[Eclectic12]

... This is why I find this stuff complicated. You have to make sure that you find figures for the Reinvested Distribution.

Not sure what is confusing you. If the cash paid is classed as a CG then it be reported on one's T3 slip so there's really nothing to do, beyond waiting for the T3 slip. Same for the RoC.
Where one wants to spot check, pick a simple year and compare your numbers against the T3 slip.

For the phantom distributions, find whatever method you prefer for getting the phantom distribution numbers. Most ETF vendors I have checked publish it multiple ways, in addition to the CDS Innovations web site.

... For iShares however, the [phantom] distributions part of the web site doesn't show it. Instead you have to download the special PDF file they publish on tax characteristics each year.

I used to think that as well but someone replied to my post showing how to get the annual reinvested amounts off the particular ETF's web page. I'll have to find that post again as I don't recall the details and when I tried to retrieve it I seem to be overlooking the spot, just like was I was before .

... I flip flop between thinking I should calculate it all (as I wrote above) and just using TD's book value. So far, the book values I've seen appear to be perfectly good.

When my ETFs have to go into the non-registered account, I plan to spot check them every year or two ... the same as I am doing now for the REIT ACB.

I expect it will be fine as I see the phantom distribution detail line items and RoC ones in my registered accounts, each year.

...I'm still confused about the whole thing. Capital gains distributions are not the same as reinvested distributions; the reinvested distributions are often hard to find; and ROC is paid along with each quarterly distribution so if you've placed trades in the year, everything gets more complicated. The T3 helps, but overall, I find the whole process very confusing.

I think you are confusing yourself.

If you trust the T3 then it reports the CG in box 21 and the RoC in box 42. The issue I see if the broker rolls up multiple investments, making one check the detailed summary that is also provided. It will be more difficult to spot check where one has bought/sold as one will need a version that breaks it down by payment, which CDS Innovations covers.

The phantom distributions are once a year so the buying/selling won't matter as long as you know the number of units in mid Dec. Once you know what term the ETF provider likes for phantom distributions, is it that hard to google "2020" ETF provider "phantom distribution name of choice"?


Cheers

 

[AltaRed]

Each of the major ETF providers also provide the phantom re-invested distributions/unit for each of their funds via the newswires in the last week of December each year. Don't even have to go to the ETF provider websites or CDS. IOW, they make it easy via news releases, at least for BMO, Blackrock and Vanguard (which between myself, my spouse and my ex...we have some from each of those providers).

The challenge for investors is to know this information in the first place....which in theory, they should know all those nuances before investing in the first place, but often do not. Once they learn it once, it is a 'no brainer' thereafter. Kind of like novices and neophytes jumping into stock or bond investing before knowing anything about calculating ACB, or even how cap gains are taxed, or attribution of income, etc.

 

[james4beach]

Not sure what is confusing you. If the cash paid is classed as a CG then it be reported on one's T3 slip so there's really nothing to do, beyond waiting for the T3 slip. Same for the RoC.
Where one wants to spot check, pick a simple year and compare your numbers against the T3 slip.

I can't tell if you are talking about taxable amounts, or ACB fixups.

You keep bringing up the CG in your post. But let's be clear... the CG is a taxable amount and reported for tax purposes, but doesn't impact the ACB.

The ACB has to be adjusted using the reinvested distribution and ROC.

If you trust the T3 then it reports the CG in box 21 and the RoC in box 42.

Yes and that's a taxable amount. But of no use for the ACB.

Does everyone agree with the following?

As @AltaRed mentions, that last item, the "reinvested distribution" which is vital for ACB tracking, can be found off the news wire. Or you can google for the tax characteristics documents. In the case of BMO's web site, it's also easy to find in the usual place you'd expect it.

 

[GreatLaker]

Does everyone agree with the following?

View attachment 21495

I agree.

ETF distributions are taxable in the year they are received, and they appear on a T3 under their various categories (interest, dividends, foreign income, capital gains ...). Some of those distributions are paid in cash, which has no effect on the ACB, just as a stock dividend paid in cash or bond interest paid in cash have no effect on the ACB. Some distributions are reinvested by the ETF provider. You need to increase your ACB by the amount of the reinvested distribution. Since you pay tax on the distributions when they are received, if you don't adjust your ACB upwards by the reinvested amount, you will pay tax again (in the form of capital gains tax) when you sell. To be clear, reinvested distributions are part of the total distributions declared by the ETF, they are taxable in the year they are received, and they are included in the distributions listed on the T3. But unlike RoC, they are not listed separately on the T3, as RoC is listed in box 42.

