Dividend Watch List

Imvescor Restaurant Group (TSX: IRG, OTC: IRGIF) and Royal Host (TSXL RYL, OTC: ROYHF) have eliminated their distributions, at least for now.

Imvescor’s move is part of an extensive restructuring process, triggered by a rapid decline in appeal at certain of its brands. Management is calling the dividend elimination a “postponement,” triggered by its need to maximize cash on hand for the effort. The company will be “optimizing” its capital structure, mainly to identify options for the CAD23 million in convertible debentures that come due Dec. 31, 2011. That suggests it will resume payments at some level once it’s able to deal with this obligation.

The company will also close its Ontario office and announced a major shakeup of management intended to improve performance on a brand-by-brand basis. Encouragingly, it actually opened three new locations in the most recent quarter, offsetting two closures and two renovations. But management will have its work cut out nonetheless, as evidenced by a 3.4 percent drop in same-store sales. That was punctuated by a 6.5 percent nosedive in same-store sales at the Scores brand.

The bulk of the costs Imvescor will incur this year will apparently be to exit unfavorable leases for closed restaurants. Projections are for some CAD2.5 million to CAD3.5 million in charges this year, with a lesser amount of costs likely in 2012. Throughout the process management will have to ensure the company is in compliance with various lending covenants as well.

By taking such decisive action management has ensured the survival of the company. The immediate cost was a nearly 50 percent decline in the stock last month. There’s likely little downside at this point, but equally little attraction to holding the stock.

That also goes for Royal Host, which last month recorded a fourth-quarter loss en route to not declaring a post-conversion dividend “at this time.” Management’s official statement was it would be better to “re-invest capital into the company’s hotel properties and refinance debt that’s coming due this year.”

That makes sense in light of recent disappointing operating results at the owner of hotels and resort locations, which have been hurt by the recession and the appreciating Canadian dollar’s dampening impact on US tourism. On the plus side, fourth-quarter average daily rate rose 1.6 percent, indicating customers are spending more. The bad news was occupancy declined a further 1.1 percentage points to 51.1 percent. That led to a decline in revenue per available room–a key operating metric–of 1.6 percent.

Royal Host was successful cutting costs in 2010, outsourcing its hotel management for all hotels, paying down two mortgage pools and capitalizing on a faster recovery for some properties. The cash saved from not paying dividends will further add to the pool of funds available for debt reduction and upgrades to improve property performance.

All of these steps should ensure the survival of the business, which includes some of the swankiest locations on both sides of the border. It also ensures a seamless transition from income trust to corporation, which Royal Host elected to do, as it was no longer able to qualify for the advantages of a real estate investment trust this year.

Unfortunately there’s no timetable for a restoration of the dividend. That also makes it unlikely we’ll see a recovery of the stock’s 25 percent drop since announcing the dividend elimination last month. This one will likely recover at some point, but there’s little appeal for shareholders now.

I’ve never been high on either Imvescor Restaurant Group or Royal Host, but I currently rate both “holds” for now, primarily because both have been so battered by their dividend moves.

Since the wave of trust conversions to corporations on Jan. 1 I’ve pointed out that several companies’ yields were still showing up in quote services at pre-conversion rates, not reflecting cuts announced with the transition. These were primarily companies shifting from monthly to quarterly dividend frequency, meaning they simply had not yet declared a dividend at the new rate.

The danger has been that investors would assume the posted yield reflected a post-conversion dividend rate and would buy in, only to be deeply disappointed by the lower rate eventually declared. That, in turn, would be a potential catalyst for a selloff in the stock, which would almost certainly be quickly reversed but not before a lot of people lost money.

Last month four more converting trusts declared their first quarterly dividends as corporations. As a result their posted yields now reflect their proper disbursements: Big Rock Brewery (TSX: BR, OTC: BRBMF), Futuremed Healthcare Products (TSX: FMD, OTC: FMDHF), North West Company (TSX: NWF, OTC: NWTUF) and Ten Peaks Coffee Company (TSX: TPK, OTC: SWSFF). Current yields shown in How They Rate are now accurate.

