“Return of capital” not taxable
If you have investments in royalty trusts or REITS, or mutual funds that hold them in their portfolios, some of the distributions you received in 2001 may not be subject to tax. These payments are called “return of capital” and are received on a tax-deferred basis.
For example, CPL Long-Term Care REIT has advised unitholders that 83% of the 2001 distribution falls into that category. These amounts will not show up on any T3 or T5 slip you receive and should not be entered on your return. However, you do have to subtract all tax-deferred income from the original price you paid for the shares to determine an “adjusted cost base” for capital gains purposes.