# Beware XIU's large reinvested distribution



## james4beach (Nov 15, 2012)

*XIU and XIC large reinvested distribution*

XIU and XIC have a large reinvested distribution in 2015. I haven't seen this happen since 2008. See the 2015 Distribution Characteristics

For XIU there's a 0.24244 per share reinvested distribution at the end of 2015. In taxable accounts, this significantly increases your adjusted cost base (ACB) and reduces the eventual tax you'll pay when you sell. It's up to you to track this number of the lifetime of your investment.

You will over-pay taxes if you forget this for XIU & XIC

For example: You buy 500 shares XIU at $19 and sell them this year for $21.
ACB = (500 x 19.00 + 9.99) = $9,509.99 initially
ACB = $9,509.99 + (500 x *0.24244*) = $9,631.21 after reinvested distribution
Proceeds of sale = 500 x 21.00 - 9.99 = $10,490.01

When you account for the reinvested distribution, the capital gain is: $858.80
If you forget the reinvested distribution, you'll mis-report capital gain as: $980.02


----------



## james4beach (Nov 15, 2012)

The ACB tracking is one thing. The other big impact is that you should get some T3 slips this year with giant Box 21 ... these are capital gain distributions that should be reported on Schedule 3, line 176. This increases the capital gains tax.

XIC had 0.48440 per share capital gains
XIU had 0.32451 per share capital gains

I don't think they've distributed these for many years, so beware of this surprise and don't forget to report those boxes on the T3


----------



## Video_Frank (Aug 2, 2013)

james4beach said:


> XIU and XIC have a large reinvested distribution in 2015. I haven't seen this happen since 2008.


In 2014 XIC had a reinvested distribution of 0.32854. Your broker *should* be keeping track of this. For me, BMoIL's ACB of XIC matches exactly with my numbers.


----------



## humble_pie (Jun 7, 2009)

james4 why have you launched 2 nearly-identical threads on XIU tax slip info? this is overkill

the XIU T3 information will be routine when the tax slips reach investors, nothing appears to be unusual this year ...


----------



## AltaRed (Jun 8, 2009)

I agree 2 threads on this is overkill and both the cap gains and re-invested distributions are not material in relative terms. That will happen when a stock like Tim's gets taken out and has to be replaced with something else. The same thing would happen in an individual's portfoiio if they did not want to keep Burger King in their portfolio, albeit at least that would be a personal, rather than forced, decision. In 2016, it might be one of the dividend ETFs that has large distributions if a high yiedling dividend stock gets taken out by a foreigner.


----------



## OptsyEagle (Nov 29, 2009)

A small curiosity question. I own a little XIC and I noticed that it declared a little foreign income. Where do you think the foreign income would come from? I believe this ETF replicates the TSX index. Is there a holding in that index that is considered foreign?

I think it was less then 1% of the taxable distributions declared, so as I said, it is a small question, just out of curiosity.


----------



## OptsyEagle (Nov 29, 2009)

OptsyEagle said:


> A small curiosity question. I own a little XIC and I noticed that it declared a little foreign income. Where do you think the foreign income would come from? I believe this ETF replicates the TSX index. Is there a holding in that index that is considered foreign?
> 
> I think it was less then 1% of the taxable distributions declared, so as I said, it is a small question, just out of curiosity.


Looking at the holdings, I am thinking it might be foreign income from some REITs that it owns. Perhaps the REITs have some US or International real estate and that income is getting flowed through. For instance it holds Dream Global Real Estate REIT as one example. That is my best guess, anyways.


----------



## AltaRed (Jun 8, 2009)

OptsyEagle said:


> Looking at the holdings, I am thinking it might be foreign income from some REITs that it owns. Perhaps the REITs have some US or International real estate and that income is getting flowed through. For instance it holds Dream Global Real Estate REIT as one example. That is my best guess, anyways.


A good guess in my opinion.


----------



## humble_pie (Jun 7, 2009)

OptsyEagle said:


> A small curiosity question. I own a little XIC and I noticed that it declared a little foreign income. Where do you think the foreign income would come from? I believe this ETF replicates the TSX index. Is there a holding in that index that is considered foreign?



yes there are a few of them.

i don't believe income classed as foreign would arise from REITs with overseas properties, though. Not when the REIT head office is in canada. Because what triggers the canadian/foreign distinction is where a head office is located.

i believe the tiny portion of XIC foreign income is coming from some stocks - mostly US companies - that have chosen to list & trade on the toronto stock exchange. Although most of the cross-border traffic goes in the opposite direction - ie canadian companies choose to list & trade on NASDAQ or new york - nevertheless there are some foreign stocks that have chosen the Maple Leaf route.

mostly, these are small to middle-sized resource & mining companies. Reportedly they list in canada because our world-famous investment bankers are so skilled at launching IPOs in the resource sector.

