1. real estate

League Group
Summary of Income Tax Issues for Certain League Investments
February 2015
This document contains income tax information which is intended to be a useful guide for
League investors.
Each investor’s situation is unique. Therefore, the information contained in this summary is of a
general nature only and is not intended to be legal or tax advice to any investor. We strongly
urge investors to seek appropriate tax advice and guidance from your own independent advisors.
INTRODUCTION
Generally, investors may be entitled to claim losses for tax purposes from two sources:
1) Entity Losses
Entity Losses are only available to investors who acquired limited partnership units
(“Partnership Units”).
Entity losses incurred by any League entity will be allocated to investors in the particular
partnership. League will calculate the Entity Losses and will advise investors of these losses
through the issuance of the appropriate income tax slips.
Attached in Appendix A is a list of Partnership Units. Investors who hold units in these
limited partnerships can expect to receive a T5013 tax slip from League by March 31, 2015
with respect to losses incurred in 2014. A final T5013 will be issued by League once the
limited partnership is fully dissolved.
2) Investment Losses
Investment Losses will arise as the investor has disposed of or is deemed to have disposed of
their investments in a League entity. Investment Losses must be calculated by the investor as
no tax slips are issued by League to calculate these losses. To claim Investment Losses an
investor will need to determine the following:
a) The amount of money returned or to be returned to the investor from the liquidation of
the League entity (the “Proceeds”);
b) The laid out costs of the investment to the investor which is termed the Adjusted Cost
Base (“ACB”) for tax purposes;
c) The appropriate year in which the investor is eligible to claim the loss; and,
d) The nature of the loss for tax purposes (for example whether it is a capital or an income
loss)
Investment Losses are expected to be incurred by investors who have invested in units of
IGW REIT (“Trust Units”) and debt instruments issued by various League entities (“Notes”).
A list of investments in Trust Units and Notes is included in Appendix A.
Some investors may also experience Investment Losses on Partnership Units although this is
less likely as they will have received Entity Losses allocated to them which reduces the ACB
of their investments in the Partnership Units.
FREQUENTLY ASKED QUESTIONS
1) How do I determine the Proceeds figure for the calculation of my Investment Loss?
In the event that League has notified you that the League Entity in which you invested has been
wound up, then the Proceeds is the sum of money (if any) that you received as a result of the
wind up process.
In the event that you have not been notified that the League Entity has been wound up, then you
may estimate the Proceeds using the figures contained in the Monitor’s Report to Stakeholders
dated June 23, 2014.
If you held Partnership Units in Colwood City Center LP, your units were redeemed on
December 22, 2014 pursuant to the Onni Restructuring Transaction. It is expected that the final
calculation of the proceeds you will receive for your Partnership Units will be completed in
March 2015 and the monies remitted to you at that time. A disposition of the Partnership Units
occurred in 2014 and therefore a loss may be claimed in 2014.
2) How do I determine the ACB for the calculation of my Investment Loss?
Your ACB will depend upon whether you hold Trust Units, Partnership Units or Notes.
The responsibility of determining the ACB of any investment is with the investor,
notwithstanding that some investments have this information provided to them via a tax slip.
Some general guidelines for determining the ACB are listed below; however, seeking the advice
of your financial/tax advisor is recommended as this can be a complex issue for investors.
Trust Units
Your ACB is typically equal to:
 The cost of all Trust Units acquired, including commissions plus any
distributions (computed at fair market value “ FMV”) issued to you in the form
of additional units;
 Less: the return of capital received during the period held (This amount is
determined by taking all of the positive amounts included in ‘Box 42 – Amount
resulting in cost base adjustment’ of your T3 slips since you purchased your
investment).
In the past, a T3 Statement of Trust Income Allocations and Designations was issued to investors
when they received distributions during the fiscal year. In 2014, no distributions were made and
consequently no T3’s will be issued.
Partnership Units
Your ACB is typically equal to:
 The cost of all Units acquired, including commissions;
 Less: distributions received since acquisition;
 Less: losses, capital losses and other deductions allocated to you for tax purposes since
acquisition;
 Plus: income and capital gains allocated to you by your investment entity for tax
purposes since acquisition.
Notes
Your ACB is typically equal to:
 The cost of all Notes acquired, including commissions;
 Less: principal repayments received since acquisition.
3) When can I claim my Investment Loss?
An Investment Loss may be claimed when there has been a disposition or a deemed disposition
of the investment.
 An actual disposition occurs when the investment is sold to an arm’s length party.
 A deemed disposition occurs when the investment is determined by an investor to fit
into the specific provisions of the Income Tax Act which permit an early recognition of
the Investment Loss. For Notes it would be when the investor establishes the Note to be
a bad debt. For Trust Units and Partnership Units it would be when the FMV of the unit
is established to be nil, and the Trust or Partnership ceases to carry on any business
activity due to its insolvency.
Deemed dispositions require the Investor to make a special election in the income tax return for
the year of the claim.
4) How do I know the nature of my loss for tax purposes?
Entity losses are typically partnership losses that can be applied against other forms of income
subject to having an adequate “at risk” amount. These losses will be reported to you on a T5013
tax slip.
Investment Losses are typically capital losses which may be applied only against capital gains.
Details of the nature of your loss and how it impacts you depends on your situation and should
be reviewed with your financial/tax advisor
5) Does my Investment Loss qualify as an Allowable Business Investment Loss (“ABIL”)
No. In order to qualify for an ABIL, your investment must be in a small business corporation.
None of the League Entities are small business corporations, according to the Income Tax Act.
Accordingly, League Investment Losses will not qualify as ABILs.
6) Is there different tax treatment for losses on Notes?
As noted above, where the Investor determines that Note has become a bad debt and makes an
appropriate election, then the loss may be claimed for income tax purposes.
