New tax rules don’t affect BMG fund

The 2013 federal budget proposes to eliminate the taxable benefits that have been enjoyed by fixed-income funds, by converting ordinary or interest income to capital gains.

Read: 2013 Budget: Not much good tax news

Since only one-half of a capital gain is taxable, the government’s revenue is reduced by 50%, so investors have been realizing a tax benefit. Often the tax on the capital gain can be deferred for longer than a decade.

The proposal is not expected to impact the BMG Gold Advantage Return BullionFund, as it does not convert interest income to capital gains. So the fund will continue to distribute return of capital distributions, which are not immediately taxable, reducing the cost base of the unit holder’s investment.

Read: New mutual fund offers cash flow for seniors

The fund combines the historical stability of uncompromised gold bullion with a mechanism to receive monthly cash flow from capital gains in a tax-efficient manner. Investors would receive these regular cash distributions, while having the potential to enjoy a growth in capital.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.