Income Trust

DEFINITION of 'Income Trust'

An investment trust that holds income-producing assets and trades units like a stock on an exchange. Income trusts attempt to hold assets which will generate a steady flow of income, such as lease payments from an office building. The income is passed on to the unit holders.

BREAKING DOWN 'Income Trust'

Income trusts give out a high portion of profits to unit holders in a similar way dividends are given out by companies. Because the cash goes directly to holders, after some costs, income trusts have some tax advantages, such as avoiding double taxation. Some of the most popular income trusts are real estate investment trusts (REITs) and natural resource trusts. The main attraction of income trusts is their ability to generate constant cash flows for investors.