I didn't but with a little help from my friend Google I do nowIdOp wrote:Do you have a link to the Golumbek article?
Identical Properties?
While Jamie seems more optimistic than I recalled, that a switch to another index fund that tracks the same index is not "identical", his caveat that this is uncharted waters still holds. See e.g. Tax-Loss Selling Index ETFs: How to Do It RightJamie Golumbek wrote:It is difficult to accept that the units of two or more mutual funds are identical properties merely because they attempt to mimic a particular index in order to achieve a similar investment objective of the return of the underlying index. A quick review of a dozen TSE 300 index funds shows that each holds different weightings of the underlying securities. For example, in one index fund the top holding was Royal Bank of Canada shares at 6.32 percent (at September 28, 2001) of the portfolio, while in another index fund the top holding of Royal Bank shares was 5.1 percent. It will be no surprise to the CCRA if it receives queries from anxious taxpayers who feel that the position set out in the TI should be revisited.
I still maintain that CRA is wrong, and worse, their example of two TSX 300 index funds flies in the face of their own criteria. They seem to be fixated on the index that's being tracked and not on any of the other material differences between two index funds that (try to!) track the same index.Update January 11, 2008 - a representative of CRA phoned and said that the 2001 bulletin mentioned above is the only and latest information on the subject. He also emailed me a copy. Some key excerpts: "... the determination of whether investment instruments are identical properties requires a review of all the facts of each particular situation which would include a review of the legal structure of the investment entity, the composition of its assets, risk factors, rights of investors and any relevant restrictions. ... a TSE 300 Index Fund, for example, would generally not be considered identical to a TSE 60 Index Fund. ... Accordingly, an investment in a TSE 300 index-based mutual fund of a financial institution would, in our view, generally be considered indentical to an investment in a TSE 300 index-based mutual fund of another financial institution."
Added: "the legal structure of the investment entity." Vanguard is a mutual-mutual fund company that's essentially a non-profit whereas BGI is a for-profit enterprise. Vanguard's shareholders are the investors in their funds/ETFs whereas BGI's are not. Therefore Vanguard puts it fund/ETF unitholders' interests first whereas BGI puts its shareholders' interests first. Vanguard's funds are structured such that one can switch from open-end to ETF share class whereas BGI's are not. That's just one of CRA's criteria. I doubt most tax auditors would even understand the details and implications of the above differences. So ISTM it boils down to how persuasive you can be if/when audited and whether you're prepared to continue the argument in tax court.