I have been told that Canada no longer withholds a deemed tax (15%) on royalty trusts held in an American IRA. I used to be able to buy royalty trusts (Canadian MLP's) inside My IRA but a couple of years ago they started withholding 15% of the distribution. Inside an IRA there was no way to receive credit on US taxes so the party was over. I understand this regulation has been rescinded. Comment??
Canadian Royalty Trusts
Feb 28, 2011
1 Replies
That is basically correct because the royalty trusts have been converted to corporations. As corporations, they are not required to withhold 15% of the distribution when the corporation is held in an IRA. They still withhold 15% on non-IRA accounts but that can be recovered at tax time.
"Virtually all Canadian income trusts will convert to corporations by the end of this year, which renders this question essentially moot. Converting trusts, however, will provide one major advantage for US IRA investors--that is they?ll no longer be withheld 15 percent of dividends by the Canadian government."
Roger Conrad - Utility Forecaster Weekly 7/22/2010
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