How Purpose Corporate Class Works

Purpose Corporate Class Funds

Purpose Corporate Class funds are set up as a mutual fund corporation with multiple fund strategies. Each strategy, often referred to as a “corporate class fund,” would represent a different investment fund. However, the different funds are part of a single corporate tax entity.

One of the main benefits of a corporate class fund is that distributions to shareholders of the mutual fund corporation are classified as Canadian dividends or capital gains – both of which receive preferential tax treatment. In comparison, a trust may also pay out other forms of income – such as foreign dividends or interest income – which attract the highest level of tax. This means that you can invest in traditional income funds and be assured that you will not receive a distribution of highly taxed interest income.

In addition, if a mutual fund realizes a capital loss in a year, it cannot be claimed by investors for tax purposes. However, the fund can use these losses to offset capital gains. The Corporate Class umbrella goes one step further, allowing these losses and gains to be spread over a wide base of many funds, instead of being confined to only one fund, as it is with a trust.

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