth Trust has filed for conversion to a MLP, which means a K-1 will be sent after the 1099r's...and the problem in that - is the UBTI (Unrelated Business Taxable Income) which is in Section 20 code V of a K-1. For any owner of a tax-sheltered IRA (Roth, traditional. SEP, Chapter S), etc.) the limit on UBTI (for all accounts combined) is $1000.00...or the disqualification of the shelters. The fiduciary of the shelter needs to file the forms of series 900, and the taxes may not be paid by the owner, but must come from the shelter.

(Many "Hot": ETF's, such as DBA, GLD, IAU, SILV also file K-1s, and commodities aren't allowed in a tax-shelter...only U.S. Treasury minted coins, no bullion, corn, hogs, furs, art, etc....they're considered collectibles. DBA doesn't hold, but it trades futures, and last year's K-1 showed income from straddles and etc., about which the IRS could care less in the IRA, but UBTI can disqualify a tax shelter.) But I digress.

The second thing about MLP's and LLC's and other K-1 reporting types in a shelter...all of the Return of Capital (which changes the short term dividends to a long-term cap gain by reducing the security's basis or cost... is "lost" in an IRA, because withdrawals from IRA's are taxed at marginal rates. As with the tax credit for foreign taxes, the depreciation losses, and cap loss carry-forwards... which are useful in a taxable account, but useless in a tax shelter.

Some of the CanRoys have income from U.S. operations, which will not be subject to the new "Harper" tax rules; Others will be taken out by Venture Capital (PrimeWest Energy, e.g.), when their value declines. Others have such large cap loss carry-forwards, that even under Cdn. corp. tax rules. they won't pay excessive taxes. Others are in Transfer Tithing: Pembina Pipeline, WestShore Terminals, they get paid for passing the stuff along. Others, such as TimberWest are being eaten by Pine Beetles; Still others manage medical clinics in the U.S. and another (U.S. owned, but Cdn registered) has funeral services; while others transport kids to schools or build transport busses. There is indeed a wide variety.

Canadian REITs won't be affected by the new taxation...and unless Congress changes the laws, the dividends are still "qualified" here...providing the holding period is followed, and the Foreign Tax credit applies regardless of the sompany's source of income. These, again, are useless for sheltered accounts.

Moral of this story: many CanRoys are worth while...their prices are affected by their business sector's prospects; there are a lot of interesting investments, but they aren't risk-free! The enthusiasm and skepticism in the postings above are really amusing.

Stocks That Pay Monthly Dividends

AOD will pay $0.18/share/mo in Mar., Apr & May. cf.: "Yahoo ETF" 02/15/07.

Stocks That Pay Monthly Dividends

That's quite a list! Add ZF & ZTR; AOD, AGD. Div rates are approx 10% of NAV for the Zweig funds; AGD, Alpine's CEF eqivalent to ADVDX, pays about 16 cents/share/mo. AOD is a newer CEF from the same firm.
A note of caution for the Canadian Oil & Gas income trusts: their NAV's have dropped because they may be forced to phase out by 2011 ... so their yields have risen (and their payouts vary by the cost/pricing of energy sales). The electric power trusts from Canada are not affected, nor are the Canadian REITs.
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