I’m not particularly excited by any of these companies now, as reflected by the fact that all four rate holds. Post-conversion dividend levels, however, should hold at least for 2011, and very likely well beyond.

North West Company is the safest of the bunch, demonstrated by a payout ratio of 57 percent. Unfortunately, it’s also decidedly unattractive with a yield of just 4.5 percent. My strong view is management was far too conservative setting its post-conversion payout ratio and could pay more. It may indeed return to dividend growth at some point, but until it does North West Company is a hold.

Big Rock’s high payout ratio and Ten Peaks’ intensely competitive business probably also rule out dividend growth any time soon. Meanwhile, Futuremed’s operations have stabilized. But the disposable nursing supplies business that was the cornerstone of its growth and 90 percent-plus of current profits has noticeably slowed in the face of competition and cost controls at medical facilities.

The dividend yield of nearly 10 percent may attract some aggressive investors. And the payout ratio did dip under 100 percent for the fourth quarter, taking into account the new quarterly rate of 16.875 cents Canadian. Management has also affirmed its belief that the new rate–announced with its conversion plans over a year ago–can hold up indefinitely.

Futuremed, however, operates in a volatile business and has made a habit of disappointing investors in recent months on many fronts. Bay Street’s three holds, no buys” and no sells on the stock is further affirmation of the uncertainty here. Consequently, I rate Futuremed Healthcare Products a hold for aggressive investors only.

Two companies in How They Rate still have yet to declare what their true dividend yields are. One is a “sell,” the other actually a Portfolio member and a “buy.” But before you jump, take note of what the actual dividends are.

Canfor Pulp Products (TSX: CFX, OTC: CFPUF) still hasn’t officially announced or declared a post-conversion dividend rate. That will almost certainly happen this month, however, and it appears investors are still expecting the pre-corporate conversion monthly rate of CAD0.25 per share to become a new quarterly rate of CAD0.75.

That’s a stark contrast to what was announced during the pulp producer’s fourth-quarter and full-year 2010 earnings call, which was a cut to a new quarterly rate of CAD0.35, a more than 50 percent cut from the prior rate that’s still showing up in quote services. The pulp business appears to be healthy, which could leave room for upside surprises. But if management holds true to what it’s said, the actual yield is only about 8 percent.

That looks dangerous to me, particularly with the stock up about 35 percent this year. If you weren’t cashed out at conversion now’s the time to take the money and run from Canfor Pulp Products.

Davis + Henderson Income Corp (TSX: DH, OTC: DHIFF) is also showing a much higher quoted yield than the quarterly rate of CAD0.30 it declared for post-conversion more than a year ago. To review, the company made two payments during the calendar first quarter of 2011, the 15.33 cents Canadian per share paid out Jan. 31 and an additional, “special” dividend paid Mar. 31.

That’s a yield of around 6 percent, not the 9 percent showing up in quote services. I’m still looking for a first quarterly dividend as a corporation to be declared next month. The company is coming off solid fourth-quarter and full-year 2010 earnings and looks set to come out with strong first-quarter 2011 numbers that will point the way to future dividend growth. That makes it very attractive for total return.

But until there’s an increase, I’m holding my buy target for Davis + Henderson Income Corp at USD20.

The Dividend Watch List’s primary focus is on companies with potentially dividend-threatening challenges at their core businesses. Here are the current companies to watch. Note not all are sells. If the price is right, even the riskiest company can be a buy for intrepid investors.