Gran Tierra is an example of this. It trades in toronto, is big enough to be included in XIC, but is not a canadian company. Gran Tierra dividends will be classed as foreign income.


----------



## Spudd (Oct 11, 2011)

Canadian REIT's do produce foreign income. Last year Rio-Can, Canadian REIT, and H&R all gave me foreign non-business income on my T3.


----------



## AltaRed (Jun 8, 2009)

I am not so sure HP. REITs HQ'd in Canada do have foreign income and that would (should?) pass through to investors. 

Examples: Chartwell in 2014 when they had US properties. http://investors.chartwell.com/Cache/1001195485.PDF?Y=&O=PDF&D=&fid=1001195485&T=&iid=4100072

Dream Global REIT here http://www.dream.ca/global/investors/#tax-information


----------



## james4beach (Nov 15, 2012)

Yes, I probably shouldn't have made two threads. It's just that XIU and XIC are extremely popular, so I wanted to help people notice these distributions. They rarely happen; it's been 8 years since this happened on XIU. If you've been reporting them for the last couple years, you may not even know this is something you have to do in 2015

- while it's true that brokers attempt to track the ACB, the consensus on the forum has been that it's our responsibility to track our own ACB over time. People who have been tracking XIU's ACB will not have seen a "reinvested distribution" adjustment like this since 2008

- remember to report the distributed capital gains from the T3 into line 176. I disagree that it's an insignificant amount; XIC is distributing about 2% of its value. With say a 100K holding, you can't just omit a 2,000 capital gain distribution... the CRA is going to flag you.

Given that T3 slips often arrive late in March, *and are the last slips to arrive*, you could easily forget to input the T3 information into your tax return. That might cause trouble as you failed to report a reasonably large taxable event.


----------



## humble_pie (Jun 7, 2009)

AltaRed said:


> I am not so sure HP. REITs HQ'd in Canada do have foreign income and that would (should?) pass through to investors.
> 
> Examples: Chartwell in 2014 when they had US properties. http://investors.chartwell.com/Cache/1001195485.PDF?Y=&O=PDF&D=&fid=1001195485&T=&iid=4100072
> 
> Dream Global REIT here http://www.dream.ca/global/investors/#tax-information



yes, Spudd mentioned. I'm not a big REIT fan so i didn't know. Thankx to both of you for the info.

i do own Dream global REIT but it's in the TFSA so no tax slip.

the other group i mentioned - foreign companies that have chosen to list publicly on the toronto or venture stock exchange - is quite legitimate, though. Any of these that are big enough to be included in XIC & that pay distributions would show up on an XIC T3 as foreign income, i believe. Gran Tierra is a likely example.


----------



## humble_pie (Jun 7, 2009)

james4beach said:


> ... XIU and XIC are extremely popular, so I wanted to help people notice these distributions. They rarely happen; it's been 8 years since this happened on XIU. If you've been reporting them for the last couple years, you may not even know this is something you have to do in 2015



James4 here is a nano-detail of the ricey-dicey hairsplitting type that usually delights you.

XIU does have reinvested capital gains alright. What altaRed calls phantom distributions. The investor has to pay current tax but never sees one centime of this so-called profit.

as you say, the amount is used to adjust the cost base *up* so that the investor is not taxed twice for the same gain amount.

here's the delicious nano-detail: once in a blue moon, iShares XIU issues another kind of dividend. This one is called a *special* dividend. It's also reinvested, although never paid nor ever even seen. It serves to adjust the cost base *down.* Fortunately the amounts are very small.

how this works, i do not know. In XIU, it did not happen this year. When it does happen, i meekly adjust my costs downwards as instructed, like a liddle lamb pie. Some things are better left unquestioned.


----------



## james4beach (Nov 15, 2012)

humble_pie, are those other adjustments you mention coded as "return of capital" (even if it's not really ROC)?

