The "conversion to capital gain" wheeze is pretty nifty, if it works for you. I just thought I'd mention that SGOV by contrast simply pays out the coupons.


Yes, that's correct.

The HSUV ETF increases in value as it accumulates interest, in the same way a company might increase in value if it just held interest-generating assets, but at least the tax man would hit the company with corporate tax. I suspect that if Revenue Canada ever cared to claim that a gain represented income and not capital gains, they would have logic on their side, and might prevail, but I think this is unlikely to ever happen. For Revenue Canada, HSUV is just another ticker, and given the small amounts in play, they are unlikely to care enough to actually dig in to see why that ticker went from $110 to $115 in a year.

The fund itself uses guarded language: "HSUV.U is not expected to make taxable distributions, which could enhance the after-tax performance of HSUV.U versus other cash savings vehicles." The key word being 'could'...