MUTUAL FUND TAX GUIDE. For your 2014 Tax Return

MUTUAL FUND TAX GUIDE For your 2014 Tax Return LESS = MORE THE LESS TAX YOU PAY, THE MORE OPPORTUNITIES YOUR INVESTMENTS WILL HAVE TO GROW MACKENZI...
Author: Timothy Norris
2 downloads 3 Views 380KB Size
MUTUAL FUND TAX GUIDE For your 2014 Tax Return

LESS = MORE THE LESS TAX YOU PAY, THE MORE OPPORTUNITIES YOUR INVESTMENTS WILL HAVE TO GROW

MACKENZIE TAX & ESTATE PLANNING

February 2015 Tax continues to be one of the biggest expenses Canadians incur in their lifetime. Mackenzie Investments’ Mutual Fund Tax Guide is designed to help you with your taxes by making it easier for you to understand how your mutual fund and other investments are taxed and reported on your annual income tax return. Inside you’ll find explanations of various tax slips, information about the tax rates in 2014, and any recent changes to tax rules that may affect you. How can you save tax? The guide offers a number of tax strategies that may help you minimize the tax you’ll pay, thereby allowing you to maximize your savings. For example, income splitting between family members, including pension income, can save you considerable tax. There are a number of other strategies you can use to provide cash flow or defer tax to a later year, when your personal tax rate may be lower. Now is a good time to review your situation with your financial advisor. Here are a few ideas for you to consider: • Have you maximized your Tax-Free Savings Account (TFSA)? This account is not just a “savings” account – you can invest in mutual funds, which will grow tax free. The contribution limit for TFSA’s has been $5,000 for the years 2009, 2010, 2011 and 2012, but was increased to $5,500 per year in 2013 and 2014. This means that if you have not yet used your TFSA, you can put in $36,500 in 2015! Remember, withdrawals from your TFSA will provide you with non-taxable cash, and you can add the withdrawal amount back to your TFSA as long as you remain within your limit.

Carol Bezaire Vice President, Tax, Estate and Strategic Philanthropy

• Have you maximized your Registered Retirement Savings Plan (RRSP) to defer taxes to future years? The 2014 RRSP maximum is 18% of earned income to a maximum of $24,270 (plus any unused contribution room you may have). The RRSP maximum rises to $24,930 in 2015. • Do you invest in corporate mutual funds to minimize tax and maximize growth of your nonregistered investments? Not only does this structure reduce the tax you pay on your investment income, you can change your investment selection on a tax-deferred basis as your needs dictate. • Are you investing for a family member who has a disability? Did you know that investing in a Registered Disability Savings Plan with Mackenzie Investments you can “catch up” on Government matching grants going back to 2008 (for qualified individuals)? • Do you plan ahead to use the donation tax credit to reduce your taxes while helping your favourite charities? Mackenzie Investments can help you plan your charitable giving and provide you with your own donor-advised fund through the Strategic Charitable Giving Foundation. Speak to your financial advisor if you are interested in finding out more. The taxation system in Canada is highly complex and ever-changing. Working with a financial advisor is the best way to find the right tax-savings strategies for you. Sincerely,

Carol Bezaire Vice President, Tax, Estate and Strategic Philanthropy Mackenzie Investments

MACKENZIE TAX & ESTATE PLANNING

Contents CHAPTER 1

What’s new in 2014?.......................................................................................................................................6 CHAPTER 2

All about mutual fund distributions..............................................................................................................8 1. What types of income does my mutual fund investment generate? 2. Why do some funds issue T3s (RL16 for Québec) and others T5s (RL3 for Québec)? 3. Why do funds make distributions? 4. Is my year-end distribution prorated if I invest in, say, November or December? 5. I didn’t receive any distributions in cash. Why did I still get a tax slip? 6. What is “return of capital”? Do I pay tax on this? 7. How do I report income from my U.S.-dollar account? 8. When I received a distribution, why did the price of my mutual fund drop? 9. What if my fund didn’t declare a distribution? 10. Do mutual fund corporations pay out distributions in the same manner as mutual fund trusts? 11. Do segregated funds pay out distributions in the same manner as mutual fund trusts? CHAPTER 3

What tax slips will I receive from Mackenzie?.............................................................................................13 1. Non-Registered Accounts – T3 (RL16 for Québec) and others T5s (RL3 for Québec) 2. Registered Accounts

2a. Registered Retirement Savings Plans (RRSPs) – RRSP Contribution Receipts 2b. Registered Retirement Income Funds (RRIFs) 2c. Registered Education Savings Plans (RESPs) 2d. Locked-In Retirement Accounts (LIRAs) and Locked-In Retirement Savings Plans (LRSPs) 2e. Life Income Funds (LIFs) and Locked-In Retirement Income Funds (LRIFs) Withdrawal Receipts – T4RIF (RL2 for Québec) 2f. Registered Disability Savings Plans (RDSPs)

3. Information applicable for non-residents of Canada – NR4 4. Information applicable for U.S. tax filers – PFIC AIS

MACKENZIE TAX & ESTATE PLANNING

CHAPTER 4

What happens if I redeemed or exchanged mutual fund securities during the year?.............................18 1. How do I calculate my capital gains or capital losses? 1a. How do I calculate the adjusted cost base (ACB) of my securities? 1b. I know the ACB of my investment. How do I calculate the capital gain or loss? 2. 3. 4. 5. 6.

Can I use the adjusted cost base (ACB) shown on my Mackenzie statement? What do I do with capital losses? How do I report redemptions on my U.S.-dollar account? What is a deemed disposition? Tax consequences of a fund merger

CHAPTER 5

Mackenzie tax-advantaged products and strategies ................................................................................26 Mackenzie Corporate Class Funds Mackenzie Series T (and T-type) Tax-Free Savings Account Registered Disability Savings Plan (RDSP) The Mackenzie Charitable Giving Fund CHAPTER 6

Who do I contact if I have questions?.........................................................................................................28 APPENDIX: The Forms.....................................................................................................................29

Quick Facts for Investors 1. 2. 3. 4. 5. 6. 7.

Where do I report T3 (RL16 for Québec) distributions on my tax return? Where do I report T5 (RL3 for Québec) distributions on my tax return? Where do I report RRSP contributions on my tax return? Where do I report withdrawals from my RRSP on my tax return? Where do I report withdrawals from my RRIF on my tax return? Where do I report my capital gains and losses on my tax return? Where do I report my PFIC income?

MACKENZIE TAX & ESTATE PLANNING

6

MUTUAL FUND TAX GUIDE 2014

CHAPTER 1

What’s new in 2014? 1. Family Tax Cut This is a non-refundable tax credit of up to $2,000 for eligible couples with minor-aged children, and is based on the net reduction of federal tax that would be realized if up to $50,000 of an individual’s taxable income was transferred to an eligible spouse or common law partner. This is effective for 2014 and subsequent tax years. This credit is as though you allocated up to $50,000 of taxable income to your spouse or common-law partner but your actual net income and taxable income will remain unchanged. What will change is your tax payable.

2. Adoption Expense Tax Credit The Adoption Expense Tax Credit is a 15% non-refundable tax credit that allows adoptive parents to claim eligible adoption expenses related to the completed adoption of a child under the age of 18 (up to a maximum of $11,774 in expenses per child for 2014). Expenses which are eligible include fees such as those paid to a licensed adoption agency as well as mandatory immigration expenses in respect of the child. The Adoption Expense Tax Credit is claimed in the taxation year in which an adoption is completed. Under changes announced in the 2014 Federal Budget, the maximum amount of eligible expenses increased to $15,000 per child for 2014. This maximum amount will be indexed to inflation for taxation years after 2014.

3. Medical Expense Tax Credit (METC) Budget 2014 introduced changes to METC. Under the changes the amount paid for the design of an individualized therapy plan is eligible for the METC as long as the cost of the therapy itself is eligible for the METC as well as meeting some other conditions. In addition the cost for service animals to assist an individual in managing severe diabetes has been added to the list of eligible medical expenses. 4.

Tax Exemption of Immigration Trusts Ends Prior to budget 2014 there was an exemption that allowed offshore trusts established by new immigrants to Canada to avoid Canadian income tax on foreign source income for up to five years from the time an immigrant becomes a Canadian resident. Budget 2014 eliminated the 60-month exemption from the deemed residency rules, including related rules that apply to non-resident trusts. This measure applies in respect of trusts for taxation years: • That end after 2014 if (i) at any time that is after 2013 and before Budget Day the 60-month exemption applies in respect of the trust, and (ii) no contributions are made to the trust on or after Budget Day and before 2015; or • That end on or after Budget Day in any other case. This effectively eliminates the opportunity to use an immigration trust to shelter income from Canadian taxation for new immigrants to Canada.

