Ref: Recentl posts by Le Penseur and Cinema Show

Here is my simple take on this and some suggestions. Note: I am no tax expert, hence tax professionals should be consulted, especially if you have a large holding.

1. Interpretations:

(a) Prior to DDI distribution: (KWG + DDI) value = KWG1 value

(b) After DDI distribution: KWG value = KWG2 = KWG1 - a bit corresponding to DDI value.

As indicated in the NR, the company distribution scheme, by way of pricing of DDI shares, would try to make the distribution of DDI tax-neutral.

After the distribution, KWG2 and DDI shares will trade independently and there should be no tax implication unless you sell DDI share for more than the reduction in the KWG value (i.e. KWG1-KWG2). That is when cap gain is triggered. If you sell DDI for less than KWG1-KWG2 then presumably you are qualified for cap loss. I would expect similar treatment can be applied if you decide to sell KWG2 and keep DDI, but I have not yet worked out this scenario.

2. Suggestions:

(a) Since this is not a simple thing, and you might need to run around collecting information comes tax time, it would be a good idea to have a copy of the NR or something equivalent that describes the distribution of DDI in your tax file, just in case CRA is asking for an explanation.

(b) Similarly, statements from your stock brokerage before and after the distribution should be in your tax file as well, and your buy/sell slips.

These would be helpful when you discuss your tax situation with a tax professional.

goldhunter