7) I was issued a T5 during 2013 which included investment income that I did not and will
not receive. Will League be sending out an amended T5 slip for 2013?
No, League will not be sending out an amended T5 slip for the unpaid interest. The Income Tax
Act allows for a deduction once the amount is determined to be uncollectible. The deduction is
claimed in the year in which the unpaid interest has been established to be uncollectible not the
year in which it was included in income.
For example, if an investor holds a $1,000 note and received a T5 slip reporting $80 of interest in
2013 which was not paid, the investor is owed $1,080 at the end of 2013. If during 2014, the
investor determines that the $1,080 is uncollectible, then the Investor may make the appropriate
election and deduct $1,080 against his income.
8) Can I claim a loss on my investment that’s in my RRSP or RRIF?
No. An investor would be entitled to a deduction equal to the FMV of the investment that was
contributed to an RRSP. Once the investment is inside a registered plan (either a RRSP or a
RRIF) the investor cannot make any claims for entity or investment losses that happened
subsequently.
9) If I close my RRSP/RRIF at Olympia Trust am I still entitled to any future payment on
my investment and if so, how will that be treated?
Ownership of your investment is not eliminated upon the closing of your account with Olympia
& Trust. If funds are available from the wind up the League entities then monies will still be
paid on your investment. Provided the investments are still held within a registered account,
there would be no tax on any proceeds received. If the investments were removed from the
registered accounts, then the proceeds would be received on a taxable basis.
10) Will tax slips be issued for League Entities not included in the CCAA process (the
“White Box Entities”)?
League will issue tax slips with respect to the White Box Entities as required by the Income Tax
Act.
CONCLUSION
All questions concerning the calculation and application of your Investment Losses should be
directed to your tax advisor.
All investors are reminded that until all League Entities are wound up you should continue to
keep your contact information (address, email, etc.) current with both League and the Monitor.
If your contact information changes, please contact League and the Monitor as noted below:
League
Email:
Phone:
[email protected]
(250) 999-9859
Monitor
Email:
Phone:
[email protected]
(604) 806-7800
Appendix A
Investment Name - Trust Units
Investment Name - Notes
10% Convertible Units - Series 1
10% Convertible Units - Series 3
3.5% Convertible Units - Series 6
4.25% Convertible - Series 5
IGW REIT - Class II - Series 1 - Priority Income
IGW REIT - Class II - Series 1A - Priority Income
IGW REIT - Class II - Series 3A - Priority Income
IGW REIT - Class II - Series 5 - Priority Income
IGW REIT - Class II - Series 5B - Priority Income
IGW REIT - Series - 1B - Priority Income
IGW REIT - Series - 3B - Priority Income
IGW REIT - Series 2 - Priority Income
IGW REIT - Series 3A - Priority Income
IGW REIT - Series 5B - Priority Income
IGW REIT - Series 7 - Priority Income
IGW REIT .9775
League IGW Real Estate Investment Trust
League IGW REIT
League IGW REIT - Class 1 Series 3 - Priority Income
League IGW REIT - Class II - Series 3 - Priority Income
League IGW REIT - Class II - Series 5A - Income Priority Units
League IGW REIT - Class II - Series 7 - Priority Income
League IGW REIT - Class II - Series 7A - Income Priority Units
League IGW REIT - Class II - Series 7B - Priority Income
League IGW REIT - Class III Series 1
League IGW REIT - Class III Series 3
League IGW REIT - Class III Series 5
League IGW REIT - Class III Series 7
League IGW REIT - Class IV Series 1
League IGW REIT - Class IV Series 3
League IGW REIT - Class IV Series 5
League IGW REIT - Class IV Series 7
League IGW REIT - Series 1 - Priority Income
League IGW REIT - Series 1A - Priority Income
League IGW REIT - Series 5A - Priority Income
League IGW REIT 10% Convertible Units - Series 7
League IGW REIT Class AAA
League IGW REIT Class AAAA
REIT RRSP
Colwood City Centre Class I Term Notes
Colwood City Centre Class II Term Notes
Colwood City Centre LP - Class B Term Notes
Colwood City Centre LP - July 2013 Term Notes
Colwood City Centre Term Note
Duncan Debenture Renewal 2011
Duncan Term Note 2011
Gatineau Centre Development LP - Convertible Term Notes
Gatineau Centre Development LP - Secured Notes
IGW REIT .985 Feb 2012
IGW REIT Term Note July 2012
LALP Class II Part A LP Notes
LALP Class II Part B LP Notes
League Investment Fund Ltd. Notes
League Opportunity Fund Ltd.
Stoney Range Industrial LP - Secured Notes
Investment Name - Partnership Units
Colwood City Centre LP
Colwood City Centre RRSP Bonus Units
Cowichan District Financial Centre Limited Partnership
Duncan LP
Fort St John Retail LP
Gatineau Centre Development LP - Class A
Gatineau Centre Development LP - Class A Bonus Units
IGW Diversified Redevelopment Fund LP - Class A
IGW Diversified Redevelopment Fund LP - Class P
IGW Diversified Redevelopment Fund LP - Class SP
IGW Public Limited Partnership - Class A
IGW REIT LP
IGW REIT Limited Partnership
IGW ResCap LP
LALP Class A LP Shares
LALP Class I LP Units
LALP Class II Part A LP Shares
LALP Class II Part B LP Shares
League Investment Fund Ltd. Units
Londondale Shopping Centre LP
North Vernon Limited Partnership
Residences at Quadra Village LP
Residences At Quadra Village LP - Class P
Stoney Range Industrial LP - Class A
Stoney Range Industrial LP - Class P
Tsawwassen Retail Power Centre LP - Class A
Tsawwassen Retail Power Centre LP - Class P