MACKENZIE TAX & ESTATE PLANNING

MUTUAL FUND TAX GUIDE 2014

7

5. Elimination of Graduated Rate Taxation of Trusts and Estates Budget 2014 changed the way trusts and estates will be taxed as of 2016. A flat top-rate tax will apply to new or existing inter-vivos trusts (established while you are alive), trusts created by a will and certain estates. Two exceptions to this treatment include: • Graduated rates (the same rates an individual would pay) will continue to apply for the first 36 months of an estate that arises on and as a consequence of an individual’s death and that is a testamentary trust. For estates which remain in existence beyond 36 months after death, flat top-rate tax will apply at the end of that 36-month period. • Graduated rates will continue to be made available with respect to trusts where the beneficiaries are eligible for the Federal Disability Tax Credit. In addition, testamentary trusts (other than estates for their first 36 months) and new or existing inter-vivos trusts will have to file quarterly tax installments; and all trusts must have a December 31 year-end.

6. New FATCA Rules FATCA stands for the Foreign Account Tax Compliance Act of the United States, which requires non-U.S. financial institutions to provide the U.S. Internal Revenue Service (IRS) through the Canada Revenue Agency (CRA) with information on certain U.S. persons who have invested in accounts outside of the United States and for certain nonU.S. entities to provide information about any U.S. owners. Implementation of the FATCA rules began July 1, 2014 for individuals, members of a joint relationship, “in-trust for” beneficiary of a non-formal trust, and sole proprietorships. Implementation of the FATCA rules for entities, which are referred to as corporation, partnership, estate or a trust that is controlled by a U.S. person or persons but are located outside of the United States, began on January 1, 2015. FATCA rules apply only to non-registered investment accounts. New client name investment accounts opened July 1, 2014 or after will require a FATCA self-certification to be completed.

7. New Ontario Probate Filing Rules After a person dies, someone will usually need to administer their estate – whether or not the deceased had a will. The legal representative of a deceased person is either an executor, estate trustee or liquidator (if the person had a will) or an administrator (appointed by a court if the person did not have a will). In order for a legal representative to be able to deal with the deceased’s property, they need to apply for a Certificate of Appointment of Estate Trustee. The Certificate proves that the representative has the authority to deal with the deceased’s financial assets. Before the Certificate can be issued, the Estate Administration Tax (EAT) must be paid, and the tax payable is based on the value of the deceased’s estate assets. Effective January 1, 2015, once the executor applies for and receives a Certificate of Appointment of Estate Trustee, the executor must submit a detailed Estate Information Return within 90 calendar days to provide details of how the estate’s value was determined. Failure to do this can result in a fine and/or imprisonment. MACKENZIE TAX & ESTATE PLANNING

8

MUTUAL FUND TAX GUIDE 2014

CHAPTER 2

All about mutual fund distributions T his chapter describes the distribution process and tax features of mutual funds. For a detailed explanation of how to report distributions on your income tax return, please see Appendix.

1. What types of income does my mutual fund investment generate? Mutual funds invest in a variety of stocks, bonds and other securities that generate various types of income for the fund. Also, when the fund sells an investment, it realizes a capital gain or capital loss on the transaction.

Dividend income is eligible for the dividend tax credit and only 50% of a capital gain is taxed. As with your salary, interest income is fully taxed at your highest personal tax rate during the year.

2. Why do some funds issue T3s (RL16 for Québec) and others T5s (RL3 for Québec)? The type of income that your fund distributes to you will vary depending on whether the fund is structured as a mutual fund “trust” or a mutual fund

Canadian dividends and capital gains are taxed at a lower rate by the federal and provincial governments compared to other income sources. The following table shows how each type of income is taxed.

Investment Shares of Canadian corporations

Type of income earned

Tax category

Dividends

Eligible Dividends

Highest marginal tax rate (Ontario 2014)

After-tax value of $100 of income at highest marginal tax rate in Ontario

Highest marginal tax rate (Québec 2013)

After-tax value of $100 of income at highest marginal tax rate in Québec

33.8%

$66

35.2%

$65

Other income

Other income

49.5%

$51

50.0%

$50

Foreign interest and dividends

Foreign non-business income

49.5%

$51

50.0%

$50

Canadian treasury bills, bonds, and mortgages

Interest

Other income

49.5%

$51

50.0%

$50

When the fund sells investments

Capital gains (losses)

Capital gains (losses)

24.8%

$75

25.0%

$75

Foreign stocks and bonds

Source: Mackenzie Investments For a more detailed description of the income distributions of mutual fund trusts compared to mutual fund corporations, please see Question 10 in this chapter.

MACKENZIE TAX & ESTATE PLANNING

MUTUAL FUND TAX GUIDE 2014

“corporation.” Mutual fund trusts issue a T3 tax slip and mutual fund corporations issue a T5 tax slip containing investment income information. Residents of Québec will also receive a RL16 tax slip with their T3 tax slip and a RL3 tax slip with their T5 tax slip.

3. Why do funds make distributions? Funds make distributions so that, overall, you pay less tax. Here’s how: • Income earned by a mutual fund is subject to tax. If the income remains in the fund, the fund will pay the tax. However, if the income is distributed to investors, they pay the tax. • Since mutual funds always pay tax at the highest tax rate for each category of income, and since many investors are taxed at a lower rate, the fund pays out the income so that it is taxed at a lower rate in the investor’s hands rather than at the higher rate in the fund. Therefore, investors generally are better off by having the fund pay a distribution. • Many mutual fund investments are held inside registered plans. Distributions paid by a mutual fund into a registered plan are not taxable until withdrawn.

4. Is my year-end distribution prorated if I invest in, say, November or December? If you have investments in a fund when it pays a distribution, you will receive the full distribution, regardless of how long you have owned the fund.

9

1

MACKENZIE TAX TIP Not all mutual fund distributions are taxed in the same manner. For example, mutual fund trusts distribute taxable income generated from a number of sources, from fixed income investments to equities. By comparison, a corporate class fund distributes only Canadian dividends or capital gains, which are taxed at a preferential rate. Remember, paying less tax can increase your overall investment returns, so when investing consider the structure of your mutual fund.

The distribution received by each investor is determined by the number of units owned by that investor on the “record day” for the distribution multiplied by the declared distribution per unit. Investments purchased in non-registered accounts late in the year may have tax implications. For more information, please consult your financial advisor.

5. I didn’t receive any distributions in cash. Why did I still get a tax slip? Distributions made by each fund are reinvested automatically to purchase additional units/shares of the fund. No sales charge is payable under this automatic reinvestment program.

MACKENZIE TAX & ESTATE PLANNING

10

MUTUAL FUND TAX GUIDE 2014

CHAPTER 2

Automatic reinvestment of distributions, however, does not provide any tax benefit. You receive the same tax treatment as you would if you actually received cash distributions and immediately purchased more units of the fund. When distributions are automatically reinvested, however, you profit from the compounding growth of the value of your investment. When you use Mackenzie Investments One-Step Dollar Cost Averaging you benefit from dollar cost averaging in a non-registered account, which reflects the various purchase prices every time a distribution is reinvested. This affects your adjusted cost base and may reduce the tax payable when you sell units.

6. What is “return of capital”? Do I pay tax on this? Distributions from some funds include a return of capital. This is an amount included in the distribution that is above and beyond the taxable income of the fund for the year. You do not pay tax on this amount and you do not include it in your taxable income for the year. The return of capital, however, may cause a decrease to your adjusted cost base. When you sell your fund, a higher capital gain may result. The “return of capital” is included in the detailed breakdown of distributions on the back of the tax slip so that you can calculate the adjusted cost base of your investment (see the adjusted cost base calculation on pages 19-22). For a T3, it is found in box 42. T5 tax slips do not record this amount.

MACKENZIE TAX & ESTATE PLANNING

7. How do I report income from my U.S.-dollar account? For Canadian income tax purposes, all transactions must be reported in Canadian dollars. Your T3 (RL16 for Québec) and T5 (RL3 for Québec) tax slips have been issued in Canadian dollars. Distributions paid to your U.S.-dollar account have been converted to Canadian dollars at the rate of CDN$1.10447 (Bank of Canada average for 2014). On the back of your T3 (RL16 for Québec) or T5 (RL3 for Québec) slip we have indicated the relevant exchange rates.