• Brompton Stable Income Fund (TSX: VIP-U, OTC: BVPIF)–Hold
• Canfor Pulp Products (TSX: CFX, OTC: unknown)–SELL
• Chartwell Seniors Housing REIT (TSX: CSH-U, OTC: CWSRF)–Hold
• FP Newspapers (TSX: FPI, OTC: FPNUF)–Hold
• Interrent REIT (TSX: IIP-U, OTC: IIPZF)–SELL
• Perpetual Energy (TSX: PMT, OTC: PMGYF)–Buy @ 5

Bay Street Beat

Similar to what we did last month in this space, but different, here’s an update, in summary form, of Bay Street opinion on CE How They Rate Oil and Gas Producers, with the same summary of analyst response to fourth-quarter and full-year 2010 earnings. It’s hard to draw conclusions from these data, as it represents a summary of an aggregation by Bloomberg that standardizes sometimes archaic financial industry-speak in ways that may obviate any meaning that may have nevertheless filtered through.

At the very least, we can see that Bay Streeters are a cautious bunch who won’t get too far off the virtual reservation established by and among their peers. It’s also evident that prices for specific issues have reached levels that leave analysts even more cautious than their nature dictates under standard operating conditions.

Oil-levered names, in particular, have run along with oil prices; even the lagging West Texas Intermediate is trading above USD110, while Brent crude, perhaps the more indicative of global prices, is above USD120. As suggested in the Feature Article and in Portfolio Update, now is the time to be strategic, to capitalize on company-specific opportunities and to be cautious.

Stick to buy targets for the companies below, which can be found in How They Rate, despite the noise from the street, despite the fact that right now analysts are generally favorably disposed to our top picks.

Advantage Oil & Gas (TSX: AAV, NYSE: AAV) was upgraded to “top pick” by FirstEnergy Capital in the wake of fourth-quarter and full-year 2010 earnings. Five other houses maintained ratings. Four call it a “buy,” while two have “hold” ratings on the stock.

ARC Resources Ltd (TSX: ARX, OTC: AETUF) was downgraded to “hold” at TDNewcrest; seven Bay Street houses maintained their ratings, leaving the scorecard five “buys,” nine “holds” and zero “sells.”

Athatbasca Oil Sands (TSX: ATH, OTC: ATHOF) has five “buy” ratings and “seven” hold ratings on Bay Street, as all 12 houses covering the stock maintained their stance after 2010 results.

AvenEx Energy Corp (TSX: AVF, OTC: AVNDF) is rated “outperform” by the one analyst that covers it, Raymond James. That’s a “buy” in Bloomberg-ese.

Baytex Energy Corp (TSX: BTE, NYSE: BTE) was downgraded to “market perform” by Raymond James shortly after announcing earnings but was upgraded to “sector outperform” by CIBC World Markets this week. Ten analysts call it a “buy,” while five say “hold.”

Bellatrix Exploration (TSX: BXE, OTC: BLLXF) is rated “buy” by seven analysts, while one calls it a “hold.” Seven have reiterated advice since earnings.

Bonavista Energy Corp’s (TSX: BNP, OTC: BNPUF) fourth-quarter and full-year earnings led 12 analysts who cover it to maintain their ratings; seven say “buy,” six say “hold.”

Bonterra Oil & Gas (TSX: BNE, OTC: BNPUF) is the first in the HTR Oil and Gas universe (moving alphabetically) to hold a “sell” rating, hung on it by Haywood Securities in a late-March downgrade. But CIBC World Markets upped its rating to “sector outperform” on this one, too, this week, with a target price of CAD72.50; the stock is changing hands at around CAD57 as of this writing. Three now say “buy,” while one says “hold.” Haywood says “sell.”

Canadian Natural Resources (TSX: CNQ, NYSE: CNQ) has 16 “buy” ratings and six “hold” ratings. JPMorgan boosted it to “overweight” last month, while Goldman Sachs dropped it to “neutral/attractive.”

Canadian Oil Sands Ltd (TSX: COS, OTC: COSWF) looks like the ugly duckling among the group, as it earns a single “buy” rating from the Bay Street crowd but also nine “holds” and four “sells.” The situation is rather static post/pre-earnings, as 10 have maintained over the past month. The stock continues to hover above CAD33 in Canada, USD35 on the US over-the-counter market.

