February 06, 2007 10:17 pm
""shareholder pressure for Telus and BCE and maybe Encana to convert to a trust structure was due to a *false* impression that it would make for a significant tax break!
Did pressure from 'shareholders' have anything to do with tax breaks? Wasn't it more a case of a desire to unlock shareholder value that had large investors pushing corps to the trust model?""
Well, yes the little shareholders would want a change if possible to getting a high cash-on-cash yield and maybe wouldn't focus particularly on strange tax issues. Even the concept that a 5.5% dividend if present is already as good as 8% trust income: might tend to be elusive.
But there does seem to be an illusion that the government is fixing a loophole, that as-is corporations are taxed and income trusts are not. Like the message that your advisor should have had you diversified, and the whole thing surprisingly started to blow up, with mass conversions beginning for large caps, so had to be stopped, and the new proposed tax does that. I think that is mostly false. The new tax is more of just a withholding tax than people think. And if the new tax in itself doesn't have much effect, especially on trusts with tax pools to handle the old trust tax on undistributed taxable income, *and* if the playing field in 2011 will either be levelled or will be favoring corporations over trusts, then *therefore* the trusts were not favored before Halloween! See? A conundrum.
Appearance is everything, when all is well, then unit values are high, and no problem with loan convenants, and the outlook is good, so unit prices stay high. When there is interference and doubt, unit prices fall and stay down. All is shadowy.
Not "political" I hope, book.