Corporations can reduce taxable income with WCSB Royalty Income Investments
As described in the prospectus, when the limited partnership renounces CEE or qualifying CDE to a limited partner, the limited partner in turn will be entitled to add the amount renounced to its "cumulative CEE account". A taxpayer with a balance in its cumulative CEE account can use, at the taxpayer’s option, all or any portion of this account to reduce its taxable income in a given year. Similarly, when the limited partnership renounces CDE to a limited partner, the limited partner in turn will be entitled to add the amount renounced to its "cumulative CDE account". A taxpayer with a balance in its cumulative CDE account can use, at the taxpayer’s option, up to 30% of the and will not disappear when the corporation sells its limited partnership units.
When the limited partnership units or any mutual fund corporation shares received in exchange for the limited partnership units are sold, the corporation will realize a capital gain equal to the sale price of the units or shares, as the case may be (less any costs of disposal) because the adjusted cost base for these units or shares will be nil. Half of any such capital gain will be taxable to the corporation and the other half will be added to the corporation's capital dividend account, which can be paid out to Canadian resident shareholders tax free.
Provincial Tax Advantages
There are other ways a corporation could reduce its taxable income, such as by paying additional salary to its shareholder-manager(s). Also, there may be negative tax consequences to a corporation holding too many investment assets. In particular, this may be a problem if there is a possibility that an owner-manager might sell the business in the foreseeable future by way of a share sale. Both of these issues amongst other things should be discussed with the corporation's accountant or tax advisor.
Visit our tax calculators page to calculate your tax deduction on your WCSB investments or determine the ACB on your investment.
frequently asked questions
Why buy units of a WCSB Royalty Income Limited Partnership rather than publicly traded shares of energy companies?