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Demystifying Income Trusts

  • Rock Lefebvre


    (Certified General Accountants Association of Canada)

  • Amar Goomar


    (Certified General Accountants Association of Canada)

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    Income trusts are one of the major investment vehicles for Canadians with an estimated 2004 market capitalization of $118.7 billion. This study aims to outline the nature of income trusts and the standing of trusts in the current financial environment. To that end, the study offers an overview of income trusts, discusses tax implications in a corporate, income trust and mutual fund structures, and reflects on recently proposed increase the dividend tax credit. The analysis shows that two most unique features of income trusts are their tax treatment and the high yield cash distributions. The recently proposed increase of the dividend tax credit may reduce the tax on dividends for a top earner and bring it in line with the current effective capital gains tax. However, these changes may be unevenly distributed across provinces and may distort investment decisions as different parts of the country react differently to different types of investment opportunities.

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    File Function: First version, 2006
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    Paper provided by Certified General Accountants Association of Canada in its series Working Papers with number 060301.

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    Length: 102 pages
    Date of creation: Mar 2006
    Date of revision:
    Handle: RePEc:cga:wpaper:060301
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