# phantom distributions from Vanguard



## Neddie (Apr 7, 2015)

I can't figure out how to interpret the tax information Vanguard gives out for 2014 distributions from VDY (https://www.vanguardcanada.ca/individual/etfs/etf-distribution-history.htm?portId=9560).

Year	2014	
Eligible dividends	$1.02250	
Non eligible dividends	$0.00000
Other income $0.00000
Capital gains $0.30087
Return of capital	$0.00122
Foreign income $0.00000
Foreign tax paid	$0.00000
Total distribution per unit for tax purpose	$1.02372

Obvious problem: eligible dividends + capital gains + roc does not add up to the "Total distribution per unit for tax purpose". They have omitted the capital gains as though they weren't taxable. By looking at my brokerage statements I can see that they weren't paid to me in cash, either.

The fellow at Vanguard I talked to said he wasn't allowed to explain it to me due to regulatory constraints, but that the capital gains were reinvested and I should research "phantom distributions".

Well, the same webpage itemizes each individual distribution for 2014 and specifies the "Reinvested distribution per unit" for each of them to be zero.

Globe and Mail has articles on phantom distributions (http://www.theglobeandmail.com/glob...by-phantom-etf-distributions/article18225076/) which confirm the obvious: reinvested amounts are taxable. So even if the capital gains were reinvested they should have been included in the taxable total.

The info for ishares ETFs (CDZ for example) makes a lot more sense: they include the capital gains in the total column, and also in the reinvested column.

Is there an error in Vanguard's information or am I missing something?


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## Woz (Sep 5, 2013)

It’s best not to use the ETF provider’s website for taxes. Instead you can look up each ETFs distribution here: http://services.cds.ca/applications/taxforms/taxforms.nsf. That’s where your brokerage goes to prepare you T3s and is more accurate. 

In 2014 they paid all of the capital gains as a non cash distribution of $0.30087/share. That means they re-invested it in the ETF instead of paying it as cash. You’ll pay tax on it this year as it’ll show up in your T3 slip in box 21.

Because you pay tax on it this year you can add that distribution to your ACB so that you don’t pay tax on that part of the capital gain again when you sell. You also need to deduct the Return of capital part from your ACB.


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## Neddie (Apr 7, 2015)

Thanks Woz, that's a useful link. So my conclusion is that Vanguard's info is just wrong.


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## GreatLaker (Mar 23, 2014)

CCP has a good blog post on this: http://canadiancouchpotato.com/2013/04/04/calculating-your-adjusted-cost-base-with-etfs/

And a white paper that explains how to use the info on CDS:
https://www.pwlcapital.com/pwl/media/pwl-media/PDF-files/White-Papers/PWL_Bender_As-Easy-as-ACB_2015-January.pdf?ext=.pdf


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## Robillard (Apr 11, 2009)

I think Woz is correct. With respect to ACB calculations, this is in line with what I saw when I worked briefly for a mutual find company.


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## Neddie (Apr 7, 2015)

The CDS Innovations site doesn't have any info for Fidelity Canada mutual funds. Any idea why not or where I could find it? Fidelity only has 2014 on their website and doesn't break it down by month.


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