# Question re: backup withholding taxes (Canadian citizen with US shares)



## risingtide (Jan 26, 2015)

I recently tendered my 200 shares of a US company, Hillshire, to a corporate action by Tyson Foods.

Tyson offered to purchase Hillshire brands for $63 per share; the date this merger was Sep 5, 2014.

A credit to my account at Computershare (the transfer agent) showed up as "ACCRUED" in the amount of USD$8,640 (the USD$12,600 gross amount minus a 28% withheld rate). I took this to mean "accrued" and not paid...basically a bookkeeping entry to show what was owed to me based on their lack of a W8-BEN for me at the time.

I did have my account formally W8-BEN certified by Computershare on Dec. 22, 2014.

Shortly thereafter, Computershare processed my Exchange request for the 200 shares, which I had sent in in 2014 (This exchange actually occured in early 2015). 

I was given the advice from a tax specialist that since my account was indeed certified on Dec. 22, 2014, and since my payment was "constructively received" in 2014, I should have been subject to the reduced withholding rate (0% actually for a share sale) in 2014. Therefore the original accrual for $8,640 should have been reversed by Computershare and payment should have been for the full $12,600. 

Is this correct? Should I have been charged the W8-BEN beneficial rate of 0% for these shares?


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## risingtide (Jan 26, 2015)

a small clarification. I did not actually tender my shares to the offer from Tyson. As here is the wording from the offer:

Computershare Trust Company, N.A., the depositary for the Offer, has advised Tyson and Hillshire Brands that, as of 12:00 midnight, New York City time, at the end of August 27, 2014, approximately 86,987,201 shares of common stock of Hillshire Brands (not including 3,663,904 shares tendered by notice of guaranteed delivery for which shares have not yet been delivered) had been validly tendered and not validly withdrawn pursuant to the Offer, representing approximately 70% of Hillshire Brands’ outstanding shares. All shares that were validly tendered and not validly withdrawn have been accepted for payment. 

Later today, Tyson expects to complete the merger of Hillshire Brands with one of its subsidiaries, and, in connection with the merger, *all remaining shares of common stock of Hillshire Brands will be converted into the right to receive $63 per share in cash, without interest, the same price that was paid in the Offer. * Following completion of the merger, Hillshire Brands will become a wholly owned subsidiary of Tyson and its shares will cease to be traded on the NYSE and the Chicago Stock Exchange.

...so based on the part in bold, as a holder of Hillshire Brands stock before the 12:00 midnight on Aug. 27, 2014, I became the holder of a "right to receive" $63 per share from Tyson after this date. 

I chose to exercise this right I owned AFTER Dec. 22, 2014 (the date my account at Computershare became W8-BEN certified).


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## Eclectic12 (Oct 20, 2010)

Maybe something is missing from the description?

As I understand it - the W8-BEN forms are going to identify you as a Canadian, who under the US-Canada tax treaty - has the US dividend tax withholding rate reduced from 30% to 15%. Selling shares, on the other hand - are not taxable by the US gov't, only by the Canadian gov't as a capital gain or loss.

The tax specialist info makes no sense to me as if the "accrued" amount is:

a) dividends - 15% should have been paid to the IRS instead of 30%.

or

b) proceeds from a share sale - 0% should have been paid to the IRS and when the Canadian tax return is filed, there may be a capital gain (or loss) to report (assuming there was no provision with CRA for a tax deferred rollover).


Cheers


*PS*

Bottom line is that as this appears to be a share buyout - the full $12.6K should be in the account, with the capital gains taxes to be paid on the Canadian 2014 tax return to CRA.


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## risingtide (Jan 26, 2015)

Thanks for your input Eclectic.

I believe that what Computershare did was they followed this ---> http://www.irs.gov/taxtopics/tc307.html

...which says that an investor must provide his TIN (W9 or W8-BEN) or they will be subject to a 28% backup withholding on certain types of payments, specifically, 



*Payments subject to backup withholding: Backup withholding can apply to most kinds of payments reported on Form 1099. These include:

Interest payments ( Form 1099-INT (PDF));
Dividends ( Form 1099-DIV (PDF));
Patronage dividends, but only if at least half of the payment is in cash ( Form 1099-PATR (PDF));
Rents, profits, or other income ( Form 1099-MISC (PDF));
Commissions, fees, or other payments for work performed as an independent contractor ( Form 1099-MISC (PDF));
Payments by brokers and barter exchange transactions ( Form 1099-B (PDF))*;
Payments by fishing boat operators, but only the part that is in cash and that represents a share of the proceeds of the catch ( Form 1099-MISC (PDF));
Payment Card and Third-Party Network Transactions ( Form 1099-K (PDF)); and
Royalty payments ( Form 1099-MISC (PDF)).
Backup withholding also may apply to gambling winnings ( Form W-2G (PDF)), if the winnings are not subject to regular gambling withholding.*


I did provide a TIN (my Canadian Social Insurance #) on the W8-BEN form I provided them and my account became tax certified using this form by Computershare BEFORE the actual exchange of shares for the $63/share occured a few days ago. However Computershare sent me a cheque for the 28% lesser amount (USD$8,640) citing that's what my account showed as a balance. I still haven't been able to reach someone at Computershare who will correct this. The first line reps cannot tell me what is wrong with my point of view and keep passing my 20+ objections on to the "tax department" who have done nothing to correct this or contact me.

Had to vent there!


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