Q&A With Gordon Pape: Does Return of Capital Matter?
Q – We have investments in TFSA’s that pay a monthly income.
At the end of the year, you get the breakdown of the income, i.e.
dividends, interest, return of capital (ROC), etc. As the funds are inside a TFSA, should ROC be of concern? As I understand it, ROC effects capital gains but wouldn’t these be non-taxable inside the TFSA? – Mike T.
A – You are correct. Any profit earned inside a TFSA is tax-free,
with the exception of foreign dividends, which are subject to a
withholding tax. It’s 15 per cent on U.S. source dividends. – G.P.