# ABBOT/ABBVIE holders...Important tax info for you



## warp (Sep 4, 2010)

If you bought ABBOT LABS before 2013, you will have gotten ABBVIE shares in the spinoff on Jan1 , 2013.

It is important to know that the ABBVIE spinoff was considered a Tax Free distribution in the US , BUT this amount will be included on your 2013 T5 as US Dividends, and you will be taxed on it, at your highest marginal rate unless you take steps to eliminate that "US dividend income", ( which you never actually got,), on your 2013 Canadian Tax Return.

You have to include an election on your 2013 Canadian Tax Return asking for a SECTION 86.1, under the Canadian tax code, in relation to this amount. It gets a little complicated , but easy to do, and it will take this supposed US dividend off your 2013 income, so you will NOT be taxed on it.

You will have to allocate new cost bases for the Abbot shares you still own, and the new Abbvie shares you received, based on your original cost base on the Abbot shares.

A similar thing happened last year with the Kraft spinoff of Mondelez. I personally own both Kraft and Abbot and was affected by all this.

This is important because if you do not do this and protect yourself...you will pay tax twice...once on the "dividend amount" included on your T5, and again ON THE SAME MONEY, when you sell your shares.

I am just trying to alert and help holders of ABBOT Labs, who got shares of ABBVIE in the spinoff.

If you have any questsions,,just ask.

Good luck


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## gimme_divies (Feb 12, 2011)

Can you please confirm that the tax implications described apply only to ABT/ABBV shares held in a non-registered account/TFSA, and not to shares held in a registered account.


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## warp (Sep 4, 2010)

gimme_divies said:


> Can you please confirm that the tax implications described apply only to ABT/ABBV shares held in a non-registered account/TFSA, and not to shares held in a registered account.


The info and tax implications will apply to Cash accounts only.....not to registered or TFSA accounts, where there would be no tax payable anyway.

As a sidenote, I will tell you, if you do not already know, that any dividends you receive from US, ( or international), stocks in your TFSA will have tax withheld. From the US the tax withheld will be 15%.
Threre is no tax withheld on US dividends in your RRSP.

I cannot see how it's possible that the Abbot distribution of Abbve shares would be considered
a US dividend in your TFSA, but you never know. Tax law is always full of stupid things, especially between countries.
If you held Abbot in your TFSA on Jan 1, 2013...I would look at your statement and see how the distribution was handled.


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## My Own Advisor (Sep 24, 2012)

You don't need to worry about this in an RRSP. Oops...too late, warp covered that and more!


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## shanti (Dec 3, 2011)

Wow, thank you for the information. 

I guess I have to file a paper T1 for 2013 with an election.


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## m3s (Apr 3, 2010)

I still have the Abbvie spinoff.. in my RRSP  Good information though


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## warp (Sep 4, 2010)

shanti said:


> Wow, thank you for the information.
> 
> I guess I have to file a paper T1 for 2013 with an election.



Yes, you will have to file a paper tax return for 2013.

I myself, have the specific Section 86.1 forms Re the Abbvie spinoff, to fill in this info for the CRA, which makes the process so much easier.
But sorry, I cannot remember where I got these forms, perhaps from the Abbot Labs website, or the Abbvie website, in their Investor Relations sections. Or perhaps I got them from my Broker. You might want to call your broker, ask how this Abbvie spinoff will be handled, and ask if they have these forms for you...as I recall I think I might have gotten them from my broker.

If you can't get them that way, go to the CRA website...CRA.GC.CA
put "section 86.1" in the search bar...the info will come up.

Its a bit complicated. ( as I learned last year when Kraft spun off Mondelez, and the spinoff showed up as a large taxable dividend on my 2012 T5, and I became aware of this section 86.1)......but you will get the hang of it , as I did.

You will have to write a Letter with your tax return stating that you are taking a section 86.1 in regard to the Abbvie spinoff...then subtract the amount of the dividend frorm your T5 for foreign US dividends.
( that you will find on your statement, or your rear end review from your broker).... 
Then you will have to do some calculations to show your original cost of the Abbot shares...then calculate your new cost basis of the Abbot shares you still have, and the cost basis of the Abbvie shares you got in the spinoff....a royal pain in the ***, but it must be done.

If you need more help , just ask...I want to help because I hate our tax system and the way people get screwed because its so somplicated and confusing.
I had never even heard of a "section 86.1" before last year...and neither had my accountant who has been doing taxes etc, for about 40 years! I have been doing my own taxes for many years.

Maybe I will try and figure out where I got these forms that are specifically for the Abbvie spinoff, and if possible email them to you.

Good luck


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## warp (Sep 4, 2010)

Ummm.....
that should read "year end statement", in my last post...NOT "rear end statement"

That was a typing error, though "up the rear" is usually where you get it when it comes to the dozens and dozens of taxes we pay, so perhaps it was a Freudian slip on my part.


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## shanti (Dec 3, 2011)

warp said:


> Ummm.....
> that should read "year end statement", in my last post...NOT "rear end statement"
> 
> That was a typing error, though "up the rear" is usually where you get it when it comes to the dozens and dozens of taxes we pay, so perhaps it was a Freudian slip on my part.


That's funny. 

I could find a sample election letter and necessary information to calculate ACBs for Abbot and Abbvie in Abbvie web site. I don't need to find the FM s of the both companies after spin-off. How nice of them. It seems all I need it to just plug in my original cost. 

Thanks warp


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## P_I (Dec 2, 2011)

For those now receiving T5's containing a rather large foreign dividend amount, detailed information is available from the Abbott Laboratories website -- Information for Canadian resident shareholders concerning the Canadian Income Tax Election on the spin-off of AbbVie Inc. from Abbott Laboratories covers the information you'll need should you want to defer the tax on the distribution of the shares.


Abbott Laboratories said:


> Generally, a Canadian resident who receives foreign shares must include the fair market value (“FMV”) of the shares received in their income as a foreign dividend. However, under certain conditions, the shareholder (a shareholder could be an individual, trust, corporation or partnership) can make an election[SUP]1[/SUP] to defer the taxation of this distribution.
> 
> We understand that the Abbott spin-off of AbbVie has satisfied all of the conditions necessary in order to permit the Canadian shareholders to make the election to defer the tax on the distribution of AbbVie shares.
> 
> [sup]1[/sup] Section 86.1 of the Income Tax Act (and the equivalent for provincial purposes).


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## warp (Sep 4, 2010)

Thanks for posting that link to the ABBOT website regarding section 86.1

These are the forms that I already had, and the forms that will make it so much easier for ABBOT shareholders to fill in to figure out cost basis on ABBOT shares and new ABBVIE shares.

What I did in 2012 tax year for my KRAFT spinoff of MONDELEZ was yellow in the "foreign dividend" on my year end summary from my brker...and actually write a note on my T-5 
telling the CRA that I was taking off the amount of the so-called foreign dividend from the amount on my T-5.

I also included a letter staing that I was electing to take a section 86.1 in regard to the KRAFT/MONDELEZ spinoff. This seemed to work, and I had no problem with my 2012 tax return.

good luck to all


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