Hi Elisabeth,

In my non-registered accounts I am holding ETFs that pay a distribution that is made entirely of ROC.  When setting the ETF distributions to reflect 100% ROC I am encountering an issue that there is a cashfow issue.  However, if I move the same distribution from ROC to Dividend, the issue is resolved.  It would appear in this case that perhaps MRA is assuming that I am not receiving a cash distribution, however, I am.  I want to ensure proper taxation is calculated on my distributions.

Will you please advise what is causing this?

The TIME MACHINE treats ROC and dividend distributions the same way so that you do receive both. The difference is in the taxation of those distributions in non-registered accounts.

The TM tracks the ACB for investments starting with the book value you manually entered (or get from Wealthica).  The ACB is reduced by the ROC distributions received, which would not be taxable until the ACB reaches zero, at which point they would become taxable capital gains. Of course, if the distributions are reinvested, this increases the ACB so that it may go back up above zero.  This is a good case for using the feature for setting the TM to use long-term rates in later years.

To understand what is causing your cash-flow problem would require going into the minutia of your runs. Did you save and compare them side-by-side? It is possible that for some years once the ACB has gone to 0, you would be taxed higher for a ROC distribution than an equivalent amount of Eligible dividend since at low-income levels the latter can be taxed at a lower rate than capital gains. Even small differences in amounts can become large with compound growth and time in the TM.

Let me know if you want me to look at your saved scenarios.

I have saved both runs.  The only differences will be found in account "QT RRIF DS" where I have changed the distributions on two of the ETFs from ROC to Dividends.  

Thank you.