(February 7 – 16:00 ET) – The federal Finance Ministry has tweaked the rules governing labour-sponsored investment funds to allow individuals to sell old units and acquire new ones within the first 60 days of the year – without surrendering the tax credit.
The change is designed to deal with the hold period restrictions that come with LSIF tax credits. Units issued before March 6, 1996 must be held for five years. Units issued since then must be held for eight years. Otherwise the associated tax credit is lost. Under the proposed change, units redeemed in February or on March 1st will be treated as having been redeemed 30 days later.
For example, if your units were issued on March 1, 1995 and redeemed on February 29, 2000, you wouldn’t have to give up the tax credit. This way a taxpayer can claim the tax credit for the new shares without giving up the old tax credit.
Finance says it will also make any necessary rule changes to ensure that a LSIF’s registration cannot be revoked by redeeming the shares this way. It is proposed that this change should apply from the inception of the rules governing the recovery of the LSVCC tax credit.
-IE Staff