What happens to capital gains in segregated funds?

In the context of segregated funds, the treatment of capital gains is indeed significant to investors. When capital gains are accrued within the segregated fund, they can be transferred to registered accounts such as RRSPs (Registered Retirement Savings Plans) or TFSA (Tax-Free Savings Accounts) without triggering immediate taxes. This allows investors to take advantage of tax deferral on capital gains until funds are withdrawn from the registered account.

This feature is attractive because it provides flexibility and can lead to more effective tax management and planning in the long run. By not having to pay taxes on the gains at the time they are realized within the segregated fund, investors maintain more capital for potential growth in their investments.

Retaining this ability to transfer gains without immediate tax consequences enhances the appeal of segregated funds among investors who wish to maximize their investment growth while navigating tax implications effectively.