Taxing mutual fund distributions

Question: Does the taxation of net capital gains apply to mutual funds outside of a registered plan and not in a trust but simply registered in an individual’s name ? – G.R.H., British Columbia


Most mutual funds are set up as trusts (a few are corporations). So if you own a mutual fund, you really own units in a mutual fund trust. This has nothing to do with whether you set up a trust account yourself. The taxation rules that apply to mutual fund trusts will therefore be in force.

Distributions of realized net capital gains, dividends and interest must be made at least once a year, and will be taxed if the units are held outside a registered plan. It doesn’t matter whether the distributions are received as cash payments or reinvested to buy additional units — they are still taxable. – G.P.