If you are like most of us, disposable income over the last few years has dwindled as a result of the economic downturn. If you are one of the lucky ones you have maxed out your registered plans and still have enough disposable income to invest outside your registered plan. The problem is that any distributions received on the unregistered investments is taxable. This is where consideration of your investments and their associated tax consequences must be carefully analyzed.
An investment that is noteworthy of your analysis is the CI Corporate Class funds. These funds provide you with some of the benefits that can be found with a tax free savings account or other registered accounts. These benefits include the ability to defer tax on investments income and capital gains. This allows for increased compound growth over the long term and the ability to make investment decision, such as rebalancing your portfolio, without worrying about the tax consequences. These funds can also allow you to draw tax efficient cash flow from your investment through T-Class funds
What is CI Corporate Class Fund
CI Corporate Class is, as the name suggests, a mutual fund corporation. As opposed to the mutual fund that can be structured as a trust, the mutual fund corporation is one entity that may consist of any number of share classes, each representing a separate fund. The Income Tax Act allows investors the ability to transfer classes of capital stock of the same corporation without tax consequences. This is the basis for the CI Corporate Class and it can result in significant tax benefits for investors.
The structure effectively creates an umbrella for the funds in the corporation. Under which the investors can switch between classes, or funds, without triggering a capital gains or loss. The actual gain or loss only occurs when you redeem from the corporation.
The Benefits of the Corporate Class Umbrella
CI Corporate Class provides the most tax efficient investments across a large selection of asset classes.
The structure allows you:
- to switch funds within the corporation without tax consequences
- receive tax efficient capital gains or Canadian dividends from traditional income funds, and
- defer paying tax on distributions, given the low dividend payout of the fund.
Please note that this Blog is just a brief overview of an investment with potential tax efficiencies. It is an investment that needs to be analyzed to determine if it fits in your investment portfolio. Decisions to invest in a Corporate Class Fund should only be done after meeting with your investment advisor. We are not investment advisors and we bring this information to you attention to educate you on potential tax efficient investments.