8.  When I received a distribution, why did the price of my mutual fund drop? When a fund makes a distribution, its unit price drops by an amount equal to the distribution per unit. However, the overall value of your investment is unchanged. Here’s why: If your distributions are automatically reinvested, they are used to purchase more units of the fund. As a result, you will own more units. When you multiply the higher number of units by the new, lower price, you will find that the value of your holdings is unchanged. If your distributions are paid out in cash, the remaining value of your investments plus the cash in hand will equal the value of your holdings before the distribution.

9. What if my fund didn’t declare a distribution? Distributions are not an indicator of fund performance. There is no link between the amount of the distribution made by a fund in any year and the fund’s performance for that year.

MUTUAL FUND TAX GUIDE 2014

11

The following example of an investment in a mutual fund trust shows why the value of your investment remains unchanged when you receive a distribution. Activity

Calculations

Total Investment Value

Before a distribution

You own 100 units at $10 per unit.

Distribution declared

Distribution of $0.50 per unit. You receive $50 (100 units x $0.50)

Unit price drops

The fund unit price is now $9.50. ($10.00 less $0.50)

Distribution reinvested

You reinvest the $50 to buy additional units at $9.50 per unit.

$1,000

You receive 5.263 units ($50 ÷ $9.50 = 5.263) so that you now own 105.263 units After the distribution (if you reinvested)

You own 105.263 units at $9.50 per unit.

After the distribution (if you received cash)

You own 100 units at $9.50 per unit. You received $50 in cash.

$1,000 $950 $50 $1,000

For illustrative purposes only.

Unless a fund has a fixed distribution, generally a distribution is paid to minimize the taxes the fund has to pay. Any increase in the value of investments in the fund are not included in the taxable income of the

fund until an investment is sold. In this way, the increase in value of the mutual fund’s investments can compound tax-free until they are sold and new investments are acquired.

To understand this, let’s look at the components of fund performance: Performance Component

Taxable?

Net income, which is equal to dividend and other income earned by the fund less management expenses

Yes

Realized gains on the sale of portfolio securities

Yes

Unrealized gains from market appreciation of portfolio securities

No

MACKENZIE TAX & ESTATE PLANNING

12

MUTUAL FUND TAX GUIDE 2014

CHAPTER 2

10. Do mutual fund corporations pay out distributions in the same manner as mutual fund trusts? No, trusts and corporations pay out differently. When income is distributed from a mutual fund trust, it “flows through” to the investor so that the trust can distribute the full range of income shown in the table on page 8. The trust may also flow through the dividend tax credit and a foreign non-business tax credit. This arises when the fund has tax withheld by foreign governments on interest and dividends earned in foreign countries. Mutual fund corporations can only flow through Canadian dividends, capital gains dividends and the dividend tax credit.

11. Do segregated funds pay out distributions in the same manner as mutual fund trusts? Although segregated funds and mutual funds have many similarities, there are some differences in how segregated funds are treated under the Canadian Income Tax Act. Segregated fund investors are not investors of a fund, but contract holders of an insurance policy. This means that income earned in the segregated fund is deemed to be allocated to the contract holders, not distributed out to investors as with a mutual fund. In other words, allocations are not paid out to investors by way of a cheque or through the purchase of additional units, but instead all income is reinvested and reflected by an increase in the unit price. Allocations are reflected by an increase or decrease in the adjusted cost base (ACB).

MACKENZIE TAX & ESTATE PLANNING

2

MACKENZIE TAX TIP Looking for income while paying the least amount of tax as possible? Mutual funds offer both systematic withdrawal plans (SWPs) and tax-efficient withdrawals from corporate class funds (Series T and T-type). Both options provide cash flow that is a combination of tax-free return of capital and capital gains or dividends, which are taxed at a far lower rate than income.

MUTUAL FUND TAX GUIDE 2014

13

CHAPTER 3

What tax slips will I receive from Mackenzie?

1. Non-Registered Accounts – T3 (RL16 for Québec) and T5 (RL3 for Québec) To provide you with investment income information, mutual fund trusts issue T3 tax slips and mutual fund corporations issue T5 tax slips. Residents of Québec also receive a Relevé 16 tax slip for distributions from a mutual fund trust and a Relevé 3 for distributions from a mutual fund corporation. These tax slips do not record any capital gains or losses that you may have realized on the redemption of your mutual fund investment during the year. Tax reporting requirements on the redemption or disposition of your investments are discussed on page 18. To reduce the number of tax slips you receive, Mackenzie issues a consolidated T3 tax slip for distributions from Mackenzie funds that are trusts, and a separate consolidated T5 tax slip for distributions from funds that are corporations. The back of each T3 (RL16 for Québec) and T5 (RL3 for Québec) shows a detailed breakdown, by fund, of the distributions. Mackenzie issues a tax slip if you received $1 or more in distributions from a fund during the year. However, if you received less (as shown on your annual statement of account), you are still required to report this amount on your income tax return.

Distributions paid to registered accounts (RRSP, RRIF, RESP, LIF, LIRA, LRIF, PRIF, DPSP, RPP, LRSP, GRSP, RDSP and TFSA) are not taxable as they remain in the tax shelter.

2. Registered Accounts Depending on the type of registered plan, you may receive contribution and withdrawal receipts. Tax receipts that are used for these taxable transactions are described on the following pages. You will not receive a receipt for distributions made by the funds to a registered plan because they are not subject to tax. As well, capital gains (or losses that are realized on the redemption or exchange of your investments within a registered plan) are also not taxable until the funds are taken out of the plan. You do not report them on your tax return until the funds are taken out of the plan. The distribution cannot be used as a deductible RRSP contribution. Tax receipts will not be provided for withdrawals made from your Tax-Free Savings Account (TFSA) because withdrawals are not taxable. But if a TFSA holder dies, the recipient of the TFSA may be taxed on any growth in the TFSA from the date of death to the date of distribution. A T4A receipt will be issued for any portion of the deceased’s TFSA that may be taxable.

T3 (RL16 for Québec) and T5 (RL3 for Québec) tax slips are issued for non-registered accounts only.

MACKENZIE TAX & ESTATE PLANNING

14

MUTUAL FUND TAX GUIDE 2014

CHAPTER 3

2a. Registered Retirement Savings Plans (RRSPs) – RRSP Contribution Receipts When you make an RRSP contribution, you can generally deduct the amount from your income on your tax return, thereby reducing the amount of tax you pay. We issue three types of contribution receipts (r1, r2, r3). The type you will receive depends on when you made the contribution, and whether you transferred in a retiring allowance to your RRSP. r1 “Rest-of-Year” receipts If you made a contribution to your Mackenzie RRSP, or a Mackenzie Spousal RRSP, between March 1, 2013 and December 31, 2013, you will receive a “Rest of Year” contribution receipt. This receipt is marked “Contributions During the Remainder of 2013.” r2 “1st 60 days” receipts If you made contributions during the first 60 days of 2015, you will receive a contribution receipt marked “1st 60 days.” If you make more than one contribution during this period, you may receive more than one receipt. You have until March 2, 2015 to make a contribution that is deductible from your 2014 income. We consolidate RRSP receipts for the 1st 60 days for systematic contributions (this includes Pre-Authorized Chequing transactions & Group RSP contributions). These transactions are consolidated and issued after the deadline. The only RRSP receipts that we issue ‘on the fly’ are for lump sum contributions.

MACKENZIE TAX & ESTATE PLANNING

3

MACKENZIE TAX TIP Take advantage of tax-deferred compounding to help your investments grow faster. One way to do this is to invest in a corporate class fund which allow you to change your asset mix. When you do, you won’t have to pay tax on your capital gain or loss until you want to. And by paying less tax, you’ll have a greater amount of money working for you.

r3 Transfer of a Retiring Allowance to a Mackenzie RRSP If you transferred in a Retiring Allowance under section 60(j.1) of the Income Tax Act, you will receive a separate contribution receipt in that amount.

Is the receipt different for a contribution made to a spousal plan? Yes, slightly. Under the section, “Name of annuitant,” the name of your spouse will be shown. The social insurance number (SIN) of your spouse will also appear. I f the contribution is not for a spousal plan, then the “Name of annuitant” section will state “same as contributor” and only your SIN will be shown.