The difference between ETFs and mutual funds is that mutual funds can issue fractional units so when distributions are reinvested, they increase the number of units you hold to account for the exact amount of the distribution. ETFs do not issue fractional units, so they cannot simply increase the number of units to account for the exact amount of the distribution. Instead they consolidate the number of units, and the unit holder must manually increase their ACB.

This iShares page has good info, particularly the first three points.
blackrock.com/ca/investors/en/resources/faqs/distributions-and-tax
You can also find it at blackrock.com/ca under Resources / Tax Information Center

This is complex and truly understanding it is not easy due to the different types and tax treatment of distributions. But incorporating it into your cost base is not that hard. 1) Increase or decrease your cost base every time you buy or sell. 2) Subtract RoC from your ACB, based on the values in box 42. 3) Add reinvested distributions to your ACB, based on amounts published by the ETF providers and available on their web sites and on CDS tax breakdown postings. Reinvested distributions also appear as transactions on TDDI March statements, but I don't know if other brokers do that.

 

[Eclectic12]

I can't tell if you are talking about taxable amounts, or ACB fixups.

You keep bringing up the CG in your post. But let's be clear... the CG is a taxable amount and reported for tax purposes, but doesn't impact the ACB.

I started with just the ACB tracking but your posts #52 and #57 added taxable CG distributions to the discussion.

It sounds like when you said "I'm still confused about the whole thing. Capital gains distributions are not the same as reinvested distributions" ... the taxable CG part was cleared up.

... The ACB has to be adjusted using the reinvested distribution and ROC.

At the risk of "keeping bringing it up" - ACB also has to be adjusted for buys and if one is using total ACB instead of ACB per unit, sells.

Other than that ... it reads to me you have it straight and your confusion is resolved as well as knowing the multiple sources for the ACB affecting phantom distributions.


Cheers

 

[james4beach]

But incorporating it into your cost base is not that hard. 1) Increase or decrease your cost base every time you buy or sell. 2) Subtract RoC from your ACB, based on the values in box 42. 3) Add reinvested distributions to your ACB, based on amounts published by the ETF providers and available on their web sites and on CDS tax breakdown postings.

Thanks for clarifying. Yeah, I agree with the above procedure.

 

[james4beach]

It seems I placed a ZSP trade right on the brink of the reinvested distribution. I can't figure out if I "got" the reinvested distribution.

ZSP had
Ex-dividend date: Dec 29, 2021
Record date: Dec 30, 2021

As luck would have it, I bought a significant number of shares on Dec 29, settled Dec 31.

My interpretation is that the "ex dividend date" is the date that the fund starts trading without dividend. So I think that when I bought on Dec 29, that I bought ZSP without its distribution... and therefore I should not fix up my ACB by the amount shown in the press release.

Do I have this right?

 

[Covariance]

My interpretation is that the "ex dividend date" is the date that the fund starts trading without dividend.
Do I have this right?

Looks ok. Technically a shareholder of record is entitled to a dividend (or distribution). The record date is the date they pull the file and see who owns the shares. So if your settlement was after the record date you didn't own them for the divi.

 

[james4beach]

Looks ok. Technically a shareholder of record is entitled to a dividend (or distribution). The record date is the date they pull the file and see who owns the shares. So if your settlement was after the record date you didn't own them for the divi.

Thanks!

 

[GreatLaker]

It seems I placed a ZSP trade right on the brink of the reinvested distribution. I can't figure out if I "got" the reinvested distribution.

ZSP had
Ex-dividend date: Dec 29, 2021
Record date: Dec 30, 2021

As luck would have it, I bought a significant number of shares on Dec 29, settled Dec 31.

My interpretation is that the "ex dividend date" is the date that the fund starts trading without dividend. So I think that when I bought on Dec 29, that I bought ZSP without its distribution... and therefore I should not fix up my ACB by the amount shown in the press release.

Do I have this right?

The short answer is yes, your understanding is correct.

The ex-dividend date is just the date that the fund price drops due to the impending dividend or distribution. It is the date by which you must enter your order to have it settle in time for you to get the dividend. That's why the price drops: on a buy order, if you enter it on the ex-dividend date you pay less because you get the dividend. (I think you are one of the advocates of dividends largely being irrelevant because of this.)

Here is what Adjusted Cost Base says:
Understanding Trade Dates and Settlement Dates | Adjusted Cost Base.ca Blog

any transactions involving distributions for ETF’s / funds / trusts (such as Return of Capital, Capital Gains Dividends, and Reinvested Capital Gains Distributions) should use the record date that applies for the distribution. Again, this ensures that any applicable capital gains and losses are reported for the correct year. Even more importantly, when using per share amounts for a distribution, using the record date is

If you own the shares on Dec 30 (i.e any orders must have a settlement on or before Dec 30) you will receive the Reinvested Capital Gains Distribution. Your order settled on Dec 31 (i.e. you owned the units starting Dec 31). My interpretation is you did not own the units on Dec 30, therefore you did not get the distribution.

