What is the difference between a mutual fund trust and a mutual fund corporation?
Core differences: Mutual Fund Trusts issue units. Mutual Fund Corporation issues shares. Mutual Fund Trust can avoid payment of taxes by passing on all income to the investor. The investor then pays tax. Mutual Fund Corporations can also avoid taxes, but the process of avoiding taxes is more complicated than a trust. When switching between funds in a Mutual Fund Trust, a deemed disposition takes place and any capital gains are taxed (unless it’s inside an RRSP). When switching between funds within a Mutual Fund Corporation, there’s a good chance that the switch is not a deemed disposition and your capital gains can essentially grow tax-free for years. The disadvantage is that your money would have to remain with the same Mutual Fund Corporation. If you move your money outside of the corporation to a different organization, capital gains are taxed.
