I’m willing to venture that a fixed monthly distribution isn’t likely to be dividend income for tax reporting purposes, rather this is the monthly distribution of the fund and in this case it is mostly return of capital.

Preet

Since I’ve mentioned T8 funds, let me clarify my question… I’ve looked closely at my fund’s account transactions list. What these funds do is that they distribute a monthly DIVIDENT and than, somehow (may be by using a magic powder), they convert these funds into 100% ROC and make payouts to my checking account. They call it as a “tax-efficient distributions”. Interesting, but in the end of the year my tax slip didn’t show any DIVIDENT distributions, only ROC. That’s why I’m wondering how they do that? May be there are other products in the market, which do the same things?

Thank You.

The actual yield on your fund might be 3%, and ROC (return of capital) might make up the other 5%. This means they are treating part of the distribution as a return of your original principal. This will slowly grind your ACB (adjusted cost base) down to zero on the portfolio and when that happens, every dollar you receive will be taxable (most will be capital gains, and there will be some interest and dividends).

Does this answer your question?

What I was referring to above is separate, although it could also apply to your funds as well – but not necessarily so.

Your T8 fund means your funds have a ROC series or T-SWP series of units.

A capital yield class fund is different, and may or may not have a T-SWP series.

Preet

"…manager could say that he is running a tax-efficient bond mandate for his investors (as is the case in a capital yield class or managed yield fund where the investor receives fixed-income type risk and returns with the distributions treated as capital gains."

I’m holding a few T8 funds, which make distributions every month. Although they treat these distributions as ROC, nobody was able to explain me clearly how they calculate these distributions (they are not exactly the same from month to month). Is this something related to your above mentioned comment?

Thank You