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Canadian Income Trust

What is 'Canadian Income Trust'

A type of corporate structure as designated by the Canada Revenue Agency that operates as a profit-seeking corporation. This type of company pays out all earnings to unit holders before paying taxes, and is usually traded publicly on a securities exchange. In 2011 all Canadian income trusts lost their special corporate tax privileges, and were required to be converted into traditional corporate structures.

Explaining 'Canadian Income Trust'

Canadian income trusts are a beneficial corporate structure alternative for firms due to lower tax liabilities. Before the profit is taxed, an income trust passes a high percentage of earnings to unit holders as cash distributions. If, once expenses have been covered, all of a firm's remaining cash is paid out to unit holders, the firm is able to entirely avoid paying income tax. This was stopped by January of 2011 for income trusts with the exception of real estate investment trusts (REITs).


Further Reading


Income trusts and shareholder taxation: getting it right
heinonline.org [PDF]
… 5 Canadian Tax Journal 1529-69 … tax paid, the government loses revenue equal to the product of the aggregate net income of income trust funds and … on operating cash flow, which is derived from the historical financial and taxation statistics published by Statistics Canada, to the …

The growth of income trusts in Canada and the economic consequencesThe growth of income trusts in Canada and the economic consequences
heinonline.org [PDF]
… 5 Canadian Tax Journal 1529-69 … tax paid, the government loses revenue equal to the product of the aggregate net income of income trust funds and … on operating cash flow, which is derived from the historical financial and taxation statistics published by Statistics Canada, to the …

Trends in park tourism: Economics, finance and managementTrends in park tourism: Economics, finance and management
www.tandfonline.com [PDF]
… 5 Canadian Tax Journal 1529-69 … tax paid, the government loses revenue equal to the product of the aggregate net income of income trust funds and … on operating cash flow, which is derived from the historical financial and taxation statistics published by Statistics Canada, to the …

Competition and contestability in Canada's financial system: Empirical resultsCompetition and contestability in Canada's financial system: Empirical results
www.jstor.org [PDF]
… 5 Canadian Tax Journal 1529-69 … tax paid, the government loses revenue equal to the product of the aggregate net income of income trust funds and … on operating cash flow, which is derived from the historical financial and taxation statistics published by Statistics Canada, to the …

Canadian business trusts: a new organizational structureCanadian business trusts: a new organizational structure
onlinelibrary.wiley.com [PDF]
… 5 Canadian Tax Journal 1529-69 … tax paid, the government loses revenue equal to the product of the aggregate net income of income trust funds and … on operating cash flow, which is derived from the historical financial and taxation statistics published by Statistics Canada, to the …

Tax Policy, Capital Structure and Income TrustsTax Policy, Capital Structure and Income Trusts
heinonline.org [PDF]
… 5 Canadian Tax Journal 1529-69 … tax paid, the government loses revenue equal to the product of the aggregate net income of income trust funds and … on operating cash flow, which is derived from the historical financial and taxation statistics published by Statistics Canada, to the …

Changes to income trust taxation in Canada: investor reaction and dividend clientele theoryChanges to income trust taxation in Canada: investor reaction and dividend clientele theory
onlinelibrary.wiley.com [PDF]
… 5 Canadian Tax Journal 1529-69 … tax paid, the government loses revenue equal to the product of the aggregate net income of income trust funds and … on operating cash flow, which is derived from the historical financial and taxation statistics published by Statistics Canada, to the …



Q&A About Canadian Income Trust


Who can benefit from this corporate structure?

Firms can benefit from this corporate structure.

How many types of corporations are there in Canada?

There are two types of corporations in Canada; public and private corporations. Public corporations have shares listed on an exchange while private corporations do not have shares listed on an exchange. Private Corporations must be registered with the government in order to trade stock or debt instruments with investors or other businesses, but do not need to file financial statements or annual reports with any regulatory agencies unless they choose to do so voluntarily . Private Corporations may also elect to become public at some point if they wish by registering their securities with the appropriate regulatory agency(ies). The number of shareholders allowed in each corporation depends on whether it is considered public or private (see below). For example, a corporation which has more than fifty (50) shareholders will be considered public under Canadian law regardless of whether it has issued any shares or sold any equity securities (i.e., common stock) for cash consideration . If there are fewer than fifty (50) shareholders then the corporation will be considered private and no disclosure requirements apply." "Canadian Income Trusts" - Investopedia http://www.investopedia.com/terms/c/can

Why are income trusts beneficial for firms?

Because they pay less tax than other companies.

When did the special tax privileges end for income trusts?

In 211 all Canadian income trusts lost their special corporate tax privileges, and were required to be converted into traditional corporate structures.

What is a Canadian Income Trust?

A type of corporate structure as designated by the Canada Revenue Agency that operates as a profit-seeking corporation. This type of company pays out all earnings to unit holders before paying taxes, and is usually traded publicly on a securities exchange.

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