Are you a BCE shareholder? Abbotsford BC
Mon - Fri: 9:00 - 4:00
Macdonald, Shymko & Company, Ltd.
Ongoing Investment Management, Planning Issues for Business Owners, Planning Concerns for Corporate Executives, Retirement Plan Investment Advice, Tax Planning
NAPFA Registered Financial Advisor, BA, MBA, RFP
Mon - Fri: 8:00 - 5:00
Are you a BCE shareholder?
By John Waters, C.A., CFP, TEP
Manager, Tax Planning, BMO Nesbitt Burns
(NC)-In recent years, there have been plenty of highly-publicized corporate takeovers like the buy-out of BCE led by the Ontario Teachers Pension Plan. In some takeover cases, shareholders of the acquired company can exchange all or a portion of their shares for those of the acquiring corporation. However, if you're a BCE common shareholder, you'll receive strictly cash for your shares. This can be a "good news, bad news" story for some - while many will make money from the sale of their shares (also known as "realizing capital gains") the money made will be taxed and could result in a large tax hit.
As a BCE investor, it's important you understand the implications of the buyout, before the deal is finalized. What you choose to do with the money you make when you sell your shares will depend on what's important to you. Take into consideration your individual needs, including personal and family income, estate planning and community support. By visiting your investment advisor and planning ahead, you'll ensure you're taking advantage of this opportunity to optimize your investment strategy to avoid any future financial headaches.
If you do make money from the buy-out of your BCE shares held outside of registered accounts, consider some strategies to reduce the amount of tax you will have to pay. As we have outlined in our publication entitled Strategies to Minimize Capital Gains Tax, which can be obtained through your BMO Nesbitt Burns Investment Advisor, some options for Canadian individual investors include:
1. Create Tax Deductions
For some, creating other tax deductions to offset increased income may lessen the tax you need to pay. For example, the extra cash from the sale of the stock could be used for a larger RRSP contribution, if you have available unused RRSP contribution room. Alternatively, depending on your risk tolerance, the purchase of a tax-favoured investment - such as flowthrough shares - can be used to defer tax payable the year a large capital gain is realized (subject to other tax considerations - please consult with your tax advisor).
2. Use Your Capital Losses
The amount of capital gains subject to tax is based on the calculation of net capital gains, which is the sum of all capital gains minus all capital losses realized in the year. If you have lost money on other investments in the same taxation year a significant capital gain is triggered, you may be able to use the losses to offset the taxes you would otherwise owe on the sale of your BCE shares. If your spouse or common-law partner has any unrealized capital losses, it may be possible to transfer these losses directly to you. Speak with your tax advisor for details.
It's important to remember that capital losses do not expire. If a capital loss is not applied in the current year, it can be carried back three years or carried forward indefinitely.
3. Make a Charitable Donation
As an investor looking to give back to your community, you should be aware that there are significant tax savings available to you. Based on enhancements introduced in the 2006 federal budget, capital gains realized on the transfer of certain publicly-traded securities to a qualifying charity may be tax-exempt; yet you can still obtain a donation tax credit equal to the value of your donation. To take advantage of this strategy it's important to plan ahead, as tax implications can be complicated in this scenario and time is of the essence (the donation of shares must be completed before the BCE takeover occurs). If you feel a charitable donation of your BCE shares is right for you, BMO Nesbitt Burns has a number of unique programs including an alliance with the Community Foundations of Canada (CFC) that you may want to consider. Speak to your BMO Nesbitt Burns Investment Advisor for more information.