MUTUAL FUND TAX GUIDE 2014

RRSP Withdrawal Receipts – T4RSP (RL2 for Québec)

15

2b. Registered Retirement Income Funds (RRIFs) Each year, other than the year in which the RRIF is established, you must withdraw a minimum amount from your RRIF. Withdrawals from a RRIF are included as income in the year of withdrawal. If you withdraw more than the minimum amount, we must withhold tax at the time of withdrawal. The minimum amount to be withdrawn, and the amount of tax required to be withheld on withdrawals over this amount, depends on the following factors:

If you withdraw funds from an RRSP, you must add the amount of the withdrawal to your income. By law, we are required to withhold a percentage of the amount withdrawn and send it to Canada Revenue Agency or Revenu Québec. When completing their tax returns, residents may owe additional tax to Canada Revenue Agency or Revenu Québec. Withholding tax rates are listed on page 32.

• the value of the account, • your age (the annuitant), or your spouse’s age, and • the year in which you moved the RRSP assets to a RRIF.

If you made a withdrawal from your RRSP during the year, you will receive a T4RSP (RL2 for Québec). This receipt shows the amount withdrawn, after allowing for any redemption charges if applicable, and any tax that has been withheld. If you are a non-resident, you will receive an NR4 receipt that shows the net amount withdrawn and the tax that has been withheld.

If I make a withdrawal from more than one fund, how many receipts will I receive? You will receive a single T4RSP (RL2 for Québec) tax receipt if the withdrawals were from the same account.

What happens if my spouse made a withdrawal from an RRSP to which I contributed? Your spouse will receive a T4RSP (RL2 for Québec) and will generally include the withdrawal in his or her income. However, if the withdrawal was made in the year in which you contributed to the plan, or in the previous two calendar years, you must include the amount withdrawn in your income for the year in which the withdrawal was made. This rule does not apply if you are separated or divorced.

Please consult your financial advisor for more information.

Do I receive a contribution receipt when I transfer an RRSP to a RRIF? In most instances you will not receive a receipt on the transfer of your RRSP to a RRIF.



Can I transfer other amounts to a RRIF? Yes, in very limited circumstances. For example, if your spouse dies and you are the sole beneficiary of your spouse’s RRSP, you are permitted to transfer their RRSP to your RRIF on or before December 31 of the year after the year of death. In this instance you will receive two receipts, a T4RSP (RL2 for Québec) to report the income inclusion and a contribution receipt for the same amount that will offset the income inclusion.

MACKENZIE TAX & ESTATE PLANNING

16

MUTUAL FUND TAX GUIDE 2014

CHAPTER 3

R RIFs Withdrawal Receipts – T4RIF (RL2 for Québec) If you made a withdrawal from your RRIF during the year, you will be issued a T4RIF (RL2 for Québec). It will show the amount withdrawn and the tax that has been withheld. If you are a non-resident, you will receive an NR4 receipt.

2c. Registered Education Savings Plans (RESPs) Contributions made to an RESP are not taxdeductible, and therefore you will not receive a tax receipt. There is no maximum annual contribution to a RESP, but there is a lifetime limit of $50,000. The federal government has provided a Canada Education Savings Grant (CESG) equal to 20% of the first $2,500 annual contribution to a RESP per beneficiary under the age of 18. The maximum annual grant is $500, creating a maximum lifetime total grant of $7,200. Additional grants are also available for low-to-middle income families as well as for Alberta residents. The Quebec government offers the Quebec Education Savings Incentive which pays a grant of up to $250 annually into an RESP. Depending on family income up to an additional $50 per year can be added to the basic grant. Grants are retroactive for up to three years. British Columbia has established the BC Training and Education Savings Program (BCTESP). The BC government will contribute a grant of $1,200 to eligible children. Children are eligible for the grant on their sixth birthday and up until the day before their ninth birthday.

MACKENZIE TAX & ESTATE PLANNING

4

MACKENZIE TAX TIP Investing on behalf of a child under age 18 outside of an RESP can pose tax problems for the adult contributor. Under the Canadian Income Tax Act, income other than capital gains is “attributed” to the adult and capital gains are taxed in the hands of the child. The tax burden can be reduced by investing in a corporate class fund, which allows you to defer taxes.

The Saskatchewan government offers the Saskatchewan Advantage Grant for Education Savings (“SAGES”) which pays a grant of up to $250 annually into an RESP. Legislation was implemented in 2013 for retroactive payments back to January 1, 2013. Please ask your advisor if you qualify. You will not receive the grant payments in cash, instead Employment and Social Development Canada forwards the grant(s) to Mackenzie for investment in the RESP. The “growth” portion of the RESP (i.e., all interest, dividends, CESG and capital gains generated by the contributions) at the time that it is paid out to the beneficiary from the plan is included in the income of the beneficiary in the year of payment. A T4A (RL1 for Québec) tax receipt will be issued to the beneficiary for the growth portion paid out (the original amounts contributed to the RESP are paid out tax-free).

MUTUAL FUND TAX GUIDE 2014

2d. Locked-In Retirement Accounts (LIRAs) and Locked-In Retirement Savings Plans (LRSPs) Since the assets in these accounts are locked in, tax receipts are not normally issued.

2e. Life Income Funds (LIFs) and Locked-In Retirement Income Funds (LRIFs) Withdrawal Receipts – T4RIF (RL2 for Québec) If you made a withdrawal during the year from your LIF or LRIF, you will be issued a T4RIF (RL2 for Québec), which will show the amount withdrawn, and the tax that has been withheld if applicable. Non-residents will receive an NR4 receipt.

2f. Registered Disability Savings Plans (RDSPs) Contributions to an RDSP are not tax-deductible, and therefore you will not receive a tax receipt. There is no maximum annual contribution to an RDSP, but there is a lifetime limit of $200,000. Contributions to an RDSP can be invested and grow tax-deferred, and the Government of Canada provides generous grants and bonds to eligible beneficiaries. The “growth” portion of the RDSP (i.e., all interest, dividends, Canada Disability Savings Grants, Canada Disability Savings Bonds and capital gains generated by the contributions) is taxable to the beneficiary when it is withdrawn from the RDSP. A T4A tax receipt will be issued to the beneficiary for the growth portion that is paid out.

17

3. Information applicable for non-residents of Canada – NR4 Non-residents holding a non-registered account will not receive a T3 or T5 tax slip but instead will receive an NR4 supplementary tax slip to report the taxable portion of the distributions from the funds. The NR4 tax slips have not been consolidated and you will receive a separate receipt for each of your funds that paid a distribution. Depending on your country of residence, Mackenzie must withhold 15% to 25% tax on your distribution, excluding any capital gains or return of capital components. Your distribution, excluding any return of capital component, is shown in Box 16 “Gross Income.” The tax, which Mackenzie withheld from your distribution and remitted to Canada Revenue Agency, is shown in Box 17. Withholding taxes paid to Canada Revenue Agency are generally deductible against tax payable in your country of residence. If you made withdrawals from a registered account in the year, you will receive an NR4 tax slip that shows the amount withdrawn in Box 16 and the tax that has been withheld in Box 17.

4. Information applicable for U.S. tax filers – PFIC AIS In addition to an NR4, T3 or T5, Mackenzie will supply a PFIC (AIS) or detailed income statement as required. For further information, please consult your financial or tax advisor.

MACKENZIE TAX & ESTATE PLANNING

18

MUTUAL FUND TAX GUIDE 2014

CHAPTER 4

What happens if I redeemed or exchanged mutual funds securities during the year?



Registered Accounts If you hold your securities in a registered account (RRSP, RRIF, RESP, LIF, LIRA, LRIF, PRIF, DPSP, RPP, LRSP, GRSP, RDSP and TFSA), any gains realized on the redemption of those units are not subject to tax.



Non-Registered Accounts If you hold your securities in a non-registered account, and redeemed or exchanged your securities during the year, you will need to report the corresponding capital gains or losses on your tax return. Please refer to your Annual Statement of Account to identify redemptions or exchanges that occurred during the year. In addition, you will also need to report any deemed dispositions. Please see page 23.



Fund Exchanges An exchange is the sale of securities of one fund to purchase securities of another fund. When you exchange Fund A for Fund B, you have actually sold, or “redeemed” Fund A and purchased Fund B. It is therefore a taxable transaction.



MACKENZIE TAX & ESTATE PLANNING



Fund Switches However, if you switch from shares of one fund to shares of another fund within the Mackenzie Corporate Class structure, the switch occurs on a taxdeferred “rollover” basis so that you will not realize a capital gain or capital loss on the switch. The cost of the shares of the new fund acquired on a switch will be equal to the adjusted cost base of the shares switched from the old fund. If you change shares of one series of a fund to another series of the same fund, the tax consequences are similar.