The formula is that ACB is increased by reinvested distributions, reduced by ROCs

XIU has been a pretty good one over time, doesn't wiggle around much (which I like) but with some other ETFs the cost base really shifts a lot. For instance we started XSP at $18.63 and over the years that's adjusted to $21.74 ... that's a 17% difference just from cost base adjustments


----------



## james4beach (Nov 15, 2012)

A heads up, again this year, beware that XIU (and maybe XIC too) have big reinvested distribution.

The iShares site shows a 2018 year-end reinvested phantom distribution of 0.43436 which doesn't show up as cash, but should be used to adjust your ACB. This is a huge amount... about 2% of the share price!


----------



## AltaRed (Jun 8, 2009)

XIC is 0.18784/unit. One would normally expect XIC to be less than XIU since more holdings would be falling out of the top 60 into the pool of 300 than stocks falling off the bottom out of XIC. A case for broad based index ETFs over more actively managed boutique crap.


----------



## Eclectic12 (Oct 20, 2010)

james4beach said:


> ... XIU and XIC have a large reinvested distribution in 2015. I haven't seen this happen since 2008. ... I don't think they've distributed these for many years, so beware of this surprise ... It's just that XIU and XIC are extremely popular, so I wanted to help people notice these distributions. They rarely happen; it's been 8 years since this happened on XIU ...


I would suggest that you need to double check. 

Googling "iShares 20xx reinvested distributions" says there from 2018 (estimated) through 2011, XIU has three years of these while XIC has five years of these. Some like the recent ones are large while others are not so large.




james4beach said:


> ... - while it's true that brokers attempt to track the ACB, the consensus on the forum has been that it's our responsibility to track our own ACB over time.


It's the investor's responsibility for the ACB but I doubt the gov't is going to chase one down where missing the re-invested distribution gives them some bonus capital gains taxes.

For one to truly trust what the broker gives them for ACB, IMO at least spot checks to see if one's numbers versus the brokers are close/spot on. Without doing so, one has to hope one's broker is right versus other brokers that have been reported as having the wrong numbers.




james4beach said:


> ... - remember to report the distributed capital gains from the T3 into line 176. I disagree that it's an insignificant amount; XIC is distributing about 2% of its value. With say a 100K holding, you can't just omit a 2,000 capital gain distribution... the CRA is going to flag you.


Agreed ... though the way I read the thread, the comment about "being small" is about the flavour that reduces ACB (I have only had RoC reported so unless RoC is being referred to, I have no experience with whatever it is).

What's in the T3, box by box should be reported into one's tax software, which will automatically take care of line items. It would seem only the few doing paper returns would have to worry about line numbers. Never mind that those using tax software plus the CRA "autofill" function only need to verify the totals as the import will take care of the data entry as well.




james4beach said:


> ... Given that T3 slips often arrive late in March, *and are the last slips to arrive*, you could easily forget to input the T3 information into your tax return. That might cause trouble as you failed to report a reasonably large taxable event.


It is a risk ... though with CRA receiving the T3's, I would expect their computers to eventually adjust. It's probably not a problem that will exist for too long before one is made aware of it (though maybe not the source).


Cheers

*PS*
How late the T3 for XIC arrives is precisely why I moved it into my TFSA. This speeds up when I can file my tax return by several weeks.


----------



## Eclectic12 (Oct 20, 2010)

james4beach said:


> humble_pie said:
> 
> 
> > ... here's the delicious nano-detail: once in a blue moon, iShares XIU issues another kind of dividend. This one is called a *special* dividend. It's also reinvested, although never paid nor ever even seen. It serves to adjust the cost base *down.* Fortunately the amounts are very small ...
> ...


Perhaps it might help if some of the years when this happened were known?

I am puzzled as my searches on BlackRock's site as well as looking at the distribution breakdowns has the usual suspects that show up in the formula plus explanations of "RoC decreases ACB" and "phantom distributions are taxable immediately plus increase ACB".


It doesn't matter to me at the moment as my ETFs are in registered accounts but that may not last forever.


Cheers


----------



## like_to_retire (Oct 9, 2016)

james4beach said:


> A heads up, again this year, beware that XIU (and maybe XIC too) have big reinvested distribution.
> 
> The iShares site shows a 2018 year-end reinvested phantom distribution of 0.43436 which doesn't show up as cash, but should be used to adjust your ACB. This is a huge amount... about 2% of the share price!


