JNJ Kenvue Spinoff for Canadian Taxpayers | Income tax filing | Discussion forum

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JNJ Kenvue Spinoff for Canadian Taxpayers
March 18, 2024
6:15 pm
gold
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I took advantage of the Johnson & Johnson spinoff of Kenvue in 2023. It was advertised as having no tax implications, but it looks like this promise only applies in the USA as I received a T5008 showing an 'exchange' with a book value (my original cost for the shares) and a disposition (the value of the shares at exchange).

In essence, the T5008 makes it appear that the JNJ shares were sold to purchase the new Kenvue shares which would force me to declare a significant capital gain. Is anyone else in the same boat? Is my interpretation correct?

March 18, 2024
8:06 pm
Norman1
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The Johnson & Johnson transaction was an offer to exchange J&J shares for shares of Kenvue.

That transaction doesn't sound like a spinoff dividend that could be tax deferred in Canada under Income Tax Act section 86.1. Such spinoffs are described in CRA: Foreign spin-offs.

The Navigator: Foreign spin-offs from RBC Wealth (circa 2021) has further details.

So, the T5008 sounds correct in showing that J&J shares were disposed of to pay for shares of Kenvue.

March 19, 2024
5:37 am
savemoresaveoften
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I read up on it out of curiousity and it says tax-free specific to US Federal tax only.
Canadians are most likely out of luck if they tender.

March 21, 2024
6:38 am
gold
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Thanks to you both for taking the time to research. I've learned my lesson and will avoid foreign spinoffs in future.

It could have been worse. This one was structured as an 'exchange' and I'll have to declare a capital gain on a stock that has almost trebled and was purchased when the currencies were near par. However, it seems that other foreign spinoffs are structured in such a way that they would generate a T5 with a foreign dividend ineligible for the dividend tax credit.

March 21, 2024
10:02 am
Norman1
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Not necessarily.

If the foreign company files certain info with CRA, then a Canadian recipient can make a section 86.1 election to exclude the foreign spinoff dividend received from taxable income.

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