MUTUAL FUND TAX GUIDE 2014

19

Calculating your adjusted cost base (ACB)

5

MACKENZIE TAX TIP

For actions you can take with respect to capital losses, please see page 23.

1. How do I calculate my capital gains or capital losses?

To make sure your adjusted cost base (ACB) is correct, it’s important to keep accurate records of your mutual fund transactions, including reinvested distributions. Your ACB affects the tax you pay on your capital gain (or loss) which occurs when you sell your mutual fund units.

To calculate your capital gains or capital losses, you first need to calculate the adjusted cost base (ACB) of your units. The following tables describe, and walk you through, the ACB and capital gains calculations using a hypothetical example.

The total of all amounts paid to purchase your securities including any sales commission paid at the time of purchase

+

The amount of any reinvested distributions

-

The return of capital component of distributions

- = The ACB of any securities previously redeemed

The ACB of your securities

1a. How do I calculate the ACB of my securities? T he ACB is easier to calculate on a total investment basis rather than on a per unit/share basis. To obtain the ACB per unit/share, divide the total ACB by the number of units/shares held. F or a partial redemption, the capital gain or loss is determined by multiplying the ACB per unit/share by the number of units/shares redeemed.

MACKENZIE TAX & ESTATE PLANNING

20

MUTUAL FUND TAX GUIDE 2014

CHAPTER 4

ACB Example (refer to the next page for calculations) Transaction 1 – Purchase During 2013 an investor purchased $5,000 of Fund A, a Mutual Fund Trust at $14.00 per unit for a total of 357.143 units ($5,000 divided by $14.00). Transaction 2 – Purchase Later during 2013, the investor made a second purchase of $5,000 of Fund A at $15.00 per unit for a total of 333.333 units ($5,000 divided by $15.00). Transaction 3 – Distribution On December 31, 2013, the fund paid a distribution of $0.30 per unit. This investor received a distribution of $207.14 (690.476 units x $0.30) which was reinvested in additional units at

$16.6701 per unit, the price at year end. 12.426 additional units were purchased ($207.14 divided by $16.6701).

The distribution also included a return of capital of $0.0073 per unit, or $5.04 in total (690.476 units x $0.0073). After the distribution, the ACB becomes $14.5142 per unit ($10,202.10 divided by 702.902 units). Transaction 4 – Redemption  n June 30, 2014, the investor redeemed 300 units at $18 per unit for gross redemption proceeds of $5,400.00. The investor O paid a 5.5% redemption fee at that time and therefore received net proceeds of $5,103 in cash (5.5% x $5,400 = $297 redemption fee). The ACB of the 300 units redeemed is $4,354.26 (300 multiplied by the ACB per unit of $14.5142). The total Adjusted Cost Base of the remaining units is reduced by $4,354.26. The new total ACB is $5,847.84, the remaining number of units is 402.902 and the ACB per unit remains at $14.5142. The ACB per unit immediately after a partial redemption is the same as the ACB per unit immediately before the redemption. For illustrative purposes only.

MACKENZIE TAX & ESTATE PLANNING

MUTUAL FUND TAX GUIDE 2014

21

ACB Calculations The ACB of your units, on a total investment basis is equal to the following:

The ACB would be calculated as follows:

Transactions 1 & 2

Total Cost

Units

ACB Per Unit

The total of all amounts paid to purchase your units, including any commissions you paid at the time of purchase:

$5,000.00

357.143

14.0000

$5,000.00

333.333

$10,000.00

690.476

$207.14

12.426

14.4828

Transaction 3 Plus: The amount of any reinvested distributions Less: The return of capital component of distributions (regardless of whether or not the distribution was paid in cash or reinvested in additional units)

($5.04)

$10,202.10

702.902

14.5142

($4,354.26)

(300.00)

14.5142

$5,847.84

402.902

14.5142

Transaction 4 Less: The Adjusted Cost Base of any units redeemed

Adjusted Cost Base of units remaining For illustrative purposes only.

MACKENZIE TAX & ESTATE PLANNING

22

MUTUAL FUND TAX GUIDE 2014

CHAPTER 4

1b. I know the ACB of my investment. How do I calculate the capital gain or loss? The capital gain or loss from the example shown would then be calculated as follows: Activity Proceeds of disposition

$5,400.00

(the gross amount of the redemption which is equal to the net asset value per security “the price” on the date of the redemption multiplied by the number of units redeemed i.e., $18 per unit x 300 units): Less The Adjusted Cost Base of the securities (see Adjusted Cost Base calculation in previous chart)

($4,354.26)

Less: Any expenses incurred on the redemption of the securities (such as redemption fees and administrative costs i.e., 5.5% redemption fee – $5,400 x 5.5%)

Capital gain (loss) For illustrative purposes only.

MACKENZIE TAX & ESTATE PLANNING

($297.00)

$748.74

MUTUAL FUND TAX GUIDE 2014

2. Can I use the adjusted cost base (ACB) shown on my Mackenzie statement? You should always use your own investment records to calculate the adjusted cost base and the capital gain or loss. Mackenzie is required to report your sale or switch from one fund to another mutual fund except a switch from one Mackenzie corporate class fund to another, to Canada Revenue Agency. Please refer to your statement, which contains necessary information for completing your income tax return for reporting capital gains and losses. You will not receive any other form (T5008) (RL18 for Québec), which provides information for capital gain and loss calculations. While every effort is made to ensure the accuracy of the ACB of your securities, our record keeping cannot include any adjustments that are specific to your individual circumstances, such as a deemed disposition. (Please see section 5 on this page for a description of deemed dispositions.) Also, the ACB shown on your statement may not include all adjustments for the return of capital component of distributions. For tax purposes, you are required to maintain records to support the amounts reported on your tax returns. An ACB worksheet similar to that shown on the previous page will assist you in your record keeping.

3. What do I do with capital losses? Capital losses can only be used to reduce or offset capital gains realized in the current tax year, the previous three taxation years, or they can be carried forward indefinitely to reduce future capital gains.

23

To carry back a net capital loss, you must file Form T1A – “Request for loss carryback” and file it with the tax return for the year in which the loss arises. You can obtain copies of the form from your local tax office or get it online.

4. How do I report redemptions on my U.S.-dollar account? F or Canadian income tax purposes, all transactions must be reported in Canadian dollars. You will have to translate the U.S.-dollar proceeds to Canadian dollars. The ACB of your investment needs to be converted from U.S. dollars to Canadian dollars using the exchange rate in effect at the time of each transaction for purchases, reinvested distributions, and the return of capital component of distributions.

5. What is a deemed disposition? T ransactions other than a redemption may give rise to a “deemed disposition.” T he types of transactions that can give rise to a deemed disposition include, but are not limited to, the following: • Death of an investor in most circumstances • T he transfer of your securities from a nonregistered investment account to an RRSP (any deemed capital losses arising on the transfer are deemed to be nil) • I f you “gift” the securities to someone other than your spouse (if you gift property to your spouse, the “attribution” rules may apply) • Ceasing to be a Canadian resident

MACKENZIE TAX & ESTATE PLANNING

24

MUTUAL FUND TAX GUIDE 2014

CHAPTER 4

T he proceeds of a deemed disposition are equal to the fair market value of the investment at the time of the transaction. Generally, the difference between the deemed proceeds of disposition and the adjusted cost base will result in a capital gain or loss. Please consult Canada Revenue Agency’s “Capital Gains Guide” or your financial or tax advisor for more information.

6. Tax Consequences of a Fund Merger Mackenzie may initiate a fund merger where the interest of investors in certain funds are best served by merging the fund into another. Fund mergers can only proceed with investor approval or by Independent Review Committee approval combined with advance investor notice. Approval from Canadian securities regulators may also be required.



Trust-to-Class Merger Units of the discontinued mutual fund trust are exchanged for shares of the continuing Mackenzie corporate class fund. This merger results in a disposition of the investor’s units for proceeds equal to the fair market value of the shares received on the merger.

MACKENZIE TAX & ESTATE PLANNING



Non-Registered Investors If a capital gain is realized on the merger, an investor has two options:

1. T o report the Capital Gain: An investor will report the disposition of the mutual fund trust units on Schedule 3 of their income tax return for the taxation year that includes the date of the merger. 2.  To defer the Capital Gain: An investor must complete a Tax Election Form and Power of Attorney, including signatures, and send it to Mackenzie before the relevant due date. You can obtain this tax package by calling Mackenzie Client Relations at 416-922-3217 (or 1-800-387-0614). This will authorize Mackenzie to complete the necessary tax election forms and file them on the investor’s behalf with CRA (and Revenu Québec, if applicable) to defer the capital gain on the investor’s units until the investor disposes of their shares of the Mackenzie corporate class fund. The investor, for this option, is not required to report the merger transaction on their income tax return.