Cenovus Energy (TSX: CVE, NYSE: CVE) has eight “buy” ratings and 13 “holds;” Goldman bumped this one to “buy/attractive” last month.

Crescent Point Energy (TSX: CPG, OTC: CSCTF) was downgraded to “sector perform” by Peters & Co Ltd, while 15 analysts maintained ratings. The overall tally is 12 “buys,” seven “holds,” zero “sells.”

Daylight Energy Ltd (TSX: DAY, OTC: DAYYF) earned an upgrade to “buy” from TD Newcrest; 14 analysts held steady, leaving the company with a 14-4-0 buy-hold-sell line on Bay Street.

Encana Corp (TSX: ECA, NYSE: ECA) is another with a fair-to-middling line: five “buys,” 17 “holds,” though zero “sells.” Twenty-one analysts maintained, making this the ultimate wait-and-see stock in the Oil and Gas coverage universe.

Enerplus Corp’s (TSX: ERF, NYSE: ERF) most recent numbers inspired 12 analysts to maintain their opinions, though just three say the stock is a “buy.” Nine call it a “hold,” while one has the “sell” sign out.

Equal Energy (TSX: EQU, NYSE: EQU) has a favorable 3-1-0 buy-hold-sell line; all four analysts held steady following fourth-quarter and full-year 2010 results.

Freehold Royalties Ltd (TSX: FRU, OTC: FRHLF) challenges Encana for the down-the-middle crown: zero “buys,” five “holds,” zero “sells.” All five maintained last month.

MEG Energy Corp (TSX: MEG, OTC: MEGEF) has 10 “buy” ratings and three “holds” on Bay Street, as nine held following fourth-quarter and full-year 2010 results. MEG made its initial public offering in the summer of 2010.

NAL Energy Corp (TSX: NAE, OTC: NOIGF) drew 13 “maintains” after earnings, with a static split of seven “buys” and six “holds.”

Nexen Corp (TSX: NXY, NYSE: NXY) has nine “buy,” 12 “hold” and two “sell” ratings on Bay Street, making it the third-most-loathed CE Oil and Gas stock on Bay Street. (Canadian Oil Sands is No. 2; No. 1 is below.) Eighteen analysts maintained ratings over the past month.

Pace Oil & Gas (TSX: PCE, OTC: MDOEF) is all sixes: six “buy” ratings from all six analysts who cover it, and all six maintained following the latest report card.

Pengrowth Energy Corp (TSX: PGF, NYSE: PGH) is rated “buy” by eight analysts, “hold” by seven, “sell” by zero. Twelve have maintained their opinion since earnings.

Penn West Petroleum Ltd (TSX: PWT, NYSE: PWE) is looked upon favorably by 11 analysts on Bay Street who call it a “buy.” Four say “hold,” as nine kept ratings in place last month.

Perpetual Energy (TSX: PMT, OTC: PMGYF), totally levered to natural gas prices, is Bay Street’s least-favorite CE Oil and Gas stock, with a lone “buy” voice against four “holds” and five “sells.” Nine maintained last month.

Peyto Exploration & Development Corp (TSX: PEY, OTC: PEYUF) has a nice, clean eight “buys” and one “hold” after all nine who cover it maintained in the wake of fourth-quarter and full-year 2010 earnings.

Progress Energy Resources (TSX: PRQ, OTC: PRQNF) has 10 “buy” ratings and six “hold” ratings, as 13 Bay Street analysts held steady last month.

Suncor Energy (TSX: SU, NYSE: SU) has 13 “buys” and nine “holds.” Fifteen analysts maintained their ratings in March.

Talisman Energy (TSX: TLM, NYSE: TLM), following 20 reiterations, has 15 “buy” ratings and nine “holds.”

