CRA finds that a day-trading MFT can allocate capital gains to its unitholders

A mutual fund trust which engages in day trading on margin in Canadian securities nonetheless can make the election under s. 39(4) for capital gains treatment, and make a s. 104(21) designations on its distributions so that its unitholders (including, apparently, traders such as investment dealers) will receive capital gains treatment on the distributions.  However, making the election may suggest that the mutual fund trust's expenses do not satisfy the income-producing purpose test in s. 18(1)(a) (although this may not matter in light of specific expense deduction provisions such as s. 20(1)(bb)).

Day trading generally would not be inconsistent with having an undertaking of investing its funds in property as required by s. 132(6).

Neal Armstrong.  Summaries of 24 March 2015 T.I. 2012-0470991E5 F under s. 39(5)(a), s. 132(6) and s. 9 – capital gain v. profit – shares.