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GENERAL TAX INFORMATION
This summary is of a general nature only and is not intended to be, nor should it be construed to be, legal or tax advice to any particular unitholder (Unitholder) of American Hotel Income Properties REIT LP, and no representation with respect to the Canadian or U.S. income tax consequences to any particular Unitholder is made. Therefore, Unitholders of American Hotel Income Properties REIT LP units are encouraged to consult their own tax advisors for advice with respect to their particular circumstances.
Unitholders should also review American Hotel Income Properties REIT LP’s public disclosures in their entirety as published on the SEDAR website at sedar.com
The actual breakdown between return of capital and dividend income for Canadian tax purposes based on American Hotel Income Properties REIT LP’s Canadian taxable income for 2016 is:
|Year||Return of capital||Taxable||Total|
|2016 – %||37.97%||62.03%||100.00%|
|2016 – $||0.328||0.535||0.863|
American Hotel Income Properties REIT (“AHIP”) LP is a Canadian-based limited partnership that is publicly traded and is treated as a partnership for Canadian and U.S. tax purposes. As such, AHIP is a “flow through” entity for Canadian and U.S. tax purposes and is not subject to tax. Income of AHIP is allocated to and is subject to tax in the hand of its Unitholders.
AHIP does not earn active business income. Instead, AHIP receives investment income, such as dividends, and return of capital from subsidiary corporations that carry on business in the United States. Income for Canadian and U.S. tax purposes is likely to be different due to the difference in currencies used to compute income and tax legislation of the two countries. Taxable income may be less than the distribution for a particular period due to returns of capital paid by AHIP in that period. The computation of AHIP’s Canadian and U.S. income for tax purposes allocated to the Unitholders for a particular taxation year is independent of (i) the annual accounting net income of AHIP; (ii) the annual cash flow generated by AHIP and (iii) the annual distributions.
ANNUAL TAX REPORTING FOR UNITHOLDERS
After the end of AHIP’s taxation year (December 31), the Canadian and U.S. taxable income of AHIP is determined and allocated to all Unitholders, who in turn are required to report such income on their respective tax returns. The allocation of U.S. taxable income to a U.S. resident Unitholder is communicated using Schedule K-1 (not a Form 1099).
The allocation of Canadian taxable income is communicated using Form T5013 (not a Form T5).
COMPUTATION OF TAX COST (ADJUSTED COST BASIS)
For Canadian and U.S. resident Unitholders, in general, a Unitholder’s tax cost of his/her AHIP units should equal the sum of (i) the amount paid to acquire the units and (ii) the net income for tax purposes allocated to the Unitholder, less the cash distributions received. Unitholders are obligated to accurately compute the tax basis of their AHIP Units.
For U.S. resident Unitholders, information provided with Schedule K1 should assist with (ii) above.
In addition, for U.S. tax reporting purposes, issuers of corporate stock must report corporate actions that affect stock basis, including but not limited to distributions in excess of corporate earnings and profits, stock splits, stock dividends, mergers, and recapitalizations. The Internal Revenue Service issued Form 8937 for reporting such corporate actions.
The following files are the Forms 8937 for the 2014 through 2016 tax years and are intended to meet the requirements of public disclosure pursuant to Internal Revenue Code section 6045B for American Hotel Income Properties REIT Inc., AHIP’s U.S. subsidiary: