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Plains All American Pipeline, L.P. Message Board

  • oilrico oilrico Jan 10, 2012 9:30 AM Flag

    Plains' BP Cdn Assets will be subject to Cdn taxes

    When Plains takes over BP Canada assets, those assets will be subject to Canadian Income tax. Could someone explain how this will work out ? Do individual investors have to report the Canadian income ? I don't quite understand how you can a company operating as a MLP in the US, and a taxed entity in Canada . As far as I know, it's the only MLP that will have a significant asset base outside the US.

    Thanks in advance

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    • http://www.irs.gov/pub/irs-pdf/i1116.pdf says"
      You may be able to claim the foreign account the general rules for tax credit without filing Form 1116 [... if ...] Your total creditable foreign taxes are not more than $300 ($600 if married filing a joint return)." Not $1200.

      If you do file 1116, the accrued tax goes on a different copy of form 1116 than the one that holds foreign tax paid. That is relevant to PAA for those who file form 1116.

    • The corporate and provincial tcombined tax rate in canada is about 40%. Thus the tax on Canadian profits is no longer at the 15% rate because PAA is paying the taxes as a Canadian Corp in Canada. You get a credit for the proportionate share of Canada taxes paid and a proportionate share of the income from Canada - those two numbers go on Form 1116 if over $1200 in foreign taxes for you in 2011 or simply put as a credit on your 1040 if the foreign w/h is less. Not sure why there is discussion about the type of income as the inocme from canada is also included in your total.

    • Thank you rudfox. Yes, my CDN O&G trusts did convert to corporations at the start of 2011, still with 15% dividend withholding per treaty.

      With PAA, I do suspect that these are CDN operating profits, with the higher tax rate.

    • See http://en.wikipedia.org/wiki/Royalty_trust#Canadian_versus_U.S._royalty_trusts and see the place that starts "The tax status of Canadian trusts is to change in 2011". So rather than sending you a Canadian tax form , I think PAA is paying the tax on Canadian operation profits. Look at all the work they are saving you not having to file the Canadian taxes yourself. :-) Then, I think, the numbers get put onto your K-1 into box 16 where it makes it into your form 1116 if you have a lot of foreign tax.

      Note that the box 16 tax is code M=accrued foreign tax. This means that you (probably with the help of TurboTax) create a second 1116 form to contain your accrued Canadian tax. So when you go to link to a form If you have form 1116 but not a second copy of 1116 while handling PAA, then when link to a 1116, create a new copy to handle the accrued taxes on a separate 1116 from the 1116 that holds paid foreign taxes.

    • I'm well aware of the fact that PAA does not pay dividends.

      I'm hoping that someone might answer my primary question concerning the deficient K-1. The girl at the K-1 help line (CPA firm it appears) had no answer and wasn't about to find one. Emails to Investor Relations are being ignored.

    • "I'm used to 15% withholding from Canada."

      PAA does not pay dividends, so the dividend withholding rate is irrelevant.

      Anyway you perhaps better get unused to it. The dividend tax rate could go up to 46% in 2013 depending on what happens with Bust tax cuts.

    • KMP has significant Canadaian holdings.

 
PAA
59.61-0.46(-0.77%)Jul 24 4:01 PMEDT

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