Canadian Income Trusts

TOP CONTRIBUTORS

Dan Greengold

Background

Canadian Income trusts are the result of allowing a pass through tax structure to Canadian businesses which elect to organize themselves as Income Trusts. The idea behind the pass through structure is the company (trust) passes all of its cash flow through to the trust or shareholders without taxation at the trust level. The trust holders pay tax in their income, but the money is not taxed at the corporate/trust level.

The trusts were initially organized in the energy sector to pass royalty income to trust unit holders with minimum taxation.

Tax Implications

Companies of Interest

Is there any interest in following the Canadian Energy Trusts? Since Halloween of 2006 and the announcement that the Government was going to tax the trusts as regular corporations instead of the current 155 rate; there has been a mix reaction of what to do next. What most did not take into consideration was that the increase would not begin until 2011. If one had jumped in right after the announcement they would now be sitting on a substantial return plus monthly dividends in the 15 to 20% range. There is still a chance that there will be an election in Canada and the power of government will once again shift to the other side or at least the ruling party might lower their projected rate to ensure they retain the power. Either way, we still have until 2011 to gain and receive monthly high dividends.