# Dividend Timing for Tax Year Purposes



## EngPhysGuy (Jul 9, 2015)

I moved some ETFs over to IB in December of last year. Both of the ETFs provide monthly dividends. From the IB activity report for Change in Dividend Accruals for month of December I see the following:

Date: 2016-12-27
Ex Date: 2016-12-28
Pay Date: 2017-01-09

My question is are the dividends taxable at the Ex Dividend date or the pay date? Since this is a new account as of December I'm wondering if I should receive a tax slip from IB or whether this will all be due in the 2017 tax year.

Thanks.


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## like_to_retire (Oct 9, 2016)

EngPhysGuy said:


> I moved some ETFs over to IB in December of last year. Both of the ETFs provide monthly dividends. From the IB activity report for Change in Dividend Accruals for month of December I see the following:
> 
> Date: 2016-12-27
> Ex Date: 2016-12-28
> ...


You're taxed on the pay date - which in this case was Jan 09, 2017

ltr


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## Eclectic12 (Oct 20, 2010)

I thought so as well but when I check my records, when I held XIC in a taxable account in 2011/2012 the opposite happened.

The iShares Canada web site says Ex Dividend date was Dec 23rd, 2011 with a Payment date of Jan 4th, 2012.
The broker monthly statement for Jan 2012 lists the payment as the same date.

*The 2011 T3 summary document*, which happens to only include XIC as *includes the Jan 4th, 2012 payment*. The 2011 T3 form with boxes matches perfectly the summary document totals.


In at least this case - payments received by the broker, despite having a "next year" payment date have been included in the previous year's tax documents. 




When looking for the XIC entries to have an ETF example, I noticed some of the Canadian REITs held were including payments as late as Jan 15th, the following year (i.e. T3 form for 2014 included a Jan 15th, 2015 payment).


Not that I have made a thorough search but so far, any eligible dividend T5 summary documents are only listing payments from the same tax year (ex. form is for tax year 2015, dates for all payments are in 2015).


Cheers


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## Eclectic12 (Oct 20, 2010)

EngPhysGuy said:


> ... this is a new account as of December I'm wondering if I should receive a tax slip from IB or whether this will all be due in the 2017 tax year.


Based on what I found in my records for XIC, I suspect you should be receiving a T3 from IB for tax year 2016 that includes the Jan 2017 payment.

If you held this ETF in a taxable account last year, likely it can be checked by reviewing the summary document for the T3 that ETF's distributions are recorded on. If last year, the early Jan 2016 payment was recorded on the 2015 T3 - then IMO IB should be providing a 2016 T3 for what they received and the broker it was transferred from should provide a T3 with the rest.

If it's like my broker, if three companies report at roughly the same time, the three will be on the same T3 summary document. The totals will be on one T3 form with the boxes. You might have to do some exploring to find the particular ones you are interest in.


Cheers


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## like_to_retire (Oct 9, 2016)

Eclectic12 said:


> I thought so as well but when I check my records, when I held XIC in a taxable account in 2011/2012 the opposite happened.


Interesting. I only ever own individual securities, and so I answered with that in mind, but you may well be correct that ETF/Mutual funds are different in that regard.

I couldn't find any mention of this issue for Canada (strangely enough), but it seems for the USA you are quite correct.

Source

_"Unlike dividends from individual securities which are taxed in the year dividends are paid, mutual fund distributions declared as payable to shareholders of record in October, November or December and paid in January of the following year are taxable to shareholders based on the record date, not the payment date."_

ltr


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## Eclectic12 (Oct 20, 2010)

like_to_retire said:


> Interesting. I only ever own individual securities, and so I answered with that in mind, but you may well be correct that ETF/Mutual funds are different in that regard.


Not sure of a couple of things ... first thing is why the "may well be correct" when I'm working from one of the ETFs that's been around a long time in Canada. Or are you thinking that a different broker for XIC might produce a T5 form where the Jan 4th, 2012 payment is included in the 2012 T3 while other brokers are putting the 2012 payment on a 2011 T5 form?

Second thing is why you seem to be ignoring that Canadian REITs have the same behaviour. It was much easier for me to find examples of these. To name a few with examples as recent as the 2015 tax year (2016 is yet to come) - NorthWest Healthcare REIT, Noranda Income Fund, Boston Pizza Royalties Income Fund, RioCan REIT, Chartwell Retirement REIT etc. For the longer held ones, there multiple years of this behaviour.




like_to_retire said:


> .. I couldn't find any mention of this issue for Canada (strangely enough), but it seems for the USA you are quite correct.


