What is the tax nature of the distributions paid by Brookfield Wealth Solutions (“BNT”)?

Distributions on the class A exchangeable shares are expected to be made entirely as a return of capital. If a distribution does not take the form of a return of capital, the distribution would be made as a dividend.

I am a Canadian resident. Are the distributions I am paid from BNT subject to withholding tax?

Distributions paid from BNT to Canadian resident shareholders are not subject to withholding tax.

What is the tax impact of BNT distributions that are returns of capital?

Returns of capital are not taxable upon receipt by Canadian shareholders. However, returns of capital will reduce a Canadian shareholder’s adjusted cost base (“ACB”) in their shares of BNT.

Should any BNT distributions be in the form of dividends, what is the nature of the dividend I am paid from BNT?

Given that BNT is a Bermuda corporation, the dividends are considered a foreign dividend. The dividends are not considered “eligible dividends” under the rules of the Income Tax Act (Canada).

Is BNT eligible for Tax-Deferred Plans?

BNT is a qualified investment for registered retirement savings plans, deferred profit-sharing plans, registered retirement income funds, registered education savings plans, registered disability savings plans and tax-free savings accounts.

What Tax Form will I receive as a Canadian shareholder?

Form T5 – Statement of Investment Income will be issued to Canadian resident shareholders, assuming there is dividend income in the year. Any return of capital amounts will not be reported on a T5 slip but will be available on our website. Should BNT’s distributions consist entirely of returns of capital in a given year, no T5 slip will be issued.

Who will send my Tax Form (T5)?

Unregistered Canadian resident shareholders (i.e., those holding their shares in street name with their brokerage) who own their shares in a non tax-deferred account should receive a T5 from their Canadian broker, assuming there is dividend income in the year. If you are a beneficial Canadian resident shareholder and did not receive your Form T5, please contact the brokerage firm with whom your shares are held. 

Registered Canadian resident shareholders will receive a T5 directly from our transfer agent TSX Trust Company. If you are a registered Canadian resident shareholder and did not receive your Form T5, please contact TSX Trust Company toll-free at 1-877-715-0498 or direct dial at 1-416-682-3860.

When will I (non-registered shareholder) receive my Tax Form (T5)?

Brokers must file the T5 form with the Canada Revenue Agency by the end of February; the forms are distributed to shareholders thereafter. If you have any questions about Form T5 you should contact your broker.

Why do the distributions I received not equal the amount reflected on my T5?

Any amounts distributed as returns of capital will not appear on a T5 form. Refer to our website for details on these amounts and your adjusted cost base.

Is BNT a Specified Foreign Property?

BNT is a Specified Foreign Property and therefore does need to be reported on Form T1135 Foreign Income Verification Statement, provided a taxpayer has Specified Foreign Property amounts with a cost exceeding $100,000 CAD. Please note that Specified Foreign Property that is held in an RRSP or TFSA account is excluded from the Form T1135 reporting requirements.

What is the Adjusted Cost Base (“ACB”) of my shares?

In general, a shareholder's tax cost or ACB of their BNT shares should equal the amount paid to acquire the shares, adjusted for any returns of capital received by the shareholder.

If a shareholder received their BNT shares via the June 28, 2021 BAM Special Dividend of BNT shares, their starting ACB will be an amount equal to the fair market value, at the time of the Special Dividend, of the Class A shares of BNT received. One commonly used methodology for fair market value is the 5-day volume weighted average price (VWAP). The 5-day VWAP ending July 2, 2021 of a share of BAM on the New York Stock Exchange was USD $51.6863. The Bank of Canada daily exchange rate for July 2nd, 2021 for USD/CAD was 1.2353 – resulting in a CAD amount of $63.8481.

