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ARTICLE · 22 SEPTEMBER 2008

New Income Trust Conversion Rules

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On July 14, 2008, the Minister of Finance released proposed amendments to the Income Tax Act (Canada) (the ITA) which are intended to permit the conversion of income trusts into corporations (the Proposals).

CanadaTax
Thomas Bauer
Thomas Bauer
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On July 14, 2008, the Minister of Finance released proposed amendments to the Income Tax Act (Canada) ("the ITA") which are intended to permit the "conversion" of income trusts into corporations (the "Proposals"). The following is a brief overview of the proposed new rules. For the most part, the new rules are to apply to transactions that take place after July 14, 2008 and before 2013.

Background

On October 31, 2006, the Minister of Finance caught the investment community by surprise when he announced amendments to the ITA (the "SIFT Rules") directed at certain publicly traded income trusts and partnerships (referred to as "specified investment flow-through" entities, or "SIFTs"). Under the SIFT Rules, SIFTs are subject to tax at equivalent to corporate tax rates on certain types of income. The SIFT Rules generally do not apply to pre-existing income trusts before 2011, provided they do not exceed "normal growth" guidelines issued by the Department of Finance.

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