The Globe and Mail reports in its Saturday edition that there are no taxes on any type of investment income -- including dividends, interest and capital gains -- in a tax-free savings account. The Globe's John Heinzl writes that in a non-registered account, you would need to subtract any return of capital distributions from your cost base. This would create a larger capital gain (or smaller capital loss) when you ultimately sell the investment. Because there are no capital gains taxes in a TFSA, adjusting your cost base is not necessary and no taxes will come into play when you sell your covered-call ETF. That is the good news. The bad news is that, in general, covered-call ETFs have lagged their plain-vanilla counterparts. Consider the BMO Covered Call Canadian Banks ETF (ZWB), which posted an annualized total return of 13.4 per cent for the five years ended Aug. 31. Sounds pretty good, but it pales next to the BMO Equal Weight Banks Index ETF (ZEB), which does not use covered calls and returned an annualized 18.4 per cent over the same period. What some unitholders do not appreciate, is that the outsized yield comes at a price. In a rising market, covered-call ETFs typically underperform non-covered-call strategies.