Market's reaction will be ugly
ROB CARRICK
From Wednesday's Globe and Mail
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Beginