Corporate Class Mutual Funds are a mutual fund structure that is signficantly more tax efficient than traditional mutual fund trusts What makes them tax efficient is that they are stuctured as a corporation. This allows the taxable income each year to be minimized compared to regular mutual funds. Also you can switch between the different funds in the corporation and not pay capital gains tax when you sell a fund. This can be done repeatedly an no capital gains taxes are payable the money is redeemed from the account. The capital gains is payable at that time.
A variation on this is another class of mutual fund call T Series. After tax money is invested in these accounts and an income can begin immiediately or at a later date. As income is received it is considered a return of capital so no tax is payalbe until the investor has received there initial investment back. For example if you invested $100,000 and receive a 5% distribution per year it would take 20 years before the income received was taxable.
It is likely that the investor would receive a tax receipt each year with the amount equal to their portion of interest and dividend income that was not able to be sheltered in the corporate structure.
There is also a new type of Mutual Fund that has been available for just a few years that offer even more tax benefits for individual and corporate investors with non-registered assets to invest.
Please contact us for more information on these highly tax-efficient investment vehicles.
