Tax Efficient Non-Registered Investments

We all pay a lot of tax on the income we work hard to earn. Then, if you take that hard earned after tax money and invest it, you have the pleasure of paying tax again on what you earn.

That doesn't seem fair does it?  Well there is another way.

There is a type of investment called Corporate Class Mutual Funds. These investments are exactly the same as regular mutual funds except for one important difference: Corporate Class Mutual Funds are owned as a Corporation, and regular mutual funds are a Mutual Fund Trust.  

Not very exciting, right?  Well it gets better.

With Corporate Class Mutual Funds the taxable income each year in minimized compared to regular mutual funds, and you can switch between the different funds in the corporation and not pay capital gains tax.  You can do this as many times as you want for as long as you want and pay no capital gains tax until you actually redeem money from the account.  At that time you will pay capital gains tax on your gains.

There is another type of mutual fund that is a variation on this. They are called Corporate Class T Series Funds.  With these funds you can invest after tax money and set up an income either immediately or at a later date. The income you receive is considered a return of capital so you pay no tax on it. You are paid back your original investment first before you are paid any taxable investment income.  With a 5% distribution per year, on a $100,000 investment you could go 20 years before you pay any tax!

There are also a new type of Mutual Fund that have been available for just a few years that offer even more tax benefits for individual and corporate investors with non-registered assets to invest.

Please ask your advisor for more information on these highly tax-efficient investment vehicles.