Winnipeg Free Press

Winnipeg Free Press (Newspaper) - November 2, 2006, Winnipeg, Manitoba a4 Winnipeg free press thursday november 2, 2006 income Trust Thunderbolt Don to panic or Rush to sell experts advise by Luann Lasalle Montreal ? Don to panic and Don to Rush to sell. Income Trust investors already feel ing the dizzying downward value of their portfolios should to overreact to the announcement that trusts will be taxed financial experts said wednesday. The mistakes Are made because peo ple Are Selling with emotion Clay Gille Spie of Rogers financial group said. As hard As it May be Gillespie a answer is not to panic. The thing to do is just to sit on the sidelines for a Little while said Gille Spie vice president and portfolio Man Ager of the Vancouver based financial adviser. Decisions about re balancing invest ment portfolios should be made about what a Best going Forward not Back Ward he added. Federal finance minister Jim Flaherty caught investors and Bay Street by Surprise with the announcement on Hal Loween. Unfortunately for investors who have top heavy portfolios with income trusts Gillespie does to have much advice. They be got to be quite scared he said adding he has heard stories of peo ple who have 70 per cent or 80 per cent or even 100 per cent investments in income trusts. I Don to have a solution for them other to say what a the Best strategy going Forward he said. What you re going to find now is that income trusts should Trade equally to what a dividend paying Stock for More conservative investors there Are other investments to consider to avoid income trusts. Finance professor George Athanas Sakos of the Richard Ivey school of Busi Ness said investors May want to turn to real estate income trusts which Are exempted from the proposed measures. They can also turn to Banks with High paying dividends said Athanassakos who teaches at the University of West Ern Ontario in London. At this Point its probably too late to sell Athanassakos said of income trusts. Flaherty a announcement had both telecoms rivals telus and Bce both reconsidering their announcements to convert to income trusts. While new trusts wont have a tax hol iday existing income trusts wont be taxed until 2011 and the distributions Are expected to be taxed like dividends. Income trusts Don to pay corporate income tax and distribute Cash to unit holders who pay income tax on the distributions. There was concern that too much of the tax Burden was being shifted away from corporations to individuals and the Federal government was being deprived of millions of dollars of corporate taxes. Tax lawyer Stephen Ruby said he would to Tell investors to sell because their investments have already taken a hit. What would be the Point said Ruby of Davies Ward Phillips & Vineberg in Toronto. If i were buying today essentially i would be buying a share in a corporation that has a four year tax its not an upside to the situation but rather just not As much of a Ruby also said that under the proposed changes distributions will have to continue to be made or the trusts will face punitive tax rates. Lawyer Frederic Harvey a tax specialist at Mccarthy Tetrault in Montreal said the announced measures mean that an income Trust in 2011 will be taxed like a corporation. It will pay corporate level tax and its distributions will be taxed As dividends in four years he said. In other words the Overall tax Bur Den for an individual remains the same Harvey said. You re theoretically get Ting the same Money or distribution but your portfolio has gone ? Canadian press fund Bosses insist the sky is not falling its four years until existing trusts Are affected by new rules so Why panic by Murray Mcneill s ome Manitoba income trusts saw their unit values take a beating wednesday As Panicky investors rushed to sell off their holdings in the Wake of the Federal governments sur prise announcement that trusts will be taxed. Some like the North West income fund Arctic Glacier income fund and Pollard banknote income fund saw their unit Price plunge by about 15 per cent by the end of the Day. Others such As up newspapers income fund the Exchange Industrial group fund and can West Media works income fund saw slightly More modest declines ? in the Range of 11.3 per cent to 13.7 per cent ? and a few luckier ones like new flyer industries income fund saw single digit declines. In stride some Trust officials like Arctic Glac Ier ceo Robert Nagy took the valuation remain tax exempt. Losses in stride saying he expects Arctic he predicted that once investors real units to regain some of that lost ground ize that reits like Lanesborough Hunt in the coming weeks As investors real Ingdon and Temple could Start to see ize it wont be As hard hit by the Federal millions of dollars in new investments tax changes As some other trusts pouring in As investors sell off their units because of the Way in business trusts its payouts Are which will be taxed structured. There a no real at the same rate As i Don to know if corporations under Well get Back All of reason to sell them. The proposed new it Nagy added. Rules and re invest and if you did sell ? but we certainly their Money in expect to see some them what would reits. Of it come it will take some some of the local you buy time he conceded. By based real estate but you la see it investment trusts ? David Christianson a financial gradually happen also saw their shares planner and investment counsellor decline in value with Winnipeg based Wellington West tuesdays late Day one financial analyst predicted its that its tax losses were no longer attract Bce and telus said they were study even though most of total wealth management inc announcement by and its billions in tax losses could be a Tive after potential buyers such As telus ing the governments decision. Them would be Federal finance min More attractive takeover target under and Bce announced plans to convert to David Christianson a financial plan exempt from the ister Jim Flaherty the new income Trust rules. An income Trust Structure. Ner and investment