Funds using low-tax strategy under scrutiny
There's been an appetite among investors, in today's low interest rate environment, to keep more of what are already relatively low yields.
One way to achieve that result is to invest in mutual funds and ETFs that allow an investor to hold a bond portfolio, but enjoy the favourable tax treatment of capital gains. The advantage being that interest income is taxed at your marginal tax rate, while only 50% of capital gains are included in taxable income.
These so-called “advantaged” funds have become extremely popular, so much so that the government is proposing to shut them down, according Finance Misister Flaherty's most recent budget.