Return of Capital

Return of capital (ROC) is the portion of a distribution that is above and beyond the net income (dividend or interest) and net capital gains earned by a fund and represent a portion of an investor’s previously invested capital. ROC distributions are not taxable instead they reduce the adjusted cost base (ACB) of the units held until the ACB goes to zero.  Capital gains tax will be payable when the units of the fund are sold or to some extent when the ACB goes to zero.  Return of capital distributions do not constitute part of a fund’s rate or return or yield.