counsellor with win proposed tax changes. In the Case of also raised questions about whether one rec capital markets analyst Jonathan however Flaherty moved to change Nipes based Wellington West total Lanesborough reit the decline was 4.2 High profile Manitoba company that has Allen speculated the company would be the rules on tuesday to tax trusts More wealth management inc., said he a advis per cent while Huntingdon reits was been considering a possible conversion a takeover target. Like corporations. Under the existing ing his clients to hold onto their income Mere 1.7 per cent. And Westfield to an income Trust ? Manitoba telecoms we believe mass tax losses of $2.7 rules income trusts avoid corporate Trust units for now. Reits units ended the Day at the same services inc. ? will now scrap that idea. Billion including depreciation have income tax because they distribute their there a no real reason to sell them Price they started. Its essentially too soon to say com become More much attractive and there Cash flow to investors to be taxed in their he said. And if you did sell them what Winnipeg real estate Mogul Arni Pany spokesperson Helen Reeves said is a High probability of its being hands. Would you buy Thorsteinson who is the chief exec in an interview. Well be looking at All acquired Over the next year in our View investment professionals said he also noted there la be a four year Tive officer for three locally based of our Allen wrote in a note to clients. Wednesday the new tax regime will transition period before existing trusts reits ? Lanesborough Huntingdon however Reeves noted its shares in the absence of a takeover bid we immediately kill new income Trust con Are affected by the tax changes sound Temple reit ? attributed the loss weren to Hurt by tuesdays announce value Manitoba Tel at $46 per share As a versions like those planned at Bce and there a no reason to is to investors not realizing that reits ment finishing the Day at the same Price going telus As Well As provoke More losses in which Are open ended passive their they started $45.60. ? with files from up and can West news ser shares in the company have traded the share prices of existing trusts in the assets Are managed by an outside party so we see that As a very positive Indi vices lower in recent weeks amid speculation Days ahead. And invest solely in Canadian assets will cation she added. Manitoba offers tax Cut to ease seniors pain and that a just the savings on their Todd said those savings will help offset tuesday when Flaherty announced following feds Lead provincial tax Bill. When Federal finance the negative Impact of the Federal gov Ottawa is increasing the Federal senior minister Jim Flaherty announced tues Ern ment a announcement tuesday that tax credit by $1,000 to $5,066 effective As Day that Ottawa would be allowing Cana is putting an end to the special tax treat of last january. Dian seniors to split their incomes for ment of trusts and will be taxing them Innis said that should result in an Federal tax purposes he estimated it will like corporations. Annual Federal tax savings of $155 for in letting pensioners split pension incomes provide up to $1 billion a year in new fed that announcement touched off a Manitoba pensioners. Eral tax Relief for Canadian pensioners. Wave of panic Selling in Canadian Stock and if the provincial government opts by Murray Mcneill Russell Todd president of Todd and markets wednesday As investors scram to match that provision As Well that associates financial knowledge inc. In bled to sell off their income Trust units. Would boost the tax saving to $225 a year Manitoba pensioners could be look Calgary said the Federal income split the up tax composite Index fell 294.2 for pensioners with an annual income of ing at some hefty tax cuts next year to Ting provision will translate into signify Points or 2.4 per cent to 12,050.39 ? the $30,270 or less added David Christian help ease the pain of any losses they May cant savings for seniors particularly biggest single one Day drop in two and a son a financial planner and investment have suffered As a result of the proposed since Many couples had a sole income half years. The tax income Trust sector counsellor with Winnipeg based Welling new Federal tax changes for Canadian earner and were taxed heavily As a fell More than 12 per cent wiping out ton West total wealth management inc. Income trusts. Result. About $20 billion from the sector. For seniors with pension incomes finance minister Greg Selinger its going to Benefit the average mid although pensioners who have invest above that limit the tax savings decrease announced wednesday that Manitoba Cial tax savings for Manitoba seniors to Low income Canadian who a receiving de in income trusts to generate retirees by 15 cents for every $1 above the will follow the Federal governments Lead the minister added. Income from an income Trust. Its going ment income May have seen their limit Christianson added. And allow pensioners to split their pen to illustrate the kind of tax savings to be Good for them Todd said. Investments take a hit wednesday Todd so this is really targeted at Low Sion incomes starting next year. That could mean for some couples the he calculated the changes could mean said the income splitting provision will income seniors Innis said. The change which allows higher minister said a couple with a combined a couple would pay Between 16 and 22 help Cushion the blow. Income taxpayers to allocate up to half of income of $51,663 would see their Annu cents of tax on the Dollar. Without Derek Innis a partner in taxation ser with files from up and their eligible pension income to their res Al provincial tax Bill plummet from income splitting that same couple would vices with Meyers Norris Penny lip in can West news services ident spouse or common Law partner $7,909 to $5,849, for a savings of More have to pay about 33 cents of tax on each Winnipeg noted pensioners also. will result in $11 million a year in Provin than $2,000. Dollar. Received a second piece of Good news ;