AIC corporate funds, the tax-smart way to invest

One powerful advantage of RRSPs or RRIFs is the tax-deferred compounding income that occurs over time. Mutual funds that are structured as corporations can provide tax-deferred compounding outside an RRSP or RRIF.

How is this possible?

In addition to traditional mutual fund trusts, AIC offers mutual funds structured as a mutual fund corporation. AIC Corporate Fund Inc. issues several classes of shares, with each share class representing a different AIC fund.

As an investor, you are permitted to switch among the share classes (i.e. among different funds) without triggering a capital gain on the share class you previously owned. As long as your investment remains within the corporate share structure, capital gains earned on a specific class of share is deferred.

This is a highly desirable consequence for investors with taxable savings who have no regular income need from their investment savings and who also want to defer and minimize their tax bill.

If you redeem fund shares out of the mutual fund corporation, however, this triggers taxation of capital gains that have occurred within the structure. So the strategy is to stay within the corporate share class structure and avoid selling until necessary.