If a shareholder received their BNT shares via the November 16, 2023 exchange offer whereby they exchanged their class A shares of BN for class A-1 exchangeable shares of BNT, their starting ACB will be an amount equal to the fair market value, at the time of the completion of the exchange offer, of the class A-1 exchangeable shares received. One commonly used methodology for fair market value is the 5-day VWAP. The 5-day VWAP ending November 24, 2023 of an A-1 exchangeable share of BNT on the New York Stock Exchange was USD $34.5389. The Bank of Canada daily exchange rate for November 24, 2023 for USD/CAD was 1.3623 - resulting in a CAD amount of $47.0523. Please note that the fair market value of the class A-1 exchangeable shares received by shareholder of BN would also constitute their proceeds of disposition for Canadian tax purposes in relation to their disposition of BN shares as a result of participating in the exchange offer.

The ACB of a shareholder’s BNT shares will be subsequently reduced by returns of capital received by the shareholder. Please refer to our web site for an example of an ACB calculation, which will be updated on an annual basis.

What was the tax impact of the distribution of shares of Brookfield Asset Management Ltd. to shareholders of BNT in December 2022?

The distribution took the form of a return of capital. As such, the distribution is tax-deferred, and no dividend, capital gain or loss would be realized in respect of BNT shares.

The return of capital amount in respect of the distribution of Manager shares is $5.481 USD per BNT Class A Share. The Bank of Canada daily exchange rate for December 9th, 2022 for USD/CAD was 1.3630.

The tax basis of the Manager shares received is equal to the fair value ascribed to the Manager shares on spinoff. Using the above return of capital amount and the 0.25 Manager Share/Brookfield Wealth Solutions Class A Share distribution ratio, the tax basis per Manager share received will be $21.924 USD. The Bank of Canada daily exchange rate for December 9th, 2022 for USD/CAD was 1.3630.

I understand I can exchange a Class A share of BNT for a Class A Share of Brookfield Corporation (“BN”). What are the tax consequences to a Canadian shareholder as a result of this exchange?

The exchange would be considered a disposition of the Class A Share of BNT. A Canadian resident shareholder who disposes of a share of BNT via an exchange would recognize gain or loss equal to the difference between the fair market value of the BAM shares received (at the time of the exchange) and the adjusted cost basis (“ACB”) of the BNT Class A shares exchanged.

I understand I can convert a Class A-1 exchangeable share of BNT into a Class A exchangeable share of BNT. What are the tax consequences to a Canadian shareholder as a result of this conversion?

The exchange would not be considered a disposition of the Class A-1 exchangeable share of BNT.  No taxable gain or loss would result from such a transaction, which would be tax deferred. The cost base of a class A exchangeable share acquired on the conversion of a class A-1 exchangeable share will generally be equal to the adjusted cost base of the class A-1 exchangeable share that was converted, though such cost would be averaged with the cost of any other class A exchangeable shares held by the shareholder.   

What is the tax nature of the distributions paid by BNT?

BNT intends to compute its earnings and profits, as determined under U.S. federal income tax principles, and as such a portion of BNT’s distributions may be returns of basis. BNT’s distributions will be dividends to the extent they are paid out of BNT’s current or accumulated earnings and profits. To the extent that the amount of a distribution exceeds BNT’s current or accumulated earnings and profits, the excess would be treaty as a reduction in the basis of a shareholder’s BNT shares.

Subject to the holding period, dividends paid by BNT will be eligible for “qualified dividend” treatment. Whether dividends paid by BNT will in fact be “qualified dividends” to any shareholder will depend on that shareholder’s specific circumstances, including the shareholder’s holding period for the BNT shares on which such dividends are received. In addition, BNT must not be a PFIC as described below. U.S. shareholders are advised to consult their own tax advisors concerning the treatment of dividends paid by BNT.

Based on current forecasts, BNT expects that substantially all its distributions will be treated as reductions in basis for US tax purposes. However, the computation of earnings and profits is complex and subject to change, and BNT cannot provide any assurances that its distributions will be reductions in basis or dividends.

Is BNT considered a Passive Foreign Investment Company (“PFIC”)?

Based on the current and anticipated composition of the income, assets and operations of BNT and its subsidiaries, BNT does not believe that it will be a PFIC for U.S. federal income tax purposes for the current taxable year or for future taxable years. However, the application of the PFIC rules is subject to uncertainty in several respects, and a separate determination must be made after the close of each taxable year as to whether BNT is a PFIC for that year. Changes in the composition of BNT income or assets may cause BNT to become a PFIC. Accordingly, there can be no assurance that BNT will not be a PFIC for any taxable year.

