Unlisted Income Trusts

Until October 31, 2006, income trusts were, by far, the fastest growing segment of Canadian listed securities. On that date, the federal government announced that the ability of existing listed income trusts to deduct distributions made to their unitholders in computing their taxable income would end on December 31, 2010. As a result, there are few, if any, listed income trusts left in Canada, other than real estate investment trusts (REITs) which were exempted from the new rules. However, a new investment vehicle – the unlisted income trust – is beginning to gain popularity as a replacement for the listed income trust.

Unlisted income trusts work exactly the same way as listed income trusts. Through an operating subsidiary, often a limited partnership, the trust can invest in virtually any form of business. Also, like listed income trusts, unlisted income trusts are generally set up to qualify for beneficial tax treatment as a mutual fund trust. The only difference