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Permian Basin Royalty Trust Message Board

  • p21419t p21419t Aug 28, 2009 12:54 PM Flag

    Royalty trust taxes

    I have several Canroys that really suffered during the "Halloween" fiasco when they decided to change the tax structures in Canada... after much ado, they are still going to have to change their taxation.
    In PA, there is an effort to develop the Marcellus Shale formation... our illustrious Govenor Rendell has attempted (and may succeed) to change all the R&D expenses allowed by drillers... that should basically gut them if their profits... and hence devalue the stocks and any distribution there.
    Point being, with the US in extreme levels of debt, I am expecting higher taxes (less profits for distributions) in the near future. My understanding is that we are in deep trouble. I believe that all of our taxes will soon be raised to try to cover the Fed's bailouts and debts... Every man, woman and child now owe over $37,000 in the national debt...
    On the other hand, as the US $ is devalued, the price of oil should go up, thereby making the stock more valuable.
    Any thoughts? Any heads-up on this?

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    • I'm guessing that you are at or past the age at which you may receive IRA distributions. The Canadian government and the provinces are trying to raise cash in the same anti-business manner as the U.S. govt. That will cause investors to seek safer places to invest than the Canroys. If safety in retirement is the key concern...perhaps PGF (or even DUK) is a better way to go. Nice 10% (or 6.2%) return and considered safer than Canroys in this environment.

    • I avoid the Canroys 100% because of all the negative tax changes coming in 2011. The bottom line is keep PBT in an IRA; it is not fit for a non retirement, trading account.

      I expect Obama and/or Congress will make moves to increase all capital gains or, perhaps as a compromise, to more heavily tax investors who do not hold securities at least a year (and more than the current rate). Hope this does not occur but we shall see.

      Long 2,000+ PBT, reinvest all monthly royalties!

    • Well, there will be higher taxes for sure but they tried the same thing in Alberta and it backfired bigtime. Drilling fell off a cliff and moved to other provinces(read about it). Anyway, PBT is located in TX which is very friendly to oil/gas producers. PBT should be a very effective hedge against inflation in general along with the payout. Not being hedged provides price escalation exposure if you want that in you investment mix.

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