Comments on: Income Trusts: Taxes

By: trustman

trustman — Sun, 14 Dec 2008 20:22:21 +0000

There is a website that many accountants and financial advisors are using to efficiently and accurately calculate the adjusted base of income trusts and closed-end funds. Definitely worth a look if you do a lot of these time consuming and often complicated calculations…www.acbtracking.ca

By: The Amatureist Financial Journey – What’s is an Income Trust?

The Amatureist Financial Journey – What’s is an Income Trust? — Mon, 10 Sep 2007 08:48:35 +0000

[...] http://www.thickenmywallet.com/blog/wp/?p=98 [...]

By: admin

admin — Thu, 26 Jul 2007 01:29:19 +0000

Moneygardner: As FJ writes, you have to really dig down into the financial reports to see how the trust accounts for cash flow. The one criticism of income trusts is that they do not adhere to a standard accounting rules so there is no consistency on how certain financials are reported from trust to trust.

By: moneygardener

moneygardener — Wed, 25 Jul 2007 20:33:14 +0000

or I’m totally off base and jungleguys explains it better here:

Inter Pipeline has a positive cash flow. According to the cash flow statement, operational cash flow in 2006 is $201 mil. At first glance, this cash flow doesn’t cover the $160 mil cash distributions to unitholders and the $65 mil in capital expenditures, but wait. As I alluded to earlier, part of the capital expenditures is assigned to growth. According to page 40 of their 2006 annual report, only $5.6 mil was “sustaining capital expenditures”. The effective payout ratio after sustaining capital expenditures is around a healthy 82% ($160 / [$201-$5.6]).

By: moneygardener

moneygardener — Wed, 25 Jul 2007 20:30:45 +0000

sorry that should read ‘Basically any utility-like…’

I think they are able to write off a depreciated asset like a pipeline, which essentially gives them more cash to distribute.

By: moneygardener

moneygardener — Wed, 25 Jul 2007 20:28:15 +0000

I guess it depends on how you define pay out ratio.

Pay out ratios are often higher than 100% if the company makes acquisitions.

There is also something to do with ‘depreciation’ that I don’t fully understand. Basically and utility-like trust will have a pay out ratio over 100% if you define it accounting-wise a certain way.

By: FinancialJungle.Com

FinancialJungle.Com — Wed, 25 Jul 2007 16:50:33 +0000

Excellent post. One more point – ROC becomes taxable once the adjusted-cost-based is lowered to below $0. e.g. if you paid $10/share, and you received $10.10 of ROC, the $0.10 becomes taxable as Capital Gain in that year even if you’re not selling.