Entrepreneurship & Small Business

How to treat HXS (Horizons S&P500) swap in business account?

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  • Feb 13th, 2020 5:40 pm
[OP]
Jr. Member
Sep 23, 2019
116 posts
175 upvotes

How to treat HXS (Horizons S&P500) swap in business account?

I have incorporated account where I held HXS shares (Horizons S&P 500 ETF)
On Dec 2nd, 2019 TD Bank added 2 transactions to this account:
Disposition Horizons S&P500 ETF
Acquisition Horizons S&P 500 Indx

I know that for tax reasons Horizons changed HXS structure and I voted default option - I believe that was simply to replace one structure to another, but keeping the same symbol.

So how do I treat this when filling my corporate taxes? If I have to treat this as sale/buy, I'll be in the big trouble as there was significant capital gain.
3 replies
[OP]
Jr. Member
Sep 23, 2019
116 posts
175 upvotes
As I am working on this, I'll add information that I discovered so far.

It appears that bank did not send me information about steps that I require to take. I called them and they forwarded me a document that states that I should go to following website:

https://www.horizonsetfs.com/section-85-election

And elect how to treat this "swap". I entered all necessary information related to my holdings and I supposed to receive "Tax Election" document that I should forward to CRA and would let me treat this as "not taxable event".
But, my bank representative told me that most likely this is "taxable event". So I am not sure yet about all this.
Jr. Member
Jan 18, 2017
198 posts
146 upvotes
So here's the thing. There's a giant, complicated, textbook-perfect answer out there, that would take a few pages to detail. I'm not going to do that here. Instead, here's the functional answer:

Very generally speaking, assume the transaction was just a name-change. The original ACB of Old-HXS now becomes the same ACB as New-HXS. Move on with life.

Watch and see if the bank issues a T5008 on this. If they do, it will get a bit more complicated. (But still readily dealt with.)


RedFlagAlias wrote: I have incorporated account where I held HXS shares (Horizons S&P 500 ETF)
On Dec 2nd, 2019 TD Bank added 2 transactions to this account:
Disposition Horizons S&P500 ETF
Acquisition Horizons S&P 500 Indx

I know that for tax reasons Horizons changed HXS structure and I voted default option - I believe that was simply to replace one structure to another, but keeping the same symbol.

So how do I treat this when filling my corporate taxes? If I have to treat this as sale/buy, I'll be in the big trouble as there was significant capital gain.
______
Canadian & US tax guy
Deal Fanatic
May 22, 2003
5073 posts
2292 upvotes
Vancouver
Did you fill out the section 85 tax election form? I already contacted my bank (RBC DI) with the form and they adjusted my ACB back to the original ACB. RBC told me it would be declared as capital gains, but submitting the election form to CRA would essentially "cancel" all the capital gains, waiting to talk to my accountant about this.

There is a discussion about this on the investing forum: horizons-etfs-assessing-impact-proposed ... 2272868/7/

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