You've certainly reminded me of days past when I use to invest in Canadian ETF's. The tax jiggery-pokery every year was mind numbing. Those 'reinvested capital gains' that were taxable as capital gain with no actual cash received and no new units - but consolidated and added to one's cost base. What a rip that was. Or sometimes those once a year 'special distribution of dividends'. Or 'return of capital' that was not taxable with cash received but not re-invested in new shares and then subtracted from cost base. Then of course the standard quarterly cash distributions of 'dividends' that were taxable as dividend income with cash received and not re-invested in new shares and not added to cost base. Sheesh - makes my head spin. I'm sure I was funding someone's retirement other than mine.

On top of this there were all the taxable characteristics per unit for tax purposes of Eligible Dividends, Non-Eligible Dividends, Capital gains, Return of capital, Other income, and Foreign Income.

And for all this extra tax work you had to do, the ETF charged you an MER fee and management fee for the fund that contained a majority of dogs that you'd never buy as individually stocks.

My switch to individual stocks was quite liberating and profitable too over the years. No more tax concerns. A stock pays a dividend that shows on a T5 slip every year. DONE - full stop. My advise is that if something produces a T3 at tax time, then pay attention.

James - you've shown yourself that no matter how you mix it up and call it a 5 pack, 10 pack, or whatever pack, it's almost a slam dunk that you beat those index ETF's simply because you aren't holding dogs that the ETF's are full of. The industry of course will tell you that the index can't be beat. I have killed the Canadian index since switching to stocks and it ain't because I'm smart.

ltr


----------



## james4beach (Nov 15, 2012)

Eclectic12 said:


> How late the T3 for XIC arrives is precisely why I moved it into my TFSA. This speeds up when I can file my tax return by several weeks.


This is what I've arrived at as well. ETFs are a pain in non-registered. Even once I solve my US tax complications, I'm going to continue only holding direct securities (stocks & bonds) in non-reg, and will continue to keep ETFs inside registered only.



like_to_retire said:


> You've certainly reminded me of days past when I use to invest in Canadian ETF's. The tax jiggery-pokery every year was mind numbing.


Same here. It wasn't pleasant doing the accounting for them and it's just not worth the effort (in non-registered). I still do the tax tracking for the ETFs my parents hold.



> James - you've shown yourself that no matter how you mix it up and call it a 5 pack, 10 pack, or whatever pack, it's almost a slam dunk that you beat those index ETF's simply because you aren't holding dogs that the ETF's are full of. The industry of course will tell you that the index can't be beat. I have killed the Canadian index since switching to stocks and it ain't because I'm smart.


I'm warming up to the idea. Most of my Canadian equity exposure is now in the 5 pack, non-reg. It's been very easy from a tax and tracking perspective... loving it. I'm still not convinced that it's easy to outperform the index long term (why does the average mutual fund do worse?) but on the other hand, I am convinced I can easily perform on par with the index, with less ACB management and tax headaches. That's already a win.

Maybe I should thank the US for forcing me into individual securities investment. Initially it started as a cross-border tax concern, but now I like where I've ended up. My fixed income portfolio outperformed bond ETFs last year, and my Cdn stock picks are doing at least as well as the index ETF.


----------



## peterk (May 16, 2010)

Wow great timing to bump this thread. I was thinking about buying XIU in unregistered very shortly! Perhaps I can rearrange and delay, avoiding unregistered ETFs for at least this year, or more.


----------



## Eclectic12 (Oct 20, 2010)

james4beach said:


> This is what I've arrived at as well. ETFs are a pain in non-registered. Even once I solve my US tax complications, I'm going to continue only holding direct securities (stocks & bonds) in non-reg, and will continue to keep ETFs inside registered only ...


Should work until the RRSP has to be collapsed ... then it might not be so easy to keep doing.




like_to_retire said:


> You've certainly reminded me of days past when I use to invest in Canadian ETF's. The tax jiggery-pokery every year was mind numbing ... Sheesh - makes my head spin. I'm sure I was funding someone's retirement other than mine.
> 
> On top of this there were all the taxable characteristics per unit for tax purposes of Eligible Dividends, Non-Eligible Dividends, Capital gains, Return of capital, Other income, and Foreign Income ...


Not being aware of what's needed so that there isn't a system in place is the big issue IMO. With a system in place for the phantom distributions and RoC made it about half an hour a year for the cost updates.

