Why corporate-class funds still make sense

Tax-deferred switching ends this year but many other advantages remain.

Matthew Elder 11 November, 2016 | 6:00PM

The corporate-class mutual fund appears to be alive and well. This is despite the 2016 federal budget that eliminated the prime appeal of corporate class: the ability to shift assets among various funds within the entity without immediately realizing taxable capital gains.

Under the outgoing rules, a corporate-class investor could exchange shares of one fund for those of another and not report a capital gain or loss on what essentially was a transaction. Capital gains would eventually have to be reported when shares were redeemed from the corporate-class structure.

Last March's budget, however, made intra-corporate-class transactions reportable as realized capital gains. As a result, half of the gain is subject to tax at the investor's top marginal tax rate in the year a transaction takes place.

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Matthew Elder

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