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The Voice of Canada’s Investment Funds Industry

Character Conversion

In its March 2013 budget, the federal government announced changes to prevent the use of financial arrangements involving derivatives contracts that allow for the character conversion of ordinary income to capital gains. The changes came into law with the passage of the budget bill and will affect some Canadian mutual funds that promote the re-characterization of income to capital gains as a significant feature.

Unfortunately, there was no opportunity for stakeholders to provide comment or input into this change before its announcement. However, IFIC staff have been meeting with officials at Finance Canada to inform them of the issues that need to be considered to create a manageable transition plan.