The T3 forms from my broker consolidate the other types so typing in the box amounts was more of pain because of the delay, not the work for me. Others with far more Canadian domiciled ETFs than me have said they spend pretty much the same time.




like_to_retire said:


> ... My switch to individual stocks was quite liberating and profitable too over the years. No more tax concerns. A stock pays a dividend that shows on a T5 slip every year. DONE - full stop. My advise is that if something produces a T3 at tax time, then pay attention ...


Yes it is more work than regular stock paying regular dividends but once understood with a system setup that works for the investor, it also is less work than it sounds like.


My view may be influenced by having to receive T3 from my REITs. I love being paid $1 and being able to use $1 or $0.95 as the capital gains tax is deferred until the sale. T3 forms won't be going away anytime soon for me.


Cheers


*PS*
I'm not trying to convince anyone to change their mind as to what's best for them. I want those who are learning to have a better idea of the amount of work involved as the different types of things to what out for make it seem like one has to spend hours and hours and hours on it.


----------



## like_to_retire (Oct 9, 2016)

Eclectic12 said:


> The T3 forms from my broker consolidate the other types so typing in the box amounts was more of pain because of the delay, not the work for me.


Yeah, I guess if someone expects a refund they would like to get their slips as quickly as possible. T3's do come later than T5's for sure.

Unless something has changed since I use to own ETF's, the T3 doesn't include re-invested distributions as they're not paid in cash but re-invested internally. This requires the ETF owner to understand this and manually seek out the information from the ETF's web site each year. Failure to do this (and I'll bet the failure rate is high) results in the ETF owner's cost base not being adjusted and they will end up paying extra tax in the end. There's no cash received and no new units because the distribution is consolidated and so added to the cost base. I suspect that CRA makes out quite well with this oversight, so they don't try too hard to educate people. 

ltr


----------



## AltaRed (Jun 8, 2009)

All of that is true, but as Eclectic12 has said, keeping track of ACB for ETFs is not a big deal. 30 minutes a year perhaps for half a dozen ETFs? Using https://www.adjustedcostbase.ca/ makes it even easier. 

The point being: No one should be deterred from having a passive couch potato portfolio for the minor inconvenience of ACB tracking in a non-reg account. Most of the people I know are much better off in a KISS couch potato portfolio even if they do not ever correct for phantom re-invested distributions and have some tax leakage. Some people should never be behind the wheel.


----------



## like_to_retire (Oct 9, 2016)

AltaRed said:


> All of that is true, but as Eclectic12 has said, keeping track of ACB for ETFs is not a big deal. 30 minutes a year perhaps for half a dozen ETFs? Using https://www.adjustedcostbase.ca/ makes it even easier.
> 
> The point being: No one should be deterred from having a passive couch potato portfolio for the minor inconvenience of ACB tracking in a non-reg account. Most of the people I know are much better off in a KISS couch potato portfolio even if they do not ever correct for phantom re-invested distributions and have some tax leakage. Some people should never be behind the wheel.


Fair enough, but I do remember back in 2007 when ishares changed XIC from being the TSX60 to the being the Composite, there was a whopper of a re-invested distribution that I was given. It was about then that I started to think of other ways of investing in equities than ETF's. 

But yeah, most years, the "phantom" re-investments aren't that big.

ltr


----------



## AltaRed (Jun 8, 2009)

Or even that frequent. There are years of zero re-invested distributions. Just go down the list of dozens of iShares or BMO ETFs to see that these are sporadic and highly dependent on what M&A activity has been on the stock exchanges each year. 

If you held those stocks individually, you would be faced with the same, and often real, current year cap gains issues. This isn't a conspiracy of any kind. It is simply a result of normal market activity of individual stocks.


----------



## like_to_retire (Oct 9, 2016)

AltaRed said:


> This isn't a conspiracy of any kind. It is simply a result of normal market activity of individual stocks.