MUTUAL FUND TAX GUIDE 2014

25

If a capital loss is realized on the merger, this amount should be reported on Schedule 3 of the investor’s income tax return to offset any capital gains that an investor realized during the year. Furthermore, any unused portion of the investor’s capital losses can be used to reduce capital gains realized in the previous three taxation years or they can be carried forward indefinitely to reduce future capital gains.





Trust-to-Trust Taxable Mergers Units of the discontinued mutual fund trust are exchanged for units of the continuing Mackenzie Fund. This merger results in a disposition of the investor’s units for proceeds equal to the fair market value of the units received on the merger. More income tax information on mergers can be found in the information circulars sent to investors or on our website at mackenzieinvestments.com.

Registered Investors There is no tax impact to registered investors.

Trust-to-Trust Merger or Class-to-Class Merger – Tax-Deferred Mergers Units of the discontinued mutual fund trust/class are exchanged for units of the continuing mutual fund trust/class. This transaction for Canadian income tax purposes is not a disposition and thus is not taxable to the investor. The cost of the new units of the continuing fund is equal to the adjusted cost base of the units that were originally held.

Funds Mergers for year 2014 Date

Terminating Fund Name

Continuing Fund Name

Type of Merger

June 25, 2014

Focused Canadian Equity Fund (CGOV)

Focused Canadian Equity Class (CGOV)

Turst to Corp.

June 25, 2014

International Equity Fund (Putnam)

International Equity Class (Putnam)

Turst to Corp.

June 25, 2014

Global Equity Fund (Setanta)

Global Equity Class (Setanta)

Turst to Corp.

Source: Mackenzie Investments

MACKENZIE TAX & ESTATE PLANNING

26

MUTUAL FUND TAX GUIDE 2014

CHAPTER 5

Mackenzie tax-advantaged products and strategies

Mackenzie Corporate Class Funds

Mackenzie Series T (and T-type)

Mackenzie’s Series T (and T-type) funds provide investors with a tax-efficient, monthly cash flow from a selection of our leading corporate class funds. Series T (and T-type) funds are an alternative to a systematic withdrawal plan, where investors redeem their investments on a regular basis, drawing down their balance and pay tax immediately. • Offers high, stable monthly cash flow • 5%, 6%, 8% annualized distribution options • Tax-deferred monthly income from corporate class funds • Growth potential through mutual funds

Being tax-efficient is important when investing outside of registered plans such as RRSPs, RESPs and TFSAs. Investors can build wealth faster by minimizing and deferring tax. Mackenzie’s corporate class funds are designed to minimize and defer tax by providing investors with three key benefits: 1. Tax-efficient growth If you invest in GICs, bonds, or dividend-paying stocks, you’ll pay tax every year for as long as you hold the investment. But if you invest in Mackenzie’s corporate class funds, you may not pay tax until you redeem your investment. The less tax you have to pay along the way, the faster your investment will grow.



Mackenzie's Symmetry Portfolio Classes address an investor's specific risk tolerance, ranging from low, with Symmetry Conservative Income Portfolio Class, to higher with Symmetry Equity Class. As your financial plan unfolds, you may want to change to another Symmetry Portfolio Class.

2. Tax-efficient income If the income you draw from your investments comes from interest, dividends or from capital gains on investments that you sell, then some of it will be taxed away. By comparison, many of Mackenzie’s corporate class funds provide monthly income that is completely tax-deferred. This means you can take smaller before-tax payments from these investments and receive the same after-tax income.

3. Tax-efficient rebalancing As your financial plan unfolds, or as your financial goals change, you’ll need to rebalance your investment portfolio. Rebalancing a portfolio can lead to the realization of capital gains and an unwelcome tax bill. With Mackenzie’s corporate class funds, any capital gains resulting from a rebalancing are deferred until you redeem your investment.

MACKENZIE TAX & ESTATE PLANNING

Tax-efficient Symmetry Portfolio Classes

And because each of the Symmetry Portfolio Classes is a corporate class fund, you can move between portfolios without triggering a capital gains tax until you redeem your investment.



MUTUAL FUND TAX GUIDE 2014



Tax-Free Savings Account Every Canadian 18 and older can save up to $5,500 (2015) every year in a TFSA, and all investment income (including interest, dividends, and capital gains) earned in a TFSA grows tax-free. • Withdraw funds at any time, for any purpose, tax-free. • Money can be used for any purpose, from emergencies to home renovations or starting a new business. • TFSA savings room is never lost. If you withdraw $7,000 from your TFSA, you can re-contribute this amount in a future year without requiring additional contribution room.



Registered Disability Savings Plan (RDSP)

27



The Mackenzie Charitable Giving Fund The Mackenzie Charitable Giving Fund is a donoradvised giving program that has a strategic and focused approach to giving. It is a simple and convenient solution that combines immediate tax benefits to the donors, and supports donors who are looking for a long-term approach to giving. Donor advised charitable funds have been available for decades in North America, typically in association with community and public foundations. A charitable fund established in the donor’s name has many of the same advantages as a private foundation, without all of the administration. Mackenzie Investments offers a donor-advised fund through its registered charity, the Strategic Charitable Giving Fund.

The RDSP is a tax-deferred savings vehicle introduced by the Government of Canada to help parents and others save for the long-term financial security of a person with a severe and prolonged disability. To assist in saving, the Federal Government offers the Canada Disability Savings Grant (CDSG) and Canada Disability Savings Bond (CDSB) to qualifying participants until the beneficiary of the plan reaches age 49. Contributions can be made by anyone, to a maximum lifetime contribution of $200,000 per individual.

MACKENZIE TAX & ESTATE PLANNING

28

MUTUAL FUND TAX GUIDE 2014

CHAPTER 6

Who do I contact if I have questions?

•  Your financial or tax advisor for answers to questions regarding your personal tax situation. • Your local taxation office to obtain tax forms and for questions regarding your personal tax situation. (For the telephone number, please refer to your personal tax return of last year or the government section of your local telephone book). Tax forms can also be obtained from Canada Revenue Agency’s website cra-arc.gc.ca and Revenu Québec’s website revenu.gouv.qc.ca. • Call Mackenzie Investments Client Relations at 1-800-387-0614 (or in the Toronto area at 416-922-3217) for questions regarding your tax receipts.

MACKENZIE TAX & ESTATE PLANNING

MUTUAL FUND TAX GUIDE 2014

29

Appendix: The Forms Quick Facts For Investors Important Dates RRSP contribution deadline for 2014 is March 2, 2015 Tax filing deadline is April 30, 2015

RRSP contribution limits 2014

18% of earned income to a maximum of...

$23,820

2015

18% of earned income to a maximum of...

$24,930

2016

18% of earned income to a maximum of...

$25,370

Source: Canada Revenue Agency

2014 top marginal tax rates (Federal and Provincial combined) Interest/foreign dividends

