I'm a US resident holding BCE shares. As a result of BCE's well-publicised share consolidation, my units in their DRiP were distributed.
BCE's guidance for US investors is not very helpful for determining how to deal with this on my 2006 US return. From what they tell you, it might be a dividend, and it might be a tax-free return of capital. In any case, they say they are not in a position to tell you which it is!?
My question is, which of these is it and why?
US tax reporting BCE distribution of units
Moderator: Mark T Serbinski CA CPA
Looks like it will cost you to find out.
I'm sure you've read this, but will post here for completeness:
http://www.bce.ca/en/investors/sharehol ... ns/aliant/
From a US tax standpoint, the gross amount of the distribution paid to you will be included in your gross income as a dividend, to the extent paid out of the current or accumulated earnings and profits of BCE, as determined under US federal income tax principles. The portion, if any, of the distribution paid to you which is not paid out of BCE’s current or accumulated earnings and profits will be treated as a tax-free return of capital, causing a reduction in the tax cost of your BCE common shares. BCE does not calculate its earnings and profits under US federal income tax rules. Therefore, BCE will not be in a position to provide such information to you. You should consult with your own tax advisors regarding the amount of the distribution that will be treated as a dividend for US federal income tax purposes.
BCE should meet the definition of a qualified foreign corporation and, as such, should the distribution be considered to be a dividend in whole or in part, you should generally be able to benefit from the 15% maximum US federal income tax rate on such dividend, provided you are an individual and you meet the required 60 day holding period.
With respect to the determination of the amount of the distribution paid to you, the BCE Plan of Arrangement provides that the distribution was effective as of July 10, 2006 at 5:01 p.m., the time of the transfer of the Units in favor of Computershare. However, there is uncertainty as to whether you are considered to have received the distribution as of that time from a US tax standpoint. If you are considered to have received your distribution as of that time, you may decide to use the value of the Units as determined by BCE (referred to above under “Canadian Tax Considerations for Canadian Shareholdersâ€) in calculating the amount of the distribution you received. However, BCE cannot provide assurance that the US tax authorities will agree with the use of such value. Consequently, BCE should not be considered responsible for any additional tax, interest or penalties assessed by the US tax authorities should you decide to use the above-mentioned estimate of the value of the Units.
I'm sure you've read this, but will post here for completeness:
http://www.bce.ca/en/investors/sharehol ... ns/aliant/
From a US tax standpoint, the gross amount of the distribution paid to you will be included in your gross income as a dividend, to the extent paid out of the current or accumulated earnings and profits of BCE, as determined under US federal income tax principles. The portion, if any, of the distribution paid to you which is not paid out of BCE’s current or accumulated earnings and profits will be treated as a tax-free return of capital, causing a reduction in the tax cost of your BCE common shares. BCE does not calculate its earnings and profits under US federal income tax rules. Therefore, BCE will not be in a position to provide such information to you. You should consult with your own tax advisors regarding the amount of the distribution that will be treated as a dividend for US federal income tax purposes.
BCE should meet the definition of a qualified foreign corporation and, as such, should the distribution be considered to be a dividend in whole or in part, you should generally be able to benefit from the 15% maximum US federal income tax rate on such dividend, provided you are an individual and you meet the required 60 day holding period.
With respect to the determination of the amount of the distribution paid to you, the BCE Plan of Arrangement provides that the distribution was effective as of July 10, 2006 at 5:01 p.m., the time of the transfer of the Units in favor of Computershare. However, there is uncertainty as to whether you are considered to have received the distribution as of that time from a US tax standpoint. If you are considered to have received your distribution as of that time, you may decide to use the value of the Units as determined by BCE (referred to above under “Canadian Tax Considerations for Canadian Shareholdersâ€) in calculating the amount of the distribution you received. However, BCE cannot provide assurance that the US tax authorities will agree with the use of such value. Consequently, BCE should not be considered responsible for any additional tax, interest or penalties assessed by the US tax authorities should you decide to use the above-mentioned estimate of the value of the Units.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best