Saw in the news that they cut the growth estimates ... but no actual distribution cut. Have you bought and sold repeatedly in the past? I have bought but never sold due because I thought that when you sold it could trigger a significant tax liability because the distributions (or part of them) are treated as return of principal which reduces cost basis?
That is what I thought at first ... but then I re-examined the information in the "backgrounder" document ...
Look at "Table 2: Simplified Comparison of Investor Tax Rates in 2011". When I looked at this table I saw that the Taxable Canadian Investor rate did not also go up by 31.5% and therefore it appeared that they were NOT simply applying an "across the board" "corporate" tax on FTEs.
When I now take a closer look I see that the * has some interesting information ...
"(*) All rates in the table are as of 2011, include both entity- and investor-level tax (as applicable) and reflect already-announced rate reductions and the additional .5% corporate rate reduction described below. Rates for "taxable Canadian" assume that top personal income tax rates apply and that provincial governments increase their dividend tax credit for dividends of large corporations."
I also don't understand the difference between the Current and New System column headings where Current has a heading of "FTP (INCOME)" and New has a heading of "FTP (NON-PORTFOLIO EARNINGS).
If they want to put the new rule in place for NEW FTEs ... that is fine and fair ... but I think it is unfair not to "grandfather" existing FTEs.
I realize that tax laws can change ... but this is a huge change.
What would happen if all the "shareholders" petitioned the board of ERF to borrow money and then use the money to pay current investors a huge one-time dividend under the current rules? Then the future income would be offset by interest payments so that "earnings" would be zero for years to come and no tax would be paid.
Here is the link to the Canadian Ministry of Finance website ...
Note that the most useful information is in the "backgrounder" ...
Based on what I can read ... it would appear that this new law would violate the US-Canada Tax Treaty ... but this is JMO based on a quick review of the information available to me. The devil is always in the details ...
Interestingly ... I found the following information on the Enerplus website ...
"For U.S. unitholders, the payments are comprised of dividend and non-taxable return of capital (tax deferred). For most U.S. taxpayers, the dividend portion should be a �Qualified Dividend� eligible for the reduced tax rate. For withholding tax purposes, 2006 estimated taxable income (dividend income) for U.S. residents is 100%. Actual taxable amounts may vary depending on actual distributions, which are dependent upon production, commodity prices and funds flow experienced throughout the year. Actual taxable amounts will be communicated to unitholders via a Form 1099 DIV prepared by their brokers."
Since they are using the word "dividend" rather than "distribution" ... it would seem that the US-Canadian Tax Treaty would be applicable.
I am wondering if the tax laws are being applied at the corporate rather than individual level? Need to find the link to the article that discussed the proposed changes.
I noticed one posting that talked about US-Canadian Tax Treaty and the fact that US Citizens should not be taxed more than 15%. Here is a link to pub 597 on the IRS website ...
It talks about Interest, Dividends, and Royalties ... but NOT "DISTRIBUTIONS". I think this is the key. I think that US Investors could make a strong case that DISTRIBUTIONS = DIVIDENDS ... but it depends upon very specific language of the treaty. I will try to find some additional information and post.
Interesting. Thanks for the informative post. The chart with the details is actually in the "backgrounder" document which you can access from the link at the top. Basically, taxes for Canadians decrease slightly and taxes for non-Canadians jump from 15% to 40+%. Obviously an easy target for Canadian politicians - "taxation without representation" ==> tax the non-residents who cannot vote them out of office. I am wondering what the REAL impact will be to U.S. Investors? If we can claim a CREDIT for foreign taxes paid against U.S. taxes then does it matter? Provided that the U.S. taxpayer has offseting tax liabilities to which the credit can be applied. Would have to look at the regulations. Anyone know the answer?
There have been takeover / merger rumours for years. Honeywell was mentioned several times in the past. Nothing came of it. Take a look at all the SEC filings for ROK in December. You will see a lot of senior mgmt exercising options ... and then immediately selling the stock that they acquired. At least that was what I read out of the filings. That would seem to indicate that they feel the stock is overvalued. They (if anyone) would know about an impending takeover / merger that would drive up the price of the stock and if so would likely excercise and hold - right? JMO
I agree that ROK is certainly less dependent on the big 3 than it used to be ... but the auto industry in general still drives a large portion of the US economy.
ROK's biggest challenge is to reduce its cost structure so it can be more price competitive in certain segments of the market. ROK has grown by acquisitions ... but has consistently failed to integrate those acquisitions from an operational (e.g. not sales and marketing) standpoint. ROK tried to implement a global ERP system using PeopleSoft and incurred lots of costs the project eventually died. ROK is now trying again ... this time with SAP. The only way that this will be successfull is if senior management makes the compensation and bonuses of all the business units completely dependent on successful implementation in a timely fashion. Will be interesting to see if the project will be successful. If it is then the future for ROK looks bright ... if not ROK will still be around for a long time but they will be much less successful financially as operational costs will be higher than for other firms.