I use TDDI and Reinvested Capital Gains Distributions for ETFs are always listed on my March statement as a Capital Gains Distribution transaction, offset by a DRIP transaction of exactly the same $ value.

 

[james4beach]

The short answer is yes, your understanding is correct.

The ex-dividend date is just the date that the fund price drops due to the impending dividend or distribution. It is the date by which you must enter your order to have it settle in time for you to get the dividend. That's why the price drops: on a buy order, if you enter it on the ex-dividend date you pay less because you get the dividend. (I think you are one of the advocates of dividends largely being irrelevant because of this.)

Thanks for the info about the timing. And yes I'm definitely one of the advocates of how dividends are irrelevant / not free money, because the share price declines as they are paid out.

I use TDDI and Reinvested Capital Gains Distributions for ETFs are always listed on my March statement as a Capital Gains Distribution transaction, offset by a DRIP transaction of exactly the same $ value.

Interesting, I wonder why they do it this way. But beware, if the statement is showing a "capital gain distribution", that's not necessarily the same as the reinvested distribution. So it would not be correct to update your ACB based purely on a "capital gain distribution". For the same reason, the capital gain distribution that appears on a T3 is not useful for adjusting your ACB.

Some people seem to think these are the same (because they often are) but the numbers can differ. Here are some examples:

The iShares 2020 tax distributions document shows the GCNS fund had a reinvested distribution per unit of 0.35671 but had 0 capital gains.

XGGB, had reinvested distributions 0.25625 but capital gains 0.31829

But those are outliers and nearly every other ETF shows reinvested distributions = capital gains. What fun!

My point being, a "reinvested distribution" is not the same thing as a capital gain distribution. So I think if you see "capital gain distribution" on a broker statement, that should not be used for updating the ACB.

A related matter, showing how confusing this is...

@AltaRed may be interested. Here was the iShares press release for 2020 taxes. Notice that Blackrock calls these "reinvested capital gains distributions" and repeatedly calls these capital gains in that press release.

But I think they're wrong! Take a look at GCNS which I mentioned above. According to the final Blackrock tax characteristics document, this fund has NO capital gains in 2020. And yet the press release calls it a capital gains distribution.

I think the press release should be calling it a "reinvested distribution" and dropping the words "capital gain". As written, the press release is wrong. The fund didn't have any capital gains.

 

[Eclectic21]

... But beware, if the statement is showing a "capital gain distribution", that's not necessarily the same as the reinvested distribution. So it would not be correct to update your ACB based purely on a "capital gain distribution" ... Some people seem to think these are the same (because they often are) but the numbers can differ ...

Since TDDI has started doing this ... either the March entries match the phantom distribution for that particular ETF or there are no march entries when the phantom distribution is zero, regardless of what the T3 says for capital gains.

... My point being, a "reinvested distribution" is not the same thing as a capital gain distribution. So I think if you see "capital gain distribution" on a broker statement, that should not be used for updating the ACB.

Maybe different brokers mix them up?
All I have personal experience with consistently aligns with the March twin entries being documentation of a phantom distribution.

I'll see what I can find for the examples.


Cheers

PS
If the GCNS distribution info is coming from the iShares Canada web site for 2020, this may be a system problem. Yahoo lists cash paid quarterly for XIC yet the iShares Canada annual distribution for 2020 has hypens for all columns (XIU as well).

 

[Numbersman61]

Since all my ETF’s are in registered accounts, I have no experience with analyzing the T3 slip in cases where the ETF had a reinvested capital distribution. Is this amount included in Box 21 of the T3? If not where is it reported so that the taxpayer reports the amount on his tax return?

 

[GreatLaker]

Interesting, I wonder why they do it this way. But beware, if the statement is showing a "capital gain distribution", that's not necessarily the same as the reinvested distribution. So it would not be correct to update your ACB based purely on a "capital gain distribution". For the same reason, the capital gain distribution that appears on a T3 is not useful for adjusting your ACB.

Some people seem to think these are the same (because they often are) but the numbers can differ. Here are some examples:

The iShares 2020 tax distributions document shows the GCNS fund had a reinvested distribution per unit of 0.35671 but had 0 capital gains.

XGGB, had reinvested distributions 0.25625 but capital gains 0.31829

But those are outliers and nearly every other ETF shows reinvested distributions = capital gains. What fun!

My point being, a "reinvested distribution" is not the same thing as a capital gain distribution. So I think if you see "capital gain distribution" on a broker statement, that should not be used for updating the ACB.

