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Canada to Tax Income Trusts and Publicly Traded Partnerships


Area Corporate Finance and Securities, REITs and Income Securities


On November 7, 2006, Canada’s Parliament passed a motion approving the Minister of Finance’s proposals to introduce an entity-level tax on distributions from income trusts and certain publicly-listed Canadian partnerships. The proposed rules, which were announced on October 31, 2006, are intended to eliminate the “tax imbalance” created by income trusts and aim to tax such entities in the same general manner as corporations. In doing so, the government sought to stem the tide of corporate conversions to income trusts.

Draft legislation to implement these new rules has not yet been released. The following outline of the proposed rules and related critical questions and planning challenges are subject to the provisions of the legislation ultimately adopted.

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