For each calendar year you will receive a T5 or T3 Income Tax information slip for any income earned and paid from the mutual fund. The income taxed in your hands retains its original character for tax purposes and is taxed accordingly.
In addition to the T5 or T3 taxable income, should the shares be sold in a calendar year then you may incur capital gains or losses, which would need to be recorded and taxed accordingly.
In addition, you could be taxed on income you never received. Taxation is based on who owns the mutual fund units on a given date at the end of the income period, typically calendar year end.
Example: If you buy mutual fund units one day before the end date, you are assessed for all income earned in that period, even though you did not benefit from that income.
Remember: Be sure to check out when the distribution date is of the fund you are buying.
Capital losses created within the mutual fund itself must be carried forward by the fund and are not allocated to unit holders. Acquisition fees are included in the adjusted cost base.