03 August 2016 Canada's Department of Finance releases draft proposals on taxation of switch funds and linked notes The Department of Finance released the anticipated legislative proposals on July 29, impacting the taxation of switch funds and linked notes relating to measures first announced in the 2016 federal budget. Many mutual fund corporations are organized as "switch funds." Such funds allow investors to exchange shares of one class of the mutual fund corporation for shares of another class. Currently, switches between classes may be deemed not to be a disposition for income tax purposes, most commonly relying on the convertible property rules of section 51. However, the March 22 federal budget announced that after September 2016, such switches would be taxable dispositions. The proposals released July 29 delay the implementation of the changes announced in the 2016 federal budget until January 1, 2017. Document ID: 2016-1327 |
