Associates First Capital Corporation Spin-off Tax Information for Canadian Taxpayers
On April 7, 1998, Ford Motor Company distributed all of the common shares of Associates First Capital Corporation owned by Ford to Ford Common and Class B shareholders of record as of the close of business on March 12, 1998. Unless you sold your right to receive the Associates shares before the distribution date, you received 0.262085 shares of the Associates for each Ford share you owned as of the Record Date.
We are pleased to advise that on June 14, 2001 the Canadian Income Tax Act was amended so that foreign spin-off dividends can now be received by Canadian shareholders on a tax-free basis at the election of the shareholder. Ford has received confirmation from the Canada Customs and Revenue Agency that the receipt of the Associates shares will be tax-free for Canadian income tax purposes, provided that the Ford shareholder files (i.e. mails through the Canadian postal system) a written election to the CCRA on or before September 11, 2001. If you make the election, you may be entitled to a refund of Canadian income taxes previously paid in respect of the Associates spin-off.
If you elect tax-free treatment, you are required to allocate the adjusted cost base ("ACB") of your Ford shares as of April 7, 1998, immediately prior to the distribution, between your Ford shares and your Associates shares received based on their relative fair market values on April 7, 1998. Based upon the average high and low prices at which Ford and the Associates traded on the New York Stock Exchange on April 7, 1998, 66.41% of your ACB in your Ford shares should be allocated to your Ford shares, and the remaining 33.59% should be allocated to your Associates shares (including any fractional share interest). If you received cash in lieu of fractional shares, you will be treated as having sold the fraction for the amount of cash received and you would report the capital gain or loss on that sale equal to the difference between your ACB in the fractional share of the Associates (determined using the above methodology) and the amount of cash received.
You should consult your tax advisor regarding the decision to make the election and the application of this new tax law to your particular circumstances.
Download the pdf version of full instructions, calculation examples, and a sample election letter to be completed by you and sent to your District Tax Office.
