Outlook For The Income Trust Sector

Originally published in Employee Benefit News Canada, Jan./Feb. 2007.

On Halloween night, Jim Flaherty, the federal minister of finance, stunned investors by announcing proposals to significantly change the income tax treatment of most publicly traded trusts and limited partnerships. The proposals will be effective for the 2007 taxation year for trusts that are listed after Oct. 31, 2006, but will be delayed until the 2011 taxation year for pre-existing trusts. Draft legislation to effect the proposals was released at the end of December 2006. For investment managers to assess the future of the sector, they need to understand which types of entities are affected and the options available to those entities.