Bce stock buyout

Last year at this time, we wrote about the proposed buyout of Bell Canada’s parent company BCE by the Teachers pension plan and others. It took almost a year for them to get all the approvals, but the buyout has finally been set to close on or before December 11. On this date, you will automatically no longer own your BCE shares, and will receive $42.75 in cash for each share you own.

WEALTH Matters — FALL 2008

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Bce stock buyout

The dividend tax credit

Managing portfolio volatility

Variable annuities

Because the price you will receive is higher than what the shares were worth at most times in the past, there will be a ‘capital gain’, which is 50% taxable. The amount of tax payable will depend on when you acquired your shares, and how much they were worth when you acquired them. 

NOW is the time to do some tax planning to minimize negative impacts such as being pushed into a higher marginal tax bracket, and potentially losing some of your Old Age Security.  Call us to discuss further how we can help you avoid these issues.

 

Here are some things to consider when deciding how to reinvest your proceeds:

· Your BCE shares earned dividends and capital gains, which are less taxable than interest.  This was a tax-efficient investment. Dividend yield averaged 3.9% over the past 5 years, and total share value increased 800% over the past 25 years – about an 8.6% average annual compound return.

· The proceeds should be reinvested in other equities, otherwise you will cause a reduction in the equity portion of your overall asset allocation.  This may not be desirable during a bear market (see managing volatility).

· There are several investment funds available which invest in large stable high quality dividend-paying shares, which would be excellent replacements for your Bell shares (see dividend tax credit).

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