Changes Made To Taxation Of Publicly Traded Income Trusts And Limited Partnerships

The Minister of Finance has made major changes to the taxation of publicly traded income trusts and limited partnerships. The proposed rules are intended to be broad enough to classify all publicly traded income trust and limited partnerships as Specified

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The Minister of Finance has made major changes to the taxation of publicly traded income trusts and limited partnerships. The proposed rules are intended to be broad enough to classify all publicly traded income trust and limited partnerships as Specified Investment Flow-Throughs (SIFTs).

A SIFT that is a trust will be subject to tax at a special rate based on the federal-provincial corporate income tax rate when non-portfolio earnings are distributed to its unit holders. It is anticipated that detailed draft legislation will be released at a later date and that some changes are likely to be made to the new rules to address technical and policy concerns.

A new mechanism for pension income splitting will allow Canadian residents who receive eligible pension income to allocate up to one-half of the income to their spouse or common-law partner.

The amount allocated for income tax purposes will be deducted in computing the income of the person who actually received the pension income and it will be included in computing the income of the person to whom the pension income is allocated.

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