Just my opinion.
ROK has diversified and is no longer as dependent on the big 3 automakers as before ... but ... the recent announcements from GM (with Ford likely to follow?) about plant closures cannot be good news for ROK.
Furthermore ... cuts in capital spending / plant maintanence by the big three automakers will have a knock-on effect as all the system integrators and equipment manufacturers will also be affected.
Quite a few insiders exercising options to buy and then immediately selling. Options do expire so I suppose its possible that they are exercising prior to expiration ... but in that case why turn around and immediately sell?
Don't know how options are taxed. If taxed upon exercise ... then I suppose its possible that one might need to immediately sell in order to provide funds to pay the capital gains taxes ... but then why not only sell enough to provide the money needed to pay the taxes?
Would seem to indicate that these insiders feel that ROK is overvalued at present.
Someone told me about a former ROK (A-B) employee who had a model that was quite good at predicting ROK price movements and one of the most important factors was big 3 capital spending?
My house was originally built with electric baseboard heat. Its an envelope house - a kind of passive solar.
The person I bought it from installed a gas/forced air/HVAC system just before I bought it because the lack of air conditioning and prospect of high electric bills in the winter would have turned off buyers.
The electric baseboards are still installed ... just switched off at the circut breakers.
Gas is still cheaper than electric ... but only for a 12 hour window M-F.
If you have Time of Use available to you the off peak rates are about 1/3 the regular rates while the peak rates are about double the regular rate.
What I am considering is going to Time of Use and then replacing the thermostats for the baseboards with new programable models (cost would be 8 x $60 = $480 + shipping).
I would then use electric heating off-peak and gas heating during on-peak (would still have to pay for the blower on the gas furnace at on-peak rates).
I have all the electric bills since the house was built (the previous owner left them for me) so I have a pretty good idea what usage would be.
Looks like I could save some $$$ but the natural gas prices would have to stay high for a couple years to pay back the cost of the programable thermostats.
Thanks for the link to the 2003 ERF tax document. I took the plunge with ERF this year so now I have to figure out how to deal with the foreign withholding this year. Prior to my purchase I had read a message that indicated that US citizens could apply to the Canadian government for a (full?) refund of all withheld taxes. However ... the ERF document makes no mention of this. The ERF document DOES indicate that IRS Form 1116 should be completed. When I read the instructions for form 1116 it did mention something about a refund (or partial refund) depending on the tax treaty between the US and a particular country. Recent postings appear to indicate that changes are (will be) in store from the Canadian tax authorities. Would appreciate information / opintions from US investors on their past experiences with the best way to deal with the Canadian withholding.
Which TurboTax did you use and was it installed on your PC or via the web?
I found that TurboTax for the web didn't seem to handle certain things related to investments very well and was wondering if the installed version was a bit better (also found a bug in their web version w.r.t. preparing amended tax returns as the result of corrected 1099-DIV).
Appologies to the old timers on this board if these kinds of questions have been asked and answered many times previously. Had a look to see if I could see any postings recently but did not run into any.
I noticed that I had 3 entries in my brokerage account from ERF: return of principal, dividend, and withholding.
OK - the first two I understand - but not third.
I knew going in that CANROYs were not the typical investment - but figured that they couldn't be much worse than PFICs (e.g. VLCCF).
What happens with the withholding for US investors? It appears that this is Canadian withholding - not US withholding - is this correct? Can US investors claim this back somehow?
Any information would be appreciated. If you could point me in the direction of the appropriate IRS documents it would be appreciated.
What does the 50% ownership requirement mean to current "shareholders" (unitholders?)?
ERF could simply issue new additional shares (units?) and part of the new issue would be that the new shares would only be sold in Canada and only to Canadian nationals. This would of course dilute value for existing shareholders. Of course the funds raised from the sale could be paid to existing shareholders (unitholders) as a special dividend.
ERF could buy back shares and then re-issue them but sell only to Canadian nationals. This would require cash to purchase on the open market. Could be an issue?
I am new to these Canadian royalty trusts. Any information from long time shareholders (unitholders?) would be appreciated.
All you longs can thank me for the recent rise to 21 ( I sold back at around 18 ).
The next dividend could be > 1.00 but I still don't understand the rise to these levels.
Cost of capital will likely increase, operating costs possibly higher, and revenue will likely be less than the previous 7 years even if spot market rates stay up. VLCCF only hit the 20's back in 2001 when spot market rates were high like today. The difference was that back then VLCC had basically 100% exposure to the upside of the spot market via the award from the LTBP / contracts with Shell. Now the exposure to the upside of the spot market is only 1 VLCC @ 100% + 2 VLCC @ 50% + 2 VLCC @ 0%. Plus the assets are not worth as much as they are 3 years older.
Oh well markets not logical. I suppose the price could be justified if the spot market rates will stay high for the next several years.