How one mutual fund can reduce taxes
 How
would you like an investment that would give you more cash
flow and less tax? If so, we have good news. There is now
a way for you to enjoy a high level of monthly cash flow,
reduce your short-term tax bill and participate in the growth
of mutual funds.
You can do it with specialized mutual funds that use a distribution
strategy called Return of Capital (ROC). With an ROC mutual
fund, you receive a monthly distribution that’s partially
made up of a return of your original invested capital. Since
you’re receiving a return of your principal, rather
than a form of income, this cash flow can be paid to you without
being taxed.
You will eventually have to pay tax on the capital gains
that you earn in the fund, but payment would be deferred until
you sell your mutual fund units or when your original invested
capital runs out.
As long as you remain in the fund, you can continue to defer
payment of taxes on the ROC portion of the distributions.
And when you do eventually sell the units, if you move into
a lower marginal tax bracket, you may enjoy a net tax savings.
An ROC mutual fund is best held in a non-registered portfolio
and is most appropriate for investors with a moderate risk
profile, perhaps in their early retirement years, who want
to maximize their after-tax cash flow.
Important information about our financial planning services can be found at the bottom of our
homepage.
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