Trilogy Energy (TSX: TET, OTC: TETZF) has a cool, 6-2-1 buy-hold-sell line, though Scotia Capital downgraded the stock to “sector perform” last month.

Vermilion Energy (TSX: VET, OTC: VEMTF) splits Bay Street, too, with six “buys” and six “holds.” Everybody kept it right where it was when earnings were announced.

Zargon Oil & Gas Ltd (TSX: ZAR, OTC: ZARFF) is rated “hold” by all three analysts who cover it, as all three maintained their ratings following fourth-quarter and full-year 2010 results.

Consult How They Rate for Canadian Edge’s buy-hold-sell advice, including all-important buy targets, for these companies.

The End of Strange Taxation

Editor’s Note: The information below isn’t exhaustive of all possible US income tax considerations nor is it intended to provide legal or tax advice to any particular holder or potential holder of Canadian income or royalty trust units or common stock of Canadian corporations. Holders or potential holders of Canadian income or royalty trust units or common stock of Canada-based corporations should consult their own competent legal and tax advisers as to their particular tax consequences of holding Canadian income or royalty trust units or common stock issued by Canada-based corporations and the most beneficial way of reporting the distributions or dividends received and Canadian withholding tax paid to the appropriate taxation authorities located in the various jurisdictions.

When the curtain closes on the 2010 filing year so will major operations on the long battle for cross-border tax clarity. Theoretically, by operation of the Fifth Protocol to the US-Canada Income Tax Treaty and supporting materials, dividends paid by basically all Canadian companies that pay entity-level tax will be considered “qualified” for US tax purposes.

There will be work to do, described below, to claw back amounts improperly withheld from distributions made in respect of shares/units held in US IRA accounts, but progress is slowly being made.

Here’s where we stand as April 15 approaches.

Qualified v. Not Qualified

This issue is resolved–on a trust-by-trust basis–once a trust’s conversion to corporate status is complete. Dividends paid by Canadian corporations are, generally, qualified. Circumstances where this is not the case are rare, particularly in the CE coverage universe.

In the US, the 2003 Jobs Growth and Tax Relief Reconciliation Act (the 2003 Act) established that a dividend paid to an individual shareholder from either a domestic corporation or a “qualified foreign corporation” is subject to tax at the reduced rates applicable to certain capital gains, in most cases 15 percent. This lower rate was recently extended for two years, through 2012.

A “qualified foreign corporation” includes certain foreign corporations that are eligible for benefits of a comprehensive income tax treaty with the US, which the Secretary determines is satisfactory for purposes of this provision and that includes an exchange of information program.

If the Canadian trust or corporation is listed on the New York Stock Exchange (NYSE), it’s dividend is probably qualified because of the Treasury Dept’s “readily tradable” test: “A foreign corporation not otherwise treated as a qualified foreign corporation is so treated with respect to any dividend it pays if the stock with respect to which it pays such dividend is readily tradable on an established securities market in the US.”

Not qualified according to the 2003 Act is any entity that can be classified as a passive foreign investment company (PFIC). This is a fact-sensitive determination that can only be made on a year-by-year basis after all the beans have been counted.

Within the meaning of the 2003 Act, a non-US entity treated as a corporation for US federal tax purposes is a PFIC if in any given taxable year if either: at least 75 percent of its gross income is “passive”; or at least 50 percent of the average value of its assets is attributable to assets that produce passive income or are held for the production of passive income. For the most part, however, the trusts and corporations recommended in the Portfolios and covered in How They Rate are operating businesses.

You can report distributions paid by a Canadian trust in 2010 as qualified if: the trust has made a public statement to the effect that the units “will be, should be or more likely than not will be” treated as equity rather than debt for US federal income tax purpose; and, the security is considered “readily tradable on an established securities market in the US” or “the foreign corporation is organized in a country whose income tax treaty with the US is comprehensive….”

