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The information contained in this summary is applicable to a taxable Canadian resident who held their units as capital property. It is not applicable to a Unitholder that is a “financial institution” as defined in the Tax Act that is subject to the “mark-to-market” rules, a Unitholder that is a “specified financial institution” as defined in the Tax Act or a Unitholder an interest in which is a “tax shelter investment” as defined in the Tax Act. Further, this summary does not constitute legal or tax advice to any Unitholder, and no representation with respect to the particular federal income tax consequences to any particular Unitholder is made, and all unitholders should consult their own tax advisors.
The transaction that occured on August 24, 2007, was comprised of two components, the Redemption (see (A) below) and the Transfer (see (B) below). Any units that were not sold into the transaction retain their original cost basis and the tax treatment related to the transaction does not apply.
Following below are the tax components received by Canadian resident unitholders who disposed of units pursuant to the Redemption and the Transfer on August 24, 2007:
(A) Units acquired by Dundee REIT pursuant to the Redemption
(received on approx. 89.6% of units disposed of):
| Payment description: |
Amount |
Form |
| Income per unit: |
|
T3 |
| Capital gains per unit: |
|
T3 |
| Dividends per unit: |
|
T3 |
| Proceeds of disposition per unit: |
|
T5008 |
| TOTAL |
|
|
|
(B) Units acquired by GE Real Estate Canada pursuant to the Transfer
(received on approx. 10.4% of units disposed of):
| Payment description: |
Amount |
Form |
| Proceeds of disposition per unit: |
|
T5008 |
|
Page 65 of the Management Information Circular dated July 13, 2007 outlined the Canadian income tax consequences of the Redemption and Transfer to certain taxable Unithholders resident in Canada. These can be summarized as follows:
Distributions Paid on Redemption:
A. a Redeeming unitholder will be allocated a pro rata share of any income arising from the sale of the Purchased Assets and the REIT Exception Transaction. Specifically, a Redeeming Unitholder will be allocated:
i. a share of net income (including recapture) that will be characterized as ordinary income and dividends that will be characterized as such;
ii. a share of the net taxable portion of capital gains that will retain their character as taxable capital gains; and
iii. a share of the non-taxable portion of capital gains that will retain their character as non-taxable capital gains
B. a Redeeming Unitholder will realize a capital gain (or capital loss) on the Redemption to the extent that its proceeds of disposition (that is, $47.50 less amounts noted in A above) exceeds (or is less than) the Redeeming Unitholders’ adjusted cost base (“ACB”) of the REIT unit immediately before the redemption.
Transfer:
- a Unitholder will realize a capital gain (or loss) on the Transfer to the extent that its proceeds of disposition exceeds (or is less than) the ACB of the REIT unit immediately prior to the Transfer.
The following is a numerical example intended to better illustrate the tax consequences noted above.
