Let me recap how “phantom” distributions arise and where to find the information for Canadian exchange-traded funds. Then I’ll briefly discuss U.S. ETFs, which have some key differences with their Canadian counterparts...
Can anybody confirm that the cds.ca site provides accurate information on ROC and phantom distributions?
That is the site I have been using for ACB tracking data in the last few years. Here is the link:
I don't know but I never trust a third party site. I've seen too many errors from the likes of Google Finance, Yahoo Finance, Globeinvestor, Reuters, etc. I always go to the source....the provider's website.
Amendments to the Income Tax Act (Canada) and Income Tax Regulations (Canada) provide for the disclosure of certain information by public trusts and public partnerships and require that distributions or allocations of capital and income for public mutual fund trust units (T3/Quebec RL-16) and public limited partnership units (T5013/Quebec RL-15) be made public, in prescribed form, by posting the foregoing information within 60 days after calendar year-end (or the fiscal period) online via this website, and within 67 days after the end of the calendar year in which the taxation year ends in the case of public investment trusts and public investment partnerships. In addition, the trust or partnership must notify the Minister as to when this posting requirement has been satisfied.
For T3's I've found they are identical to those provided by the company sites themselves. In fact I've found they're better since they are all made to adhere to the same form on CDS.
Anyone at BMO, RBC, Scotia, etc that can share on how these are reported?
Just learned about the phantom distributions by noticing discrepancies with the adjusted cost base between TD Direct Investing and my software.
These amounts only show up as capital gains in the yearly Trust Units Summary that TDDI produces and nowhere else. While that information is in the monthly statements and TDDI does adjust the cost base correctly, I'd like to convince them that it's not acceptable not to provide that information in the yearly summaries.
Unless I'm mistaken, it's the only information missing from the yearly documents that I need to file my taxes correctly.
I'm curious to know how the other discount brokers provide that information in the yearly summaries (if at all). Anyone at BMO, RBC, Scotia, etc that can share on how these are reported?
I am not aware of phantom re-invested distributions showing up anywhere on brokerage statements (BMO IL or Scotia iTrade) or itemized tax summaries (have never looked for them) and they are not on T3 tax slips. The only place I find and get them is on the individual ETF websites....although one can also get them from CDS if so inclined.
They are not needed for annual tax return purposes directly. These phantom reinvested distributions only apply to some ETFs from time to time (to my knowledge) and are added to ACB such that when you eventually sell some/all of the ETF, your acquisition cost will be 'higher' due to the addition of these distributions.
These "phantom distributions" are usually capital gains only.
Imagine for a moment an index fund that realizes a large gain when it has to sell a stock that has been removed from the index, for whatever reason... The fund needs the cash from selling the old stock in order to purchase the new stock that has been added to the index to replace the old one.
For tax purposes the fund has to allocate the capital gain to the unit holders, but does not want to distribute cash. The answer is a phantom distribution. Your broker however will likely not be aware of the amount until after December 31. [Even for cash distributions made during the year the broker won't usually know the 'tax components' of the distribution until the Fund completes its annual accounting and determines its taxable income.]
The amount of the phantom distribution will be included in the annual T3 slip for the fund (prepared in March, after the Fund completes its accounting) - however there is generally not any indication on the slip to flag the fact that all or part of the reported amounts are 'phantom'.
(Maybe someday CRA will create a box on the slip for that..but don't hold your breath. It took them many years to add box 42, and they were motivated - ROCs were costing them tax revenue)
DavidR wrote: ↑23 Mar 2017 14:21
The amount of the phantom distribution will be included in the annual T3 slip for the fund (prepared in March, after the Fund completes its accounting) - however there is generally not any indication on the slip to flag the fact that all or part of the reported amounts are 'phantom'
I'd suggest 'all or any part of' for completeness.
Dilettante72 wrote: ↑23 Mar 2017 12:42
Anyone at BMO, RBC, Scotia, etc that can share on how these are reported?
When I was at BMO IL, I got T3 slips with detailed information about each distribution. I compared these with the actual cash distribution in my account.
There were two types of phantom things:
Capital gains were always fully reinvested (e.g. were not distributed into my investment account): I add these amounts to the ACB as they are additional investments.
There were often a 0.01$ rounding difference between the T3 amounts and actual amounts received in my investment account: I add or subtract the difference as it is an additional investment or a return of capital, respectively.
Last year, at Virtual Brokers, my T3 was not as detailed. But, again, I considered any difference between taxable distributions and actual distributions received as re-investments (in other words, additional investments that increase the cost basis). Unlike with BMO IL, there were no rounding errors; re-investment amounts exactly matched reported taxable capital gains.
Variable Percentage Withdrawal (finiki.org/wiki/VPW) | One-Fund Portfolio (VBAL in all accounts)
That seems a lot of work to go to when the ETF sites give you the specific phantom re-invested distributions on a per unit basis. I find that phantom re-invested distributions are relatively infrequent. Also, unless you backcheck with the ETF's data, it seems the extra work doing it the way you do increases the chance of error.
Out of 7 Cdn ETFs, my ex had exactly 0 with phantom re-invested distributions in 2016, per the BMO and Blackrock ETF websites.
Out of 3 Cdn ETFs, I had one (XEF) have a phantom re-invested distribution.
Didn't have to do any math work off the T3s nor check distributions recorded in the accounts. Took less than 15 minutes to look up 2 websites more than 2 months ago.
longinvest wrote: ↑23 Mar 2017 21:08[*] There were often a 0.01$ rounding difference between the T3 amounts and actual amounts received in my investment account: I add or subtract the difference as it is an additional investment or a return of capital, respectively.
So much for grammar my command of the English language, eh? Did I ever also say that I absolutely detest spreadsheets? And decimal places on my calculator?
I have found that TDDI fudges the results so there's no rounding error when splitting up trust or ETF income. RBCDI has rounding error doing the same thing.
IB has rounding error in their monthly/daily reports.
I've had one or two of these penny rounding errors in this year's T-slips too. Can't recall exactly ATM but I think they were from mutual funds. I'm a bit embarrassed too that I didn't think of treating them as a cost base adjustment ... it's one of those nice ideas that few would put into practice.