Tax-efficient investing

Northland’s fund units and debentures are qualified investments for registered retirement savings plans (RRSPs), registered education savings plans (RESPs), deferred profit-sharing plans (DPSPs) and registered retirement income funds (RRIFs) under the Canadian Income Tax Act.

Most investors holding fund units outside a tax-registered plan will declare a portion of distributions as taxable income in the year they are received. This amount will be included on T3 or T5 income tax slips.

Fund distributions partially qualify for tax deferral, because capital cost allowances and expenses significantly reduce the fund’s income that would otherwise be taxable. The tax-deferred portion of distributions represents a return of capital for Canadian income tax purposes and reduces the adjusted cost base of the trust units.

In most cases, a trust unit is considered to be capital property. The actual or deemed disposition of a unit will give rise to a gain (or loss) equal to the amount by which the proceeds of disposition are greater (or less) than the adjusted cost base of the unit and any associated selling expenses.

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