Capital gains

Ineligible Canadian dividends

Eligible Canadian dividends

Alberta

39.0%

19.5%

29.4%

19.3%

British Columbia

45.8%

22.9%

38.0%

28.7%

Manitoba

46.4%

23.2%

40.8%

32.3%

New Brunswick

46.8%

23.4%

36.0%

27.4%

Newfoundland and Labrador

42.3%

21.2%

31.0%

22.5%

Northwest Territories

43.1%

21.5%

30.7%

22.8%

Nova Scotia

50.0%

25.0%

39.1%

36.1%

Nunavut

40.5%

20.3%

31.2%

27.6%

Ontario

49.5%

24.8%

40.1%

33.8%

Prince Edward Island

47.4%

23.7%

38.7%

28.7%

Quebec

50.0%

25.0%

39.8%

35.2%

Saskatchewan

44.0%

22.0%

35.3%

24.8%

Yukon

42.4%

21.2%

32.0%

15.9%

Source: Canada Revenue Agency

MACKENZIE TAX & ESTATE PLANNING

30

MUTUAL FUND TAX GUIDE 2014

APPENDIX: THE FORMS

2014 Federal income tax rates Up to $43,953

15.0%

$43,953 to $87,907

22.0%

$87,907 to $136,270

26.0%

Over $136,270

29.0%

Source: Canada Revenue Agency

Withholding tax rates for RRSP/RRIF withdrawals 2014 Québec

All other provinces/territories

Up to $5,000

21.00%

10.00%

$5,001 – $15,000

26.00%

20.00%

Over $15,000

31.00%

30.00%

Source: Canada Revenue Agency

RRIF minimum withdrawals Age

Withdrawal

Age

Withdrawal

Age

Withdrawal

65

4.00%

77

8.15%



89

12.71%

66

4.17%

78

8.33%

90

13.62%

67

4.35%

79

8.53%

91

14.73%

68

4.55%

80

8.75%

92

16.12%

69

4.76%

81

8.99%

93

17.92%

70

5.00%

82

9.27%

94

20.00%

71

7.38%

83

9.58%

95

20.00%

72

7.48%

84

9.93%

96

20.00%

73

7.59%

85

10.33%

97

20.00%

74

7.71%

86

10.79%

98

20.00%

75

7.85%

87

11.33%

99

20.00%

76

7.99%

88

11.96%

100

20.00%

Source: Canada Revenue Agency MACKENZIE TAX & ESTATE PLANNING

MUTUAL FUND TAX GUIDE 2014

31

1. Where do I report T3 distributions (RL16 for Québec) on my tax return? The following example shows how and where to report your mutual fund trust distribution on your tax return. Suppose you receive a total of $1,000 in distributions from two funds as follows: Fund A

Fund B

Capital gains

$21.21



$21.21

Dividend income*

$123.66

$150.28

$273.94

Foreign non-business income (net**)

$13.94



$13.94

Other income

$476.29

$137.04

$613.33

Return of capital

$57.08

$20.50

$77.58

Total







$692.18

Total

$307.82

$1,000.00

For illustrative purposes only. * Eligible taxable dividends are grossed up by 38%. Non-eligible dividends are grossed up by 18%. **This is the gross amount of the foreign non-business income earned of $16.36 less foreign withholding tax of $2.42.

MACKENZIE TAX & ESTATE PLANNING

32

MUTUAL FUND TAX GUIDE 2014

APPENDIX: THE FORMS

• You will receive a consolidated T3 (RL16 for Québec) tax slip with a detailed breakdown of the distributions by fund on the back of the slip. • On your 2014 income tax return, you would report the amounts shown on the front of the T3 slip as indicated on the following chart.

T3 slip

Box Description

Report on this line of your tax return

Box 21

Capital gains

Line 176 of Schedule 3 – Capital Gains (or Losses)

Box 25

Foreign non-business income

Line 121 and on line 433 of Form T2209

Box 26

Other income

Line 130

Box 34

Foreign non-business income tax paid

Line 431 of Form T2209 and line 405 of Schedule 1

Box 42

Amount resulting in cost base adjustment

$77.58 is not reported on your income tax return

Box 23

Actual amount of dividends other than eligible dividends

Box 32

Taxable amount of dividends other than eligible dividends (This amount is 118% of the amount reported in Box 23)

Box 39

Dividend tax credit for dividends other than eligible dividends (This amount is 11% of the amount reported in Box 32)

Box 49

Actual amount of eligible dividends

Box 50

Taxable amount of eligible dividends (This amount is 138% of the amount reported in Box 49)

Box 51

Dividend tax credit for eligible dividends (This amount is 16.44% of the amount reported in Box 50)

Dividends from Canadian corporations The amounts you have to report as income are the amounts shown in box 32 and box 50. Include the total of these amounts on line 120 of your return. The federal dividend tax credit to which you are entitled is the total of box 39 and box 51. Include this amount on line 425 of Schedule 1

Source: Canada Revenue Agency

If you are missing any required schedule, please contact your local Canada Revenue Agency office to obtain the required information or online at cra-arc.gc.ca

MACKENZIE TAX & ESTATE PLANNING

MUTUAL FUND TAX GUIDE 2014



33

Residents of Québec On your 2014 Québec income tax return, you would report the amounts shown on the front of the Relevé 16 slip as indicated on the following chart.

Relevé 16 slip

Box Description

Report on this line of your tax return

Box A

Gains en capital (Capital gains)

Line 22 in Schedule G

Box F

Revenus étrangers non tirés d’une entreprise (Foreign non-business income)

Line 130

Box G

Autres revenus (Other income)

Line 130

Box C1

Montant réel des dividendes déterminés (Actual amount of eligible dividends)

Box C2

Montant réel des dividendes ordinaires (Actual amount of ordinary dividends)

Box I

Montant imposable des div. déterminés et ordinaires (Taxable amount of eligible and ordinary dividends) This amount is 138% of the amount reported in Box C1 and 118% of the amount reported in Box C2

Line 128

Box J

Crédit d’impôt pour dividendes (Dividend tax credit) Enter the dividend tax credit to which the beneficiary is entitled. You must first calculate the dividend tax credits separately according to the following formulas: • amount in box C1 x 16.422% (for eligible dividends); • amount in box C2 x 10% (for ordinary dividends)

Line 415

Box L

Impôt étranger sur des revenus non tirés d’une entreprise (Foreign income tax on non-business income)

This amount gives entitlement to the foreign tax credit with regard to non-business income. Complete form TP-772-V, Foreign Tax Credit.

Box M

Rajust. du prix de base d’une participation (Cost base adjustment of capital interest)

$77.58 is not reported on your income tax return

Dividends from Canadian corporations Carry the total of the amounts entered in boxes C1 and C2 to lines 166 and 167 of your return

Source: Canada Revenue Agency

If you are missing any required schedule, please contact your local Ministère du Revenu du Québec to obtain the required information or online at revenu.gouv.qc.ca

MACKENZIE TAX & ESTATE PLANNING

34

MUTUAL FUND TAX GUIDE 2014

APPENDIX: THE FORMS

2. Where do I report T5 distributions (RL3 for Québec) on my tax return? You will receive a consolidated T5 (RL3 for Québec) tax slip with a detailed breakdown of the distribution on the back of the slip. Suppose you receive $750 in distributions from one fund as follows: Dividend income* Capital gains

$500 $250

Total

$750

For illustrative purposes only. * Eligible taxable dividends are grossed up by 41%. Mutual funds pay eligible dividends.

On your 2014 income tax return, you would report the amounts shown on the front of the T5 slip as indicated on the following chart.

T5 slip

Box Description

Report on this line of your tax return

Box 10

Actual amount of dividends other than eligible dividends

Box 11

Taxable amount of dividends other than eligible dividends (This amount is 118% of the amount reported in Box 10)

Box 12

Dividend tax credit for dividends other than eligible dividends (This amount is 11% of the amount reported in Box 11)

Dividends from Canadian corporations other than eligible dividends – The amount that is reported as income is the amount shown in Box 11. The dividend tax credit to which an individual is entitled is shown in Box 12. For more information, see lines 120 and 425 in your income tax return.

Box 18

Capital gains dividends

Box 24

Actual amount of eligible dividends

Box 25

Taxable amount of eligible dividends (This amount is 141% of the amount reported in Box 24)

Box 26

Dividend tax credit for eligible dividends (This amount is 16.44% of the amount reported in Box 25)

Source: Canada Revenue Agency

MACKENZIE TAX & ESTATE PLANNING

Line 174 of Schedule 3, Capital Gains (or Losses) Eligible dividends from Canadian corporations – The amount that is reported as income is the amount shown in Box 25. The dividend tax credit to which an individual is entitled is shown in Box 26. For more information, see lines 120 and 425 in your income tax return.

35

MUTUAL FUND TAX GUIDE 2014

On your 2014 Québec income tax return, you would report the amounts shown on the front of the Relevé 3 slip as indicated on the following chart.

Rélevé 3 slip

Box Description

Report on this line of your tax return

Box A1

Montant réel des div. determinés (Actual amount of eligible dividends)

Line 166

Box A2

Montant réel des div. ordinaires (Actual amount of ordinary dividends)

Line 167

Box B

Montant imposable des dividendes (Taxable amount of eligible and ordinary dividendes) This amount is 141% of the amount reported in Box A1 and 125% of the amount reported in Box A2

Line 128

Box C

Crédit d’impôt pour dividendes (Dividend tax credit) This amount is 11.90% of Taxable amount of eligible dividends and 7.05% of Taxable amount of ordinary dividends

Line 415

Box I

Dividendes sur les gains en capital (Capital gains dividends)

Enter this amount in Schedule G

Source: Canada Revenue Agency

3. Where do I report RRSP contributions on my tax return? Suppose you contributed $2,000 to your RRSP on November 1, 2014. You will receive a contribution receipt. On your 2014 income tax return, report the $2,000 contribution on line 2 of Schedule 7 “March 1, 2014 to December 31, 2014” or line 3 for “January 1, 2015 to March 2, 2015”. (On your 2014 Québec tax return, report the $2,000 contribution on line 214).

