For a high-income Canadian investor, which type of income is generally taxed most favourably compared to interest income?

Question: For a high-income Canadian investor, which type of income is generally taxed most favourably compared to interest income?

Answer options:

• Foreign dividend income.
• Eligible Canadian dividend income. ✅ Realized capital gains.
• Interest income from GICs.

Correct answer: Realized capital gains.

Explanation: In Canada, capital gains are generally taxed more favourably than interest income, as only 50% of a capital gain is included in taxable income. Eligible Canadian dividends also receive preferential tax treatment through the dividend tax credit, which can sometimes make them taxed more favourably than interest income, but typically capital gains are 'best'.