The 'death' of income trusts

This paper looks at the effect that the October 31, 2006 Ministry of Finance announcement that income trusts and other flow-through entities will be taxed like corporations will have on the future of the income trust as an alternative business organization to the corporation. It looks at the structure of income trusts as a business organization and identifies the potential problems inherent to income trusts vis-a-vis the corporate structure.; The paper argues that the decision to use income trusts as a business structure was primarily a tax-driven decision since its flow-through ability resulted in less taxes paid by the income trust. The paper concludes that the Ministry of Finance's decision to impose an entity-level tax on income trusts will lead to the decline in use and possible termination of income trusts as an alternative business organization as it will no longer have a tax advantage over the corporate structure.