| ASSUMPTIONS : |
| a) At the time of the Redemption and Transfer, a Unitholder owns 100 units that were purchased on January 1, 2007 at a per unit cost of $38.65 (including commissions). |
| b) The Unitholder does not participate in the DRIP. |
| c) A “pro rata” election is made (i.e. approximately 76% of the units owned were disposed of and approximately 24% were retained). |
| d) Of the 76 units disposed of, 68 units will have been redeemed and 8 units will have been transferred. |
|
a. Pro rata allocation of distributions received on the Redemption that arose from the sale of Purchased Assets and the REIT Exception Transaction:
| |
Amount per unit |
Total for 68 units redeemed |
Source of information |
| Income |
|
|
T3 |
| Taxable capital gains |
|
|
T3 |
| Non-taxable capital gains |
|
|
T3 |
| Dividends |
|
|
T3 |
| Proceeds of Disposition |
|
|
T5008 |
| Total |
|
|
|
|
b. Capital loss on Redemption:
| |
Amount per unit |
Total for 68 units redeemed |
Source of information |
| Proceeds of disposition |
|
|
T5008 |
| Adjusted cost base |
|
|
See Footnote 1(a) below
|
| Capital loss |
|
|
|
| Taxable capital loss |
|
|
|
|
c. Capital gain on Transfer:
| |
Amount per unit |
Total for 8 units Transferred |
Source of information |
| Proceeds of disposition |
|
|
T5008 |
| Adjusted cost base |
|
|
See Footnote 1(b) below
|
| Capital gain |
|
|
|
| Taxable capital gain |
|
|
|
|
Footnote 1 - Computation of Adjusted Cost Base
| |
Units |
ACB / unit |
Total ACB |
Comments |
| Units acquired on January 1, 2007 |
100 |
|
|
|
| Return of capital, Period 1-8 distributions |
100 |
|
|
See CDS form |
| ACB prior to Redemption |
100 |
|
|
|
| Redemption |
(68) |
|
|
(a) |
| Transfer |
(8) |
|
|
(b) |
| ACB post-transaction |
24 |
|
|
|
|
Dundee REIT distributes at least 80% of its Distributable Income on an annualized basis to unitholders in the form of monthly distributions. However, only a portion of the distributions made to unitholders are taxable. The non-taxable portion of any net realized capital gains and any other amount in excess of the net income of Dundee REIT payable to the unitholder will not generally be included in the unitholder’s income for the year.
The Trust has determined that the
distributions
should be treated in the following manner:
|
Jan.-Aug. 2007 |
Sept.-Dec. 2007 |
2006 |
2005 |
| Other taxable income: |
88.2% |
36.7% |
28.9% |
32.1% |
| Taxable Capital Gains: |
1.8% |
5.1% |
1.8% |
2.1% |
| Return of Capital: |
10.0% |
58.2% |
69.3% |
65.8% |
|
The link below shows record dates with distributions paid and the taxable income that should be allocated:
In 2008, it is anticipated that approximately 75% of the distributions
will be tax deferred, with the remaining 25% being taxed as income.
Registered non-resident unitholders are subject to withholding tax on 100% of the distribution at the following rates:
| 2008 |
| US |
15% |
| German |
17.5% |
| Other |
17.5% |
|
Therefore, for a registered non-resident holding 100 units, the monthly tax withheld on a per unit distribution of $0.183 will be calculated as follows:
| |
Percentage of tax withheld |
Gross Distribution |
Tax Withheld |
Net Distribution |
| US |
15% |
$18.30 |
$2.75 |
$15.55 |
| German |
17.5% |
$18.30 |
$3.20 |
$15.10 |
| Other |
17.5% |
$18.30 |
$3.20 |
$15.10 |
|
Non-registered unitholders who hold their units through a financial institution, may be subject to a higher withholding tax deduction. However, they are eligible to receive a refund once the breakdown of the distribution payment is known.
In addition, for non-residents participating in the distribution reinvestment plan, non-resident witholding tax is deducted from the non-residents' distributions prior to determining the reinvestment amount and the 4% bonus.
Fair Market Value of Dundee REIT units as at June 30th, 2003
Investors who became unitholders of Dundee REIT by exchanging their Dundee Realty
Corporation shares for units of Dundee REIT should be aware of the Fair
Market
Value as at June 30th, 2003.
Distributions
A holder of Dundee REIT Units is generally required to include the taxable income received from the REIT in his or her income tax return. The taxable portion of the distribution has to be included even if the distribution is reinvested under the Distribution Reinvestment and Unit Purchase Plan.
Canadian unitholders will receive a Statement of Trust Income Allocations and Designations (T3) for income tax purposes. You should receive a statement either from your financial institution or stockbroker if you hold your units in an account or directly from Dundee REIT’s transfer agent, Computershare Trust Company of Canada, if you are a registered unitholder and are in possession of a unit certificate.
Non-resident unitholders should receive a Statement of Amounts Paid or Credited to Non-Residents of Canada (NR4) with the taxable income reported in box 16 and the non-resident tax withheld shown in box 17.
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