Management of Toronto-based BGR Precious Metals (TSE) will vigorously challenge any attempt by Ontario tax authorities to reassess the gold investment firm’s status as a trading entity, shareholders were told recently.
With 75% of its assets invested in gold equities, and the rest in gold bullion and silver options, BGR, like other investment funds, has been taxed on the basis of capital gains rather than on income.
However, the Ontario Revenue Ministry is considering reassessing the way in which it taxes gains and losses on securities transactions undertaken by BGR since Jan. 31, 1985, and treating them as income.
Managed by a subsidiary, Toronto-based Dundee Capital with advice from Goodman & Co., Cavelti Capital Management and N.M. Rothschild Asset Management Ltd., BGR is the only closed end precious metals investment fund to survive the recent slump in gold prices.
“As the Revenue Ministry is backlogged, it may be at least November before BGR is up for reassessment,” said Ray Benzinger, vice-president of finance, who believes it will be quite some time before the issue is resolved. The effect of any reassessment could cost the company $300,000 or five cents a share, according to company estimates.
BGR’s net assets declined to $50.2 million or $8.42 a share for the year ended Jan. 31, compared to $73.6 million or $12.36 a share at the close of the previous year.
The decline reflects an $18.8-million drop in the market value of BGR’s portfolio and distributions to shareholders of almost $6 million in quarterly dividend payments, the company said.
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