BCE Takeover – Plan Now To Ease The Tax Hit

If you own BCE shares you are probably aware, a consortium led by the Ontario Teachers’ Pension Plan Board (OTPPB) is in the process of purchasing all outstanding BCE common shares for $42.75 each. The deal was approved by the Competition Bureau and a majority of BCE common and preferred shareholders on September 21, 2007, and is expected to close in 2008.

How does this affect you?

You could be affected in a number of ways if you hold common shares of BCE.

You could pay more taxes in 2008. If you have owned BCE shares for an extended period of time, chances are that the purchase of your shares may leave you with a significant capital gain. Fifty percent of your net capital gains (total capital gain less total capital losses) realized in a year is included in your income for the year and subject to tax. In other words, you may have a significant tax bill in 2008.

Government benefits may be reduced. Higher taxable income means not only higher taxes, but a potential reduction in available tax credits, such as the age amount and the spousal amount, as well as income-tested government benefits such as Old Age Security and the GST credit.

To get an idea of how much of a capital gain (or loss) you may realize, you need to know the average cost of your BCE shares.

Planning opportunities

Since the transaction is expected to close next year, you may be able to spread out the anticipated capital gains liability over two years by disposing of some of your BCE shares this year and others in 2008.

One way to reduce your capital gains and help the environment at the same time is by donating your BCE shares in-kind to Ontario Nature. You will not have to pay any capital gains tax on the donated shares and you will receive a charitable tax receipt for their market value.

So when you are planning how to deal with this unexpected capital gain consider Ontario Nature. Become a champion of nature!