Topic: How To Invest

Q: Pat, I am interested in adding to my REIT holdings and would like to know what your opinion is regarding adding REI.UN and CHP.UN to my TFSA account as opposed to placing them in a cash or registered account.

Article Excerpt

A: We see both RioCan REIT, $28.58, symbol REI.UN on Toronto, and Choice Properties REIT, $13.33, symbol CHP.UN on Toronto, as buys. Which account to hold REITs in depends on an individual’s personal tax situation and what else they hold in their overall portfolio. However, here’s a look at REIT distributions and their tax implications in different accounts. Most REITs distribute almost all of their net income to their unitholders. As a result, REITs pay little or no income tax, since most of their earnings flow through to investors. In a cash account, unitholders are responsible for paying tax on the entire amount of a distribution. (While that monthly or quarterly payment is not called a “dividend,” it may include a dividend component). Still, unitholders often defer paying tax on a big part (usually 50% to 100%) of their distributions until they sell their units. That part—a return of capital—is taxed at the same rate as capital gains. The distribution’s return of capital lowers the…

You are trying to access subscriber-only content.

To read this article, you may subscribe or sign in.
If you are already a subscriber, log in here.

If you wish to become a subscriber, click here. Or you may enjoy access to all our publications when you become a Member of Pat McKeough's Inner Circle Pro.