Clarke’s (TSX: CKI) interest in Terravest (TSX: TVK) shares was about 40% of its market capitalization.
Today, Clarke made the decision to spin off the shares to shareholders.
This decision does not come without consequences – for shareholders, they will be paying a tax bill of an increase in income of $5.49 per Clarke share, in the form of an eligible dividend. For non-Canadian holders, this does mean there will be tax withholdings in most cases.
Most holding companies do not do this primarily for such reasons – more movement of capital usually means more taxation. There are a few exceptions – tax-free spinoffs (which require significant amounts of ownership of the company in question), for instance. Inter-corporate dividends of after-tax income is another. Finally, if you are lucky enough to have the capital sheltered in a registered account or TFSA, you’re covered.
Otherwise, when money moves, prepare to pay taxes.