Taxtips.ca ... where one moves beyond the general article on ETFs, has this link that says similar to the US link, where it is talking about ETFs instead of MFs.


> Keep in mind that a distribution that you received in January of 2016 may be included in the T3 income for 2015, because it was recorded by the ETF in December.


http://www.taxtips.ca/personaltax/investing/taxtreatment/etfs.htm


A peculiarity to Canadian domiciled ETFs that a lot of people miss are "phantom distributions". A non-cash re-investment in a MF ends up with more units but in a Canadian ETF, the units are re-consolidated so that without digging for it, it is easy to miss. It should increase one's ACB so missing it means paying capital gains tax twice on that amount.
https://www.adjustedcostbase.ca/blog/phantom-distributions-and-their-effect-on-adjusted-cost-base/
http://www.theglobeandmail.com/glob...by-phantom-etf-distributions/article18225076/
http://www.theglobeandmail.com/glob...n-with-phantom-distributions/article18409698/


For investments like REITs that pay return of capital (RoC), a lot of people mistake it for an eligible dividend then wonder why the details of their income tax is different from say TD bank. Some investigate so they are correctly subtracting the RoC portion from the cost base (ACB) but can be mislead as I have seen articles that claim "RoC is not taxable". Where one follows it through in detail, RoC is always taxable as a capital gain. The only question is whether the CG will be paid when the investment is sold (ex. ACB - RoC paid > 0) or one reports the RoC paid as a CG on one's tax return on Schedule 3, line 132 as it is paid (ex. ACB - part of RoC paid < 0, ACB is set to 0 where future RoC payments are reported as a CG).
http://www.taxtips.ca/personaltax/investing/taxtreatment/incometrusts.htm


Out of curiosity .. when you say "individual securities" do you mean ones that pay no income or pay only 100% dividends? 
If mixed income is paid, there may be work to do or better places to hold the investment than a taxable account.


Cheers


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## Eclectic12 (Oct 20, 2010)

EngPhysGuy said:


> I moved some ETFs over to IB in December of last year. Both of the ETFs provide monthly dividends ...


Now that the tax timing has been settled, AFAICT - I just wanted to question whether the ETFs are paying "dividends". 

From the ETF's I have looked at, I can recall only a handful that had high amounts of dividends (eligible or ineligible) where there was usually other types of income like return of capital or capital gains or business income mixed in.


If you are aware of this and/or aware that Canadian domiciled ETFs can pay reinvested non-cash payments that should raise one's cost base but are not easy to figure out, it is all good. If not, take a look at the links in post #6.


In general, stuff like business income, dividends, non-business income will be taken care of by the T3 form, on yearly basis. 

For portions that are return of capital (RoC), brokers seem to be getting better at updating for it but have been known to be wrong. Missing RoC means paying too little capital gains, where CRA might ask questions in the future.

Phantom distributions are what the investor probably wants to catch the most as missing these means one pays capital gains on one's tax return then because the cost base was not increased, the CG is doubled up when the investment is sold. Some long running Canadian ETFs have as much as $6 per unit in phantom distributions since inception.


Cheers


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## like_to_retire (Oct 9, 2016)

Eclectic12 said:


> Out of curiosity .. when you say "individual securities" do you mean ones that pay no income or pay only 100% dividends?
> Cheers


I'm referring to common stock that pay dividends. It's all I own in equities - no REITS, ETF, Funds.

Many of these stocks go EX in December and pay in January, and the January payments are always on the T5 for the year they are paid.

ltr


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## Eclectic12 (Oct 20, 2010)

Fair enough ... for this type, I can only find a single year on the T5, matching the tax year.


Cheers


*PS*

In case you decide at some point to buy a REIT or ETF in a taxable account, hopefully you will be better prepared that some who have posted here, including myself.


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## EngPhysGuy (Jul 9, 2015)

Thanks for the replies and real-life scenarios / examples.

It's quite helpful.


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## EngPhysGuy (Jul 9, 2015)

Just to follow up. I did indeed receive a tax statement from IB for 2016. So it seems that if the Ex-Div date is within the tax year then the dividend is payable in that year, even though the pay date and the date that I actually receive the money is in the following year. This leads me to another question as it seems IB doesn't provide a formal T3 showing box #'s and amounts for these boxes. These ETFs are Canadian listed ETFs but hold foreign securities.

Instead of I have the following:
T3: Capital Gains (box 21?)
T3: Return of Capital (box 42?)
T3: Foreign Non-Business Income (box 25?)
Non - US Tax Paid (box 34?)

This is different than my formal questrade slip that I received which does not include the Capital Gains on the T3 slip but does list the value in detailed line by line.

Thanks.


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## Eclectic12 (Oct 20, 2010)

Sorry ... I missed updating this thread to say that with more detail verification, the ETF I held in a taxable account paid as late as Jan 15th, the following year but as the ETF company reported the payment in the previous tax year, the T3 included the next year payment.


As for IB not providing a formal T3, I find that weird ... unless maybe the amounts are too small? I wonder if you try the autofill on a blank tax return from CRA's web site, whether CRA has a T3 form.


Returning to my records for past history with ETFs, I have always received a formal T3 form. 

I located a T3 summary from 2008 that included one Canadian ETF and three late reporting REITS on the same T3 form.

When the section for the ETF finished with the last paid amount, which is from Jan 2nd, the following year, the details lines are then summed up with labels as follows:

1) Capital Gains (box 21)
2) Actual Amount of Ineligible Dividends (box 23)
3) Foreign Non Business Income (box 25)
4) Other Income (box 26)
5) Foreign Non Business Tax Paid (box 34)
6) Actual Amount of Eligible Dividends (box 49)
7) Return of Capital (box 42).

With clear markings, it is easy but tedious to trace through what came from which investment, compare against what the individual company published and verify the aggregation.


It is weird that questrade would not include the CG in box 21 but have it in their line by line.



Cheers


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## EngPhysGuy (Jul 9, 2015)

Eclectric - thanks again. Your quick and thorough responses are very much appreciated.

As for IB - the total capital gain was quite small at just over $500. Maybe this is the reason. 
As for Questrade - I agree. Maybe I'll have a quick chat with their online folks and see if they know the reason. I only plugged in the boxes that were on the T3 in my last years tax return so hopefully this isn't going to cause an issue. Again, the amount was fairly small, <$1k.

Thanks.


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## Eclectic12 (Oct 20, 2010)

EngPhysGuy said:


> Eclectric - thanks again. Your quick and thorough responses are very much appreciated.


No problem ... others have helped me so I am glad to give back.




EngPhysGuy said:


> As for IB - the total capital gain was quite small at just over $500. Maybe this is the reason.


CRA says if the income is less than $100, then the trustee has to notify the beneficiary but can skip the T3 slip.
http://www.cra-arc.gc.ca/tx/trsts/t3slp/whn-eng.html

CG income of around $500 looks to me like a T3 slip should have been sent.




EngPhysGuy said:


> As for Questrade - I agree. Maybe I'll have a quick chat with their online folks and see if they know the reason. I only plugged in the boxes that were on the T3 in my last years tax return so hopefully this isn't going to cause an issue. Again, the amount was fairly small, <$1k.


Small amounts should be easy to fix ... the silly part is why they would go through the calculations, reports etc. to produce an incomplete T3. I'd complain about it as it is at minimum adding to your work as well as potentially leaving future issues with CRA (i.e. more work).


Cheers


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## EngPhysGuy (Jul 9, 2015)

Thanks again. Maybe I jumped the gun seeing a downloadable excel file with tax info. Looks like the T3 will be available March 31:
https://www.interactivebrokers.com/en/index.php?f=tax&p=explain

As for Questrade, I was expecting the capital gains to be the entire distribution that was received. However, I did receive a small amount in box 21 this year ($2 of $1k in distributions), so it looks like it is just a portion of the distribution, from the emerging markets ETF in this case.

Cheers


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## Eclectic12 (Oct 20, 2010)

The other places you can check that might have the info a bit earlier are the ETF web site and CDS Innovations Inc (https://services.cds.ca/application...s/-EN-LimitedPartnershipsandIncomeTrusts?Open). The ETF company should have it up on their web site first, then I suspect it's a toss up as to whether the broker or CDS that have it next.

Cheers


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