CE has provided links to statements issued by income trusts in its coverage universe in the Income Trust Tax Guide; these statements typically include language along the lines of the following:

In consultation with its US tax advisors, TrustCo believes that its trust units should be properly classified as equity in a corporation, rather than debt, and that dividends paid to individual US unitholders should be “qualified dividends” for US federal income tax purposes.

As such, the portion of the distributions made during 2008 that are considered dividends for US federal income tax purposes should qualify for the reduced rate of tax applicable to long-term capital gains. However, the individual taxpayer’s situation must be considered before making this determination.

Of course, any trust or corporation listed on the New York Stock Exchange is readily tradable. As for those issues traded on the US over-the-counter (OTC) market, the final piece of the “qualified” equation is provided by the United States-Canada Income Tax Convention.

Review 1099s from your broker carefully. Check out individual trusts’ statements on the US tax status of their distributions. The best source of information–as indicated by the willingness of the IRS to rely on the tax status interpretation of the trusts–is the particular trust. We’ve heard many stories of CE subscribers successfully dealing with their brokerage firms on this issue.

If there’s no statement published on a website, contact the investor relations (IR) representative of the particular income trust via e-mail or phone. If the Web statement or your contact with IR reveals the trust believes its distributions to be qualified–it’s best to get it in writing–give this information to your broker.

Use the Qualified Dividends and Capital Gain Tax Worksheet of Form 1040 to determine the amount of tax that may be applicable.

The bottom line is this: The IRS will waive penalties with respect to reporting of payments if individuals required to file Form 1099-DIV make a good faith effort to report payments consistent with the law.

IRAs

In the December 2010 Canadian Edge we advised readers to choose Schwab for proper treatment of withholding from distributions/dividends paid by income trusts, SIFTs and converted trusts now operating as corporations. We regret that we were overzealous in our endorsement. Though we acted then on information received from multiple subscribers, we have since gotten word that Schwab’s official policy remains to withhold from amounts paid to US IRAs, without regard to changes wrought by the Fifth Protocol to the US-Canada Income Tax Convention and explanatory documents.

Our inquiries into the reason for the contradictory anecdotal evidence about treatment of distributions from SIFTs and former Canadian income trusts that have converted to corporations made in respect of units or shares held in US IRAs have revealed a “culprit,” and it’s Citigroup (NYSE: C), which, through an affiliated clearing corporation, continues to improperly withhold. SIFTs and converted corporations that clear through the Depositary Trust Company (DTC) are, according to several brokerage-house back offices, being properly handled. Dividends paid by Atlantic Power Corp (TSX: ATP, NYSE: AT), for example, which clears through DTC, are being handled properly. On the other hand, Citigroup handles Colabor Group’s (TSX: GCL, OTC: COLFF) dividends, and US investors who hold it in an IRA have been getting the shaft since Colabor started paying entity-level taxes in 2007.

One way to pursue relief is to write a letter to the Canada Revenue Agency (CRA), the Great White Northern equivalent of our Internal Revenue Service (IRS), to request a Letter of Exemption under Article XXI of the US-Canada Income Tax Treaty. Your brokerage, as the custodian of the relevant account–the IRA of which you are the beneficiary–should write this letter, but this is one of the onerous service it’s refusing to engage in on your behalf.

Include your name, the name of your brokerage, the account number of the IRA, and an explanation of why there should be no withholding from dividends paid by Canadian SIFTs and Canadian corporations that converted from income trusts in respect of units or shares held in a US IRA account.

The argument, articulated here before and based on the contents of a letter to US Representative Phil Gingrey (R-GA) signed by Elizabeth U. Karzon, Branch Chief, Branch 1, Office of Associate Chief Counsel (International), US Dept of the Treasury, Internal Revenue Service, dated June 17, 2010, is as follows.

It’s a general rule of US federal taxation that an individual isn’t liable for US taxes on amounts earned through an IRA until those amounts are distributed. But US tax law can only defer US tax. US tax authorities have no power to influence a foreign country’s imposition of tax on income that the IRA derives from that country.

