Relieving Amendments To Trust Loss Restriction Rules For Investment Funds

On October 20, 2014, the government tabled in the House of Commons a Notice of Ways and Means Motion containing proposed amendments to the Income Tax Act (Canada) ("Tax Act") providing relief from the loss restriction event rules for certain investment funds that are mutual fund trusts under the Tax Act, or that would be mutual fund trusts if they had 150 unitholders.

Generally, the loss restriction event rules result in a deemed taxation year-end and restrictions on the carry-forward of losses for a trust if a person becomes a majority-interest beneficiary, or a group of persons becomes a majority-interest group of beneficiaries. In the context of investment funds structured as trusts, the rules could have applied in several circumstances including: fund start-ups and wind-downs; fund-on-fund structures; fund mergers; day-to-day operations particularly where the units of a fund are not widely held.