Sure, but it's generally a result of buying and selling to keep the ETF sector allocations within a certain range. With individual stocks I have control over that, but not with an ETF.

ltr


----------



## humble_pie (Jun 7, 2009)

this is the devil's advocate speaking. I know nobody believes me now. However when some money-centre bank crashes & all its derivatives flame out & all the representational synthetic trading gets exposed, then folks here can say to themselves Aha, so That's what she was Talking about!

re phantom distributions: those amounts represent the adjustment an ETF has to make between its advertised "index" performance vs the reality performance of the actual securities it indeed did hold throughout the year. IE its representational securities, its derivatives, its swaps, futures, options & other shenanigans.

i know i know the above is heresy each:


----------



## humble_pie (Jun 7, 2009)

AltaRed said:


> If you held those stocks individually, you would be faced with the same, and often real, current year cap gains issues. This isn't a conspiracy of any kind. It is simply a result of normal market activity of individual stocks.



phantom distributions are not "normal" in the least. if an investor held the XIU 60 stocks individually, the collection would have a higher market value to reflect gains. If investor sold any of the stocks that had gains, he would have actual dollar gains to report.

something else is going on with the phantom distributions. Other funds also have them. For example, i've been holding an RBC USD money market fund. In late december it delivered something like USD 1,600 in phantom distribs. This suggests to me that - not disclosed in the audited financial statements but allowed according to the fund prospectus - this particular fund is holding, trading & swapping some currency derivatives, in addition to all the normal-looking short term interest-bearing paper which it publicly discloses.

imho regulatory disclosure is woefully lacking. But finance is a self-regulated industry, so disclosure won't improve until a tsunami of consumer complaints builds up. It took more than 2 decades - more than 20 years, imagine that - for millions of consumer complaints to the authorities re mutual fund & other issuer trailer fees, for the new CRM regulations to finally come into effect only a couple years ago.

.


----------



## james4beach (Nov 15, 2012)

While I agree there are some derivatives sneaking around inside these things, I don't think the phantom reinvested distributions are indicators of that. As I understand the accounting, the reinvested distributions are due to some mix of capital gains and fund inflows/outflows.

Mutual funds do the same thing, but in their case, the number of units held increases. But I believe it's due to the same mechanisms. It just happens to be more irritating with ETFs.


----------



## AltaRed (Jun 8, 2009)

I agree phantom re-invested distributions do occur in a range of products and I also agree there is woefully inadequate disclosure. Even the latest CRM2 disclosures on annual client statements don't address fees paid 'upstream' of the broker, e.g. management fees within the fund manager shop. All we get now is disclosure of fees we have paid directly to our broker and fees paid directly to the broker by third parties such as trailer fees.


----------



## humble_pie (Jun 7, 2009)

james4beach said:


> the reinvested distributions are due to some mix of capital gains and fund inflows/outflows



this is the kind of abstract language the etf fundcos use to splainaway their phantom shenanigans, i'm not buying it

you go on to say that mutual funds adjust their portfs for capital gains "and the number of units held [by the investor] increases." That's normal. Phantom distribs are not normal. Fund ETFs have never supplied an adequate explanation of the phantom mechanism.


----------



## james4beach (Nov 15, 2012)

humble_pie, I also suspect shenanigans. My general observation with Wall Street / Bay Street is that any time something is not extremely clear and transparent, someone is up to something funny.

The reinvested distribution stuff is too murky. ETFs were supposed to be all about transparency.


----------



## Eclectic12 (Oct 20, 2010)

like_to_retire said:


> Yeah, I guess if someone expects a refund they would like to get their slips as quickly as possible. T3's do come later than T5's for sure ...


 ... and within the category of T3's, my experience is that the ETF ones are the last to arrive, much later than REIT ones or other types.




like_to_retire said:


> ... Unless something has changed since I use to own ETF's, the T3 doesn't include re-invested distributions as they're not paid in cash but re-invested internally. This requires the ETF owner to understand this and manually seek out the information from the ETF's web site each year ...


That's knowing is the key part ... which few seem to do. 

Hopefully more companies will convert to BMO's method where the Tax Info page has dates distributions were paid with a column for re-invested distributions, aka phantom distributions as well as a separate table with the typical tax breakdown of the totals. iShares, OTOH puts up a link that the recent info is available but the farther back one goes, the harder it is to find.




like_to_retire said:


> ... I suspect that CRA makes out quite well with this oversight, so they don't try too hard to educate people.


While the gov't probably does well, I don't see it as their job to educate people anymore than they do for capital gains or dividend income. The financial news once in a while highlights this point but few I talk to read those articles.




like_to_retire said:


> Fair enough, but I do remember back in 2007 when ishares changed XIC from being the TSX60 to the being the Composite, there was a whopper of a re-invested distribution that I was given. It was about then that I started to think of other ways of investing in equities than ETF's.
> 
> But yeah, most years, the "phantom" re-investments aren't that big ...


