Taxation of Income Trust

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The federal government surprised everyone on Halloween when they announced that income trusts who have been publicly traded before November 1, 2006 will become taxable in 2011, with the exception of certain real estate income trusts. What will happen is income trust will be taxed the same as Canadian corporations.

Trust that haven't started trading in the stock market yet will be taxed using the new rules starting 2007.

This announcement created a huge drop in the S&P/TSX Composite index, down 294.2 points or 2.4 percent to 12,050.39. The TSX Income Trust sector fell more than 12 percent which saw the sector lose about $20 Billion in market value overnight.

What lead to the decision to tax income trust can be read on this article from the Globe and Mail.

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