From a tax efficiency standpoint, which mutual fund should Bob transfer into his RRSP?

Transferring a bond fund into an RRSP (Registered Retirement Savings Plan) is particularly advantageous from a tax efficiency perspective due to the nature of the income generated by bond funds. The primary income from bond funds is usually interest income, which is taxed at the investor's marginal tax rate in a non-registered account. However, when this interest income is earned within an RRSP, it is sheltered from immediate taxation, allowing it to grow tax-deferred until withdrawal.

In contrast, other types of funds, such as dividend funds, may provide income that is eligible for a dividend tax credit in a non-registered account, potentially leading to a more favorable tax treatment compared to interest income. Equity funds primarily generate capital gains, which are only partially taxed when realized. Specialty funds could vary widely in terms of income types but generally do not offer the same degree of tax advantage related to interest income as a bond fund does when placed in an RRSP.

Thus, for maximizing tax efficiency, especially concerning the immediate taxation of interest income, transferring a bond fund to an RRSP is a strategic choice. This allows Bob to minimize his tax liabilities while enhancing his investment growth potential within the tax-sheltered environment of the RRSP.