It looks like the big dollar phantom distributions are from prior to the split. 2005 seems to be the winner (though I haven't checked all the way back to 1999) with what looks like $3.92 a unit. The person posting the info bought in Sept so they were hit will the full gain despite owning for only part of the year. Pre split, unit prices were more like $68 a unit.

2006 dropped to $1.32 while 2007 jumped back up $2.18 a unit. 2008 was tiny while 2009 through 2012 had zero. If I recall correctly, 2018 is estimated to have one, 2017 had one and 2015 had one. As of yet, I have not found the amounts recently being anywhere close to the 2006 and 2007 ones.


Cheers


----------



## AltaRed (Jun 8, 2009)

FWIW, my T3s this past tax year all came within a few days or so of each other (online PDF) March 17-22, both REIT and ETF. I don't file until about Apr 15-20th no matter what.


----------



## like_to_retire (Oct 9, 2016)

AltaRed said:


> I don't file until about Apr 15-20th no matter what.


Same here, since I can't remember the last time I didn't owe money on my taxes. How weird it would be to get a refund. If there are no major changes through the year, and you pay your four instalments, and you get your standard 10% dividend increases, then you will always owe money at the end of the year.

ltr


----------



## l1quidfinance (Mar 17, 2017)

This thread got me thinking about this and then I came across this. 

Quite concise article. 

It really doesn't seem too much work. 

https://www.theglobeandmail.com/glo...ure-out-my-etfs-capital-gain/article33809409/


----------



## like_to_retire (Oct 9, 2016)

l1quidfinance said:


> This thread got me thinking about this and then I came across this.
> 
> Quite concise article.
> 
> ...


Yeah, and once a newbie is finished reading that article they want to scream - WTF?

ltr


----------



## Eclectic12 (Oct 20, 2010)

AltaRed said:


> FWIW, my T3s this past tax year all came within a few days or so of each other (online PDF) March 17-22, both REIT and ETF. I don't file until about Apr 15-20th no matter what.


Sounds like it has improved as I can remember having to wait until early/mid-April some years for the ETF T3. Having moved the ETFs to my TFSA around 2010, my timing info is from a while ago.


Cheers


----------



## AltaRed (Jun 8, 2009)

That timing is good....except when there is an error and they re-issue a correct tax slip about Apr 10th. Extremely rare and something that can be done post-filing.


----------



## humble_pie (Jun 7, 2009)

like_to_retire said:


> Yeah, and once a newbie is finished reading that article they want to scream




scream is right

the globe's john heinzl is a good scribe but i think he's missed one tiny additional detail. Every few years XIU pays some kind of extra-special distribution that has to be used to _lower_ the cost base. Heinzl doesn't seem to be including these here.

so sorry not to have details but that's because my brain automatically turns off such details during the 11 months of the year i'm not actively working on taxes. However, this rare extra-special distrib is not a Return of Capital, although it functions similarly.

most brokers supply annual tax documents called "Statements of Investment Income." These arrive physically with the T3s & the T5s. Those rare extra-special XIU distributions that lower cost base appear there. Also on the T3s of course. I doubt that all brokers are tracking those extra-specials accurately (scream)

LTR is right. Stocks are simpler. You own a stock, you own it. You own an ETF, maybe it's a gossamer collection of shares, representational shares, unknown shares which the ETF manufacturer loans out to hedge funds, options, futures & swaps (scream)

.


----------



## james4beach (Nov 15, 2012)

humble_pie said:


> LTR is right. Stocks are simpler. You own a stock, you own it. You own an ETF, maybe it's a gossamer collection of shares, representational shares, unknown shares which the ETF manufacturer loans out to hedge funds, options, futures & swaps (scream)


Even for individual stocks there are corporate actions, re-organizations, shares being converted from one form to another (and the broker having to play all kinds of ledger tricks to account for this) including cash in lieu of partial shares in acquisitions. Especially for non-mega-cap stocks, there can be a lot of events over the years.

At least for ETFs, the accounting and record keeping mechanisms are the same no matter which ETF it is. So once you learn how to track it, you can keep doing that with any ETF.


----------



## Eclectic12 (Oct 20, 2010)

like_to_retire said:


> l1quidfinance said:
> 
> 
> > This thread got me thinking about this and then I came across this.
> ...