Distributions from Canadian income and royalty trusts therefore may be subject to tax in Canada depending on Canadian tax law and the terms of the US-Canada Income Tax Treaty (the Treaty).

Certain US entities that are generally exempt from taxation in a taxable year in the US–such as IRAs–are exempt from taxation on dividend income arising in Canada in that same taxable year, according to Article XXI of the Treaty, “Exempt Organizations.”

Based on a 2005 change in Canadian tax law, Canada began imposing a 15 percent withholding tax on distributions from income and royalty trusts to US residents. Canadian tax law didn’t initially treat these distributions as dividends, however, and so they weren’t exempt from Canadian tax under Article XXI of the Treaty.

In 2007, Canada amended its domestic law again and began taxing certain of these trusts as corporations and treating distributions from these trusts as dividends for purposes of both their domestic law and their tax treaties.

Canada and the US signed an exchange of diplomatic notes in 2007, on the same day the two parties signed the Fifth Protocol to the Treaty, that include what we’ve often referred to as “Annex B.” These notes confirmed, among other things, “that distributions from Canadian income trusts and royalty trusts that are treated as dividends under the taxation laws of Canada shall be considered dividends for the purposes of [the Treaty].”

However, Canadian law–the Tax Fairness Act–provides that Canada won’t tax income and royalty trusts already in existence as of Oct. 31, 2006, as corporations until Jan. 1, 2011. Until then, Canadian tax law won’t treat distributions from such trusts as dividends. Distributions from these pre-existing trusts won’t be exempt from Canadian tax under Article XXI of the treaty until 2011–when these income and royalty trusts will become “Specified Investment Flow-Throughs,” or SIFTs, taxed at the entity level.

The IRS acknowledges that investors who hold Canadian trust units in IRAs may not claim a foreign tax credit for the Canadian taxes withheld on the income paid in respect of those units. This is consistent with a general rule that foreign tax credits may not be credited against an individual’s tax liability unless the individual is liable for the tax. Nor can the IRA make use of a foreign tax credit because it’s exempt from tax in the US.

This may ultimately result in double taxation when the IRA distributes this income to the unitholder. The 2007 Tax Fairness Act, when it and the Fifth Protocol have full effect, will generally eliminate the 15 percent Canadian withholding tax on dividends paid by income and royalty trusts in respect of units held in US IRAs.

It may be helpful to attach to your letter a copy of Karzon’s letter to Rep. Gingrey; I’m happy to provide a pdf copy to anyone who requests it via e-mail to ddittman@kci-com.com.

Once the Letter of Exemption is issued you–or your broker–on behalf of your IRA must inform the transfer agent of the Canadian SIFT or former income trust that’s now a corporation from withholding for Canadian tax purposes.

The address for the Canada Revenue Agency is:

Non-Resident Withholding Accounts Division
International Tax Services Office
Canada Revenue Agency
2204 Walkley Road
Ottawa, ON
K1A 1A8
Canada

You can also call the CRA at 1-800-267-3395 or 1-613-952-2344. The fax number is 1-613-941-6905.

You should copy Citigroup as well as the company that’s paying your dividends.  Citigroup’s Global Transaction Services unit can be reached through an online form; our attempts to speak to someone in authority have thus far gone unrewarded. Contact information for your holdings is available on company websites, accessible via How They Rate. In addition to attaching a copy of the Karzon letter to your correspondence with the CRA, Citigroup and your companies, carbon copy your US congressman.

There’s no question this is an uphill battle. You’re likely to be told by the CRA that the brokerage, as the custodian of the IRA, must submit the request. That’s why we’re copying the folks on Capitol Hill. Let’s see, first, how accountable brokerages, transfer agents and government agencies are to self-directed investors and, second, whether the new wave of responsiveness washing over DC results in Congress correcting what should be an easily fixed problem.