Correct. I only add the reinvested portion to my cost base. ETFs issue distributions that may be from interest, dividends, cap gains etc., and those appear in the relevant box on my T3 for tax reporting. Some of those distributions get reinvested, but the nature of the distribution that gets reinvested is not relevant. I add the reinvested amount to my cost base. If I don't add it, then I end up paying tax again on capital gains when I sell. I check reinvested distributions on my statement against the amount reported in the fund company press releases to make sure they agree.

 

[GreatLaker]

Since all my ETF’s are in registered accounts, I have no experience with analyzing the T3 slip in cases where the ETF had a reinvested capital distribution. Is this amount included in Box 21 of the T3? If not where is it reported so that the taxpayer reports the amount on his tax return?

Yes, all ETF capital gains are listed in box 21 of the T3, whether they are paid in cash or reinvested.

Note these capital gains are those realized by the fund when it sells securities at a gain. Funds typically only report capital gains on an annualized basis so they can aggregate capital gains and losses for the entire year and only report capital gains when they exceed any losses for the year.

All capital gains realized when the investor sells ETF units are the investor's responsibility to track and report.

 

[Numbersman61]

The reason for my question is the way BlackRock prepared their schedule for 2020 distributions. Here is the link Financial Planning & Investment Management | BlackRock
When you download the link, you will note that for GCNS, the capital gains reinvested per unit is .35671 but they show 0 for Box 21. My expectation is that Box 21 should have been .35671 for 2020. It is possible that this amount will show up in Box 21 on 2021 T3.

 

[james4beach]

Maybe different brokers mix them up?
All I have personal experience with consistently aligns with the March twin entries being documentation of a phantom distribution.

Ah that's interesting. So what you're seeing in the broker's fix-up (March) entries, appears to be = reinvested distribution.
This would make sense as they are probably using this "hack" to adjust their book values.

But I still recommend looking at the actual source (ETF issuers) to check what reinvested distribution and ROC they give there. I think many of us agree that we should do our own calculation to verify the broker's number instead of just taking the broker's numbers.

Though, the broker's cost base has always matched my own calculations in the last few years. I have never found a mismatch.

If the GCNS distribution info is coming from the iShares Canada web site for 2020, this may be a system problem.

The GCNS example I gave were directly from iShares, using the final tax characteristics document they published. So in one place, iShares is calling it a capital gain distribution, but in another place, is calling it "reinvested distribution" with zero capital gains inside it.

So clearly there is some confusion, or some poor choice of words, even at iShares themselves. They seem confused about whether a distribution is capital gains or not.

 

[GreatLaker]

The reason for my question is the way BlackRock prepared their schedule for 2020 distributions. Here is the link Financial Planning & Investment Management | BlackRock
When you download the link, you will note that for GCNS, the capital gains reinvested per unit is .35671 but they show 0 for Box 21. My expectation is that Box 21 should have been .35671 for 2020. It is possible that this amount will show up in Box 21 on 2021 T3.

If you look at that spreadsheet, the fund had total distribution of $1.35671, of which $1.00 was paid in cash and $.35671 was reinvested. So it sounds like one or more of the other income categories was reinvested. James also suggested in Post #71 that these are reinvested distributions, but not necessarily reinvested capital gains distributions.

I don't think that invalidates my statement that "ETF capital gains are listed in box 21 of the T3, whether they are paid in cash or reinvested."

Another thing I noticed is that in CDS Innovations Tax Breakdown Postings for 2020, that fund has two spreadsheets, one of which is revised. You can find it here: CDS Innovations Inc :: Tax Breakdown Posting - Processed Documents (T3-2020)

After a decade of ETF investing I am still learning

 

[Numbersman61]

Thanks for the link. The amended report on the CDS spreadsheet indicates that the total non-cash distribution per unit of $0.35671 consists of $0.15729 other income, $0.08367 capital gain, $0.03122 eligible dividend, $0.08009 foreign non-business income, 0.00784 return of capital, $0.00340 foreign non-business income tax paid.
I’m going to continue to avoid investing in ETF’s in non-registered accounts.

 

[james4beach]

After a decade of ETF investing I am still learning

I really think the Canadian ETF industry has to change what they're doing about these reinvested distributions, capital gains, and ROCs.

This has to be made simpler IMHO. Those of us on this board are very familiar with ETFs, and yet here we still are, tracking down CDS innovations spreadsheets, or the Tax Characteristics documents, and trying to decipher what's on the T3 statements.

All these years later, still trying to make sense of properly accounting for the reinvested distributions and ROC. There are too many wacky types of distributions.

I just think this is unnecessary complexity and should be improved by the industry.