4. Where do I report withdrawals from my RRSP on my tax return? Suppose you withdrew $5,000 from your RRSP in 2014 and tax of $500 was withheld. You would receive a T4RSP slip. On your 2014 income tax return, report the amount shown in Box 22 “Withdrawal and commutation payments” on Line 129 on your income tax return. Report the amount of tax withheld shown in Box 30 “Income tax deducted” of Line 437 on your income tax return.

MACKENZIE TAX & ESTATE PLANNING

36

MUTUAL FUND TAX GUIDE 2014

APPENDIX: THE FORMS



Residents of Québec S uppose you withdrew $5,000 from your RRSP in 2014 and tax of $1,050 was withheld. You will receive a T4RSP slip and a Relevé 2 slip. E ach slip provides the same information except that (for the federal tax of $250) the T4RSP slip shows the amount of federal tax that was withheld ($250) and remitted while the Relevé 2 slip shows the Québec tax withheld ($800) and remitted.  n your 2014 Québec income tax return, report the $5,000 shown in Box C O “Autres paiements” on Line 154. Report the $800 of Québec tax withheld shown in Box J “Impôt du Québec retenu à la source” on Line 451 of your Québec tax return.

5. Where do I report withdrawals from my RRIF on my tax return? S uppose the minimum amount you were required to withdraw in 2014 was $23,550 and you withdrew $30,000 and tax of $645 was withheld. You will receive a T4RIF. I f you were 65 or older on December 31, 2014, you would report the $30,000 shown in Box 16 “Taxable amounts” on Line 115 “Other pensions or superannuation” on your income tax return. Otherwise, you would report the amount on Line 130 “Other income.” In either case, you would report the $645 of tax withheld shown in Box 28 “Income tax deducted” on Line 437 on your income tax return.



Residents of Québec S uppose the minimum amount you were required to withdraw in 2014 was $23,550 and you withdrew $30,000 and tax of $1,935 was withheld. You would receive T4RIF slip and a Relevé 2 slip. E ach slip provides the same information except that the T4RIF slip shows the amount of federal tax that was withheld ($645) and remitted while the Relevé 2 slip shows the Québec tax that was withheld ($1,032) and remitted. On your 2014 Québec income tax return, report the $5,000 shown in Box C “Autres paiements” on Line 154. Report the $800 of Québec tax withheld shown in Box J “Impôt du Québec retenu à la source” on Line 451 of your Québec tax return.

MACKENZIE TAX & ESTATE PLANNING

MUTUAL FUND TAX GUIDE 2014

37

6. Where do I report my capital gains and losses on my tax return? C apital gains or losses are reported on Schedule 3 – “Capital Gains (or Losses) in 2014” under “Publicly traded shares, mutual fund units, deferral of eligible small business corporation shares and other shares.” C apital gains or losses are reported on Revenu Québec Schedule G in Part A titled “Capital Property” under the section titled “Shares and units in a mutual fund trust.” Using the following example, the investor would report the capital gain as follows: No. of shares

300

Name of corporation



Year of acquisition

2006

Proceeds of disposition

$5,400.00

Adjusted Cost Base

$4,354.26

Outlays and expenses (from dispositions)

$297.00

Capital Gain (or loss)

$748.74

Capital Gain inclusion rate 2014

50%

Taxable Capital Gain

$374.37

Fund A

For illustrative purposes only.

7. Where do I report my PFIC income? If you are a U.S. person or green card holder, you are required to report your worldwide income in both Canada and the United States. Your mutual fund income must be reported under U.S. “Passive Foreign Investment Corporation” rules (“PFIC”). This information will differ from the information you receive on a Canadian T3, T5, NR4, Relevé 3 or Relevé 16. Ask your advisor for an “Annual Information Statement” from the fund company. The information recorded on your AIS will be recorded on U.S. Schedule Form 8621 for each of your mutual fund investments and must be included with your U.S. income tax return. This information is not required for your Canadian income tax filing. MACKENZIE TAX & ESTATE PLANNING

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments and the use of an asset allocation service. Please read the prospectus of the mutual funds in which investment may be made under the asset allocation service before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. For Series T (and T-type), please note that a return of capital reduces an investor’s adjusted cost base (ACB). Capital gains taxes are deferred until units are sold or until the ACB goes below zero. Investors should not confuse the cash flow distribution with a fund’s rate of return or yield. While investors in Series T (and T-type) will be able to defer some personal capital gains, they still must pay tax on capital gains distributions that arise from the sale of individual fund holdings by fund managers, and on interest and dividend distributions. If required, Series T (and T-type) will also pay a distribution that must be reinvested in December, consisting of income and capital gains. Mackenzie developed the Mackenzie Charitable Giving Fund program with the Strategic Charitable Giving Foundation, a registered Canadian charity. Donations under the program are irrevocable and vest with the Foundation. The information is general in nature and is not intended to be professional tax advice. Each donor’s situation is unique and advice should be received from a financial advisor. Please read the program guide for complete program details, including fees and expenses, before donating. The payment of distributions is not guaranteed and may fluctuate. The payment of distributions should not be confused with a fund’s performance, rate of return or yield. If distributions paid by the fund are greater than the performance of the fund, your original investment will shrink. Distributions paid as a result of capital gains realized by a fund, and income and dividends earned by a fund are taxable in your hands in the year they are paid. Your adjusted cost base will be reduced by the amount of any returns of capital. If your adjusted cost base goes below zero, you will have to pay capital gains tax on the amount below zero.

MACKENZIE TAX & ESTATE PLANNING

Each Capital Class fund is a class of shares of Mackenzie Financial Capital Corporation (“Capitalcorp”) which is a mutual fund corporation. Unlike mutual fund trusts that calculate their income tax as individual entities, a mutual fund corporation must compute its income for tax purposes as a single entity rather than on a fund-specific basis. Therefore, all income, including capital gains, generated by the Capital Class funds is aggregated for tax purposes. The aggregate capital losses are used to offset the aggregate capital gains and, to the extent that results in net capital gains for Capitalcorp, capital gains dividends are paid to investors as described in the simplified prospectuses and annual information forms of the Capital Class funds. Increased capital gains increase the likelihood that capital gains dividends will have to be paid. While switching among Capital Class funds results in no immediate tax consequences to an investor, switching activity may trigger capital gains within Capitalcorp, thus increasing the possibility of a capital gains dividend being declared. The non-payment of dividends in the past does not mean that no dividends will be paid in the future. Any series of a corporate class fund may pay ordinary dividends and/ or capital gains dividends at any time in a manner that Capitalcorp’s board of directors, in consultation with management, determines is fair and reasonable. Unlike mutual funds, the returns and principal of GICs are guaranteed. The content of this guide (including facts, views, opinions, recommendations, descriptions of or references to, products or securities) is not to be used or construed as investment advice, as an offer to sell or the solicitation of an offer to buy, or an endorsement, recommendation or sponsorship of any entity or security cited. Although we endeavour to ensure its accuracy and completeness, we assume no responsibility for any reliance upon it. This should not be construed to be legal or tax advice, as each client’s situation is different. Please consult your own legal and tax advisor.

LONGEVITY | INCOME | VOLATILITY | ESTATE | INFLATION | TAXES

INCOME New portfolio solutions to help overcome today’s retirement challenges Retirement today poses three significant challenges: generating income in a low yield environment, managing persistent volatility and growing capital to reduce longevity risk. Two new portfolios – Mackenzie Monthly Income Conservative Portfolio and Mackenzie Monthly Income Balanced Portfolio – are built to overcome all three challenges and help deliver the retirement you want.

Mackenzie Retirement Portfolios

NEW

FUNDS

Learn more at

talkliveit.com

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. MACKENZIE TAX & ESTATE PLANNING

GEN E RA L I NQ U I RI E S

For all of your general inquiries and account information please call: ENGLISH BILINGUAL ASIAN INVESTOR SERVICES TTY FAX E-MAIL WEB

1-800-387-0614 1-800-387-0615 1-888-465-1668 1-855-325-7030 416-922-4186 1-866-766-6623 416-922-5660 [email protected] mackenzieinvestments.com

00867

Find fund and account information online through Mackenzie Investments’ secure InvestorAccess. Visit mackenzieinvestments.com for more information.

MF1856 3/15