Why the 5 billion dollar paper shuffle equal to 1/800th of Canada's 2003 net worth? ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ (Basically, BCE's had a hypothetical dollar, and lend it with interest to [a BCE company]; and then this dollar bought preferred shares in another BCE company 4047974; then 4047974 lent the dollar at no interest back to BCE, seems an odd loop.) ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
(BCE�s Bell Canada transaction footnote, 2002 annual report, p,45, Sedar april 03) ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ "BCH, 4047974 Canada Inc. and Bell Canada" "In the second quarter of 2002, as part of a tax loss consolidation savings strategy covered by an advance tax ruling,"
"BCH advanced $5 billion in cash to us through a subordinated interest-bearing demand loan." [Note, second quarter 2002, BCE's 5 billion for SBC in works; therefore seemly hypothetical funds advanced.]
"We then used the proceeds to acquire preferred shares in 4047974 Canada Inc. (4047974Canada), a wholly-owned subsidiary of BCH."
"4047974 Canada then advanced $5 billion to BCH through an interest-free subordinated demand loan." [Interest free note added, not in first disclosure, that 4047974 reduced.]
"In the first quarter of 2003, the principal amounts outstanding under this tax loss consolidation savings strategy were decreased to $2.5 billion." [No context for reader]
"For 2003, the interest rate on the loan is equal to 4.5%, which is essentially the same as the dividend rate on the preferred shares. The interest rate and the dividend rate are reset at the beginning of each year."
"We have the legal right and intention to offset the demand loan payable to BCH and the investment in preferred shares of 4047974 Canada." [Note, Loan loop does not puff up BCH's GAAP disclosed balance sheet asset, or liabilities, displayed equity.]
"As a result, these items, as well as the related interest expense and dividend income, have been presented on a net basis."
"The tax savings resulting from the interest expense is presented as a reduction of the income tax expense."
~~~~~~~~~ (5.4 billion goodwill SBC asset issue) [Firstly, BCE should have paid no taxes on the sale of 20 percent of Bell Canada to SBC, as the deal should have structured that SBC was investing new equity. Same logic for being a loan. BCE paid capital gains on the sale to SBC, must be true, as BCE claimed goodwill on the enterprise being returned, no direct disclosure on exact taxes paid. Note, BCE is just paying back a loan, BCE has already received tax credits for investing SBC's loan, and losing it.]
[Note, 50 percent capital gains exemption, and 25 percent premium to SBC, total combined value, is somewhat equal to the market value of 5.4 billion in goodwill tax credits. Unusual goodwill tax loophole. Note, new BCE Ontario Teacher Pension deal would create this goodwill anyway, and recreates BCE's used goodwill, as BCE recreated SBC's goodwill.]
[Alternative approach to BCE describing the transaction with a goodwill gain. BCE declares a 5.4 billion dollar loss on the SBC debt repayment. Again no tax lose credits, as BCE has already lost these funds and received tax loss credits.]
[Note, SBC not allowed 50 percent capital gain exemption, as this was a loan to BCE, and was interest, and not a gain from a sale. Revenue Canada's extra take.]