Q: Hi...further to my recent questions regarding Eric's NRGI ETF, I just want to make sure I understand the tax treatment of this ETF before I purchase it.
According to his website, NRGI is 82% USA and 18% Cdn as of Aug 31/22.
Please correct me if I am wrong:
1. Any share price appreciation will obviously be taxed as Canadian capital gains.
2. Any dividends from a Canadian company will be taxed as Canadian dividends and received the dividend tax credit.
3. Any dividends from a USA company will be taxed as interest income.
4. Any "covered call" dividends from either a USA or Canadian company will be treated as Canadian capital gains (not 100% sure on this one).
So, ignore the share price appreciation aspect for now. Eric has stated the target distribution is 7%.
My conclusion is that the distribution could then be split into roughly 5% dividend (82% of which would be taxed as interest income) and 2% covered call (taxed as capital gain).
Q#1 = So, is it safe to say that the ETF would be taxed with roughly 4% being interest income tax, a negligible amount of Canadian dividends, and the vast majority being taxed as capital gains (share price change plus CC-dividend impact)?
Q#2 = So, I believe it still makes sense to buy this in a Cash Account...do you agree?
Thanks for helping me understand this one....Steve
According to his website, NRGI is 82% USA and 18% Cdn as of Aug 31/22.
Please correct me if I am wrong:
1. Any share price appreciation will obviously be taxed as Canadian capital gains.
2. Any dividends from a Canadian company will be taxed as Canadian dividends and received the dividend tax credit.
3. Any dividends from a USA company will be taxed as interest income.
4. Any "covered call" dividends from either a USA or Canadian company will be treated as Canadian capital gains (not 100% sure on this one).
So, ignore the share price appreciation aspect for now. Eric has stated the target distribution is 7%.
My conclusion is that the distribution could then be split into roughly 5% dividend (82% of which would be taxed as interest income) and 2% covered call (taxed as capital gain).
Q#1 = So, is it safe to say that the ETF would be taxed with roughly 4% being interest income tax, a negligible amount of Canadian dividends, and the vast majority being taxed as capital gains (share price change plus CC-dividend impact)?
Q#2 = So, I believe it still makes sense to buy this in a Cash Account...do you agree?
Thanks for helping me understand this one....Steve