Q&A: Corporate Class Funds

A reader has heard this is a way to save tax but is unsure how it works

 

Q – My question relates to investing outside an RRSP. I understand they have these corporate funds that can save you taxes but I am not sure what they mean. Could you explain how it works and suggest a few funds? Also can ETFs can do the same? – Mike C.

 

A – Corporate class funds have become quite popular but they are mainly suitable for people who like to switch a lot. Several funds are set up under a corporate umbrella, hence the term corporate class. This allows investors to move money among these funds, for example from a stock fund to a bond fund, without triggering capital gains tax liability (hence the tax “savings”). In fact, you will be taxed when you eventually sell your position. Corporate class funds simply postpone the day of reckoning, albeit perhaps for many years. Many major fund companies offer this option. Ask your financial adviser for suggestions. I do not know of any corporate class ETFs. – G.P.

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