Sure ... but then again, there's lot of hobbies or home owner tasks where people start with this reaction, take their time learning and later wonder what their initial fuss was about.


Cheers


----------



## Eclectic12 (Oct 20, 2010)

humble_pie said:


> ... the globe's john heinzl is a good scribe but i think he's missed one tiny additional detail. Every few years XIU pays some kind of extra-special distribution that has to be used to _lower_ the cost base. Heinzl doesn't seem to be including these here.
> 
> so sorry not to have details but that's because my brain automatically turns off such details during the 11 months of the year i'm not actively working on taxes. However, this rare extra-special distrib is not a Return of Capital, although it functions similarly ...


Stranger and stranger ... the iShares distribution faq covers the usual suspects plus RoC and re-invested distributions but has no mention of this type that I have found.




humble_pie said:


> ... most brokers supply annual tax documents called "Statements of Investment Income." These arrive physically with the T3s & the T5s. Those rare extra-special XIU distributions that lower cost base appear there. Also on the T3s of course ...


So far, all I have found on the "Statements of Investment Income" is what the T3, box 42 is classed as with a vague note that "RoC is used to calculate the ACB". I don't seem to have held anything in a taxable account that has paid this.

The box 42 description is only slightly more helpful as it says that this is a distribution or RoC where the footnote instructions are to be followed. The footnote directs one to look at the summary (somewhat circular) that is the "Statements of Investment Income".


Perhaps a year comes to mind where the CDS repository T3 can be checked for possibly clearer directions?


Cheers


----------



## like_to_retire (Oct 9, 2016)

Eclectic12 said:


> Stranger and stranger ... the iShares distribution faq covers the usual suspects plus RoC and re-invested distributions but has no mention of this type that I have found.
> 
> So far, all I have found on the "Statements of Investment Income" is what the T3, box 42 is classed as with a vague note that "RoC is used to calculate the ACB". I don't seem to have held anything in a taxable account that has paid this.
> 
> ...


A quick check of my spreadsheet shows that I received a "special dividend distribution" in 2003 from Barclays XIC (which represented the TSX60 Index back then). This was the only special distribution I received.

The yearly special distribution of 'dividends' was taxable as dividend income with no cash received and no new units. The amount was to be added to the book value.

See below for Barclays explanation for that year (from my spreadsheet records).

_"2003 BARCLAYS NOTES ON DISTRIBUTIONS of Yearly capital and special distributions
Capital gains distributions and *special dividend distributions* are in the form of additional units of the respective fund. Immediately following these distributions, the number of units outstanding for the respective fund is consolidated so that the number of units held by investors is the same as before these distributions. Each unitholder to whom an amount is made payable in respect of a taxable capital gain will have a corresponding taxable capital gain on or in respect of which tax may be payable. Each unitholder to whom an amount is made payable in respect of a special dividend will have corresponding taxable dividend income on or in respect of which tax may be payable. The amount of Capital Gains distributions and Special Dividend distributions made payable to a unitholder will be added to the adjusted cost base of the unitholder's units".
_
ltr


----------



## Eclectic12 (Oct 20, 2010)

It is good to know that "special dividend distributions" increase the ACB like a re-invested distribution. 

By any chance have you held XIU in a taxable account?
What I am trying to find is the every few years XIU special distribution that like RoC, lowers the cost base.


Cheers


----------



## like_to_retire (Oct 9, 2016)

Eclectic12 said:


> It is good to know that "special dividend distributions" increase the ACB like a re-invested distribution.
> 
> By any chance have you held XIU in a taxable account?
> What I am trying to find is the every few years XIU special distribution that like RoC, lowers the cost base.
> ...


No, I always just held XIC before and even after they converted it to the Composite from the TSX60.

ltr


----------



## Eclectic12 (Oct 20, 2010)

AltaRed said:


> Eclectic12 said:
> 
> 
> > Sounds like it has improved as I can remember having to wait until early/mid-April some years for the ETF T3. Having moved the ETFs to my TFSA around 2010, my timing info is from a while ago ...
> ...


Perhaps I missed some other timing for T3 forms being posted?

In my case, even if the T3 was posted say April 3rd ... I wouldn't get around to filling out the tax return until well after April 10th and would have checked for any updates at the same time. It would have to have been a correct T3 at the end of April or later (or a mistake on my part) to miss it.


Cheers


----------

