Canadian Income Trust

AAA

DEFINITION of '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.

INVESTOPEDIA EXPLAINS '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).

RELATED TERMS
  1. Income Participating Security - ...

    A security that comprises a common share and a high-yield bond ...
  2. Life Income Fund - LIF

    In Canada, a type of registered retirement income fund that is ...
  3. Earnings Before Tax - EBT

    An indicator of a company's financial performance calculated ...
  4. Capital Cost Allowance - CCA

    A yearly deduction or depreciation that can be claimed for income ...
  5. Unit Trust - UT

    An unincorporated mutual fund structure that allows funds to ...
  6. Canada Revenue Agency - CRA

    A federal agency that collects taxes and administers tax laws ...
Related Articles
  1. Retirement

    Lazy Portfolio Strategies For Your RRSP

    Check out this cheap and easy way to secure good returns for the long term.
  2. Options & Futures

    An Introduction To Canadian Income Trusts

    Yields in excess of 10% aren't rare, but these unique investments need to be chosen very carefully.
  3. Investing

    Can a corporation deduct dividend payments to shareholders before taxes are calculated?

    Corporations may not legally deduct the dividend payments before taxes but there is another approach - a corporate structure called an income trust. Income trusts allow a firm to deduct dividends, ...
  4. Taxes

    Registered Retirement Savings Plans (RRSP)

    Learn how the Canadian government makes saving for your post-work years easy. We take you from your first contribution to your first withdrawal.
  5. Professionals

    How do companies measure labor supply in human resources planning?

    Find out how and why a company's human resources department would measure labor supply, and what policies would address a shortage or surplus.
  6. Economics

    Oil Prices' Impact On Oil Transport Sector

    Short-term changes in oil prices and in the volume of oil produced have a marginal impact on the oil transportation industry in Canada.
  7. Fundamental Analysis

    Why are OTC (over-the-counter) transactions controversial?

    Learn more about over-the-counter transactions, and why OTC traders are considered riskier than traders working with larger market exchanges.
  8. Fundamental Analysis

    What is the difference between cost of equity and cost of capital?

    Read about some of the differences between a company's cost of equity and its cost of capital, two measures of its required returns on raised capital.
  9. Fundamental Analysis

    What is arbitrage pricing theory?

    Find out what arbitrage pricing theory is and how it can theoretically be used by investors to generate risk-free profit opportunities.
  10. Fundamental Analysis

    What does a high weighted average cost of capital (WACC) signify?

    Find out what it means for a company to have a relatively high weighted average cost of capital, or WACC, and why this is important to lenders and investors.

You May Also Like

Hot Definitions
  1. Command Economy

    A system where the government, rather than the free market, determines what goods should be produced, how much should be ...
  2. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  3. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  4. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  5. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  6. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
Trading Center