I am a U.S. resident. Are the distributions I am paid from BNT subject to withholding tax?

Distributions paid from BNT to a U.S. resident shareholder are not subject to withholding tax.

What Tax Form will I receive as a U.S. shareholder?

Distributions paid by BNT are reported annually on Form 1099 which is generally distributed to shareholders in February.

What is the cost basis of my BNT shares?

In general, a shareholder's cost basis of their BNT shares should equal the amount paid to acquire the shares, adjusted for any returns of basis received by the shareholder.

If a shareholder received their BNT shares via the June 28, 2021 BN Special Dividend of BNT shares, their starting cost basis will be an amount equal to the fair market value, on the date of the Special Dividend, of the Class A shares of BNT received. One commonly used methodology for fair market value is the 5-day volume weighted average price (VWAP). The 5-day VWAP ending July 2, 2021 of a share of BN on the New York Stock Exchange was USD $51.6863.

If a shareholder received their BNT shares via the November 16, 2023 exchange offer whereby they exchanged their class A shares of BN for class A-1 exchangeable shares of BNT, their starting cost basis will be an amount equal to the fair market value, at the time of the completion of the exchange offer, of the class A-1 exchangeable shares received. One commonly used methodology for fair market value is the 5-day VWAP. The 5-day VWAP ending November 24, 2023 of an A-1 exchangeable share of BNT on the New York Stock Exchange was USD $34.5389. Please note that the fair market value of the shares received by shareholders of BN would also constitute their proceeds of disposition for US tax purposes in relation to their disposition of BN shares as a result of participating in the exchange offer.

The cost basis of a shareholder’s BNT shares will be subsequently reduced by returns of basis received by the shareholder.

What was the tax impact of the distribution of shares of Brookfield Asset Management Ltd. to shareholders of BNT in December 2022?

As discussed above, the computation of earnings and profits, which determines the tax character of BNT’s distribution, is complex and subject to change. As such, BNT cannot provide any assurances that its distributions will be reductions in basis or dividends. This said, BNT expects the distribution of shares of the Manager, to be treated as reductions in basis for US tax purposes. Accordingly, the distribution of Manager shares would be entirely tax deferred to US shareholders of BNT.

Assuming that the distribution of Manager shares is a reduction in basis, your tax basis in BNT shares will be reduced by the fair market value of the Manager shares received.

There are several possible methods for determining the fair market value of the Manager Class A Shares received in the Special Distribution. One possible approach is to utilize the New York Stock Exchange’s 1-day volume-weighted average price (“VWAP”). The New York Stock Exchange’s 1-day VWAP on December 12, 2022, the first business day following the effective date of the Special Distribution, was $32.07 for each Manager Share. For U.S. federal tax information reporting purposes, Brookfield Wealth Solutions  intends to use $32.07 as the fair market value of each Manager Class A Share.

BNT intends to post a detailed Form 8937 for 2022 which will include a detailed example calculating the impact to the tax basis of US shareholders of the distribution of shares of Brookfield Asset Management Ltd.

I understand I can exchange a Class A share of BNT for a Class A Share of Brookfield Corporation (“BN”). What are the tax consequences to a U.S. shareholder as a result of this exchange?

We expect the exchange to be treated as a taxable disposition of your Class A Shares for U.S. federal income tax purposes. A shareholder treating the exchange as a taxable sale would recognize gain or loss equal to the difference between the value of the BN shares received (at the time of the exchange) and the adjusted tax basis of the BNT Class A shares exchanged.

I understand I can convert a Class A-1 exchangeable share of BNT into a Class A exchangeable share of BNT.  What are the tax consequences to a US shareholder as a result of this conversion?

The exchange would not be considered a disposition of the Class A-1 exchangeable share of BNT.  No taxable gain or loss would result from such a transaction, which would be tax deferred.  The aggregate tax basis of the class A exchangeable shares received for the class A-1 exchangeable shares will be the same as the aggregate tax basis of the class A-1 exchangeable shares that were converted.