d_teller

Today's Best Risk / Reward Income Investments, Part I: Canadian Power Stocks

Au Contraire_ Atlantic Power Units are earning income from primarily U.S. power sites...so they aren't affected by the special taxation of income trusts due in 2011...

They are exempt, as are Cdn REITS, and a few other specific trusts. Some were planning to convert to MLP's but realized that U.S. Unit holders would get whammed by a special tax on MLP's from Canada. (PGH converted last year, then reconverted to a corpn., this July to avoid the taxation to U.S. unit holders).

This special taxation provision was enacted in October, a couple of years ago, by the Harper Govt., to "prevent abuse of flow-through profits" from business trusts...and it had a severe, negative effect on a lot of Cdn Unit Trusts, except, slowly, people (investors) woke up to the facts of the trusts future write off's of various business expenses when they convert to corporations (Unit Investment Trusts can't write off depletion, etc., but Corporations can, so the tax burden may be pretty small until 2013.)

I currently hold ATPWF and many other Cdn Units, some purchased directly at the TSX and others from the "pink sheet" equivalents...when commodity prices go up, the dividends go up, if they are producers...but if they're in services or utilities, their values and dividends tend to move with the economy.

Currently, a 15% Cdn income tax is withheld on any dividends paid, but in a taxable account...this 15% is a tax-credit (whether you file a standard or deduction-filled return)on U.S. Federal returns. If foreign taxes exceed $400.00 U.S., one can still get a credit by filling out a tedious, but simple additional form, because the U.S. has a tax-treaty with Canada (and many other countries).


On Aug 24 01:32 PM Bob Mc wrote:

> Virtually all of ATPWF's revenues comes from the US. Isn't this an
> important drawback as compared to the other stocks. I have invested
> in the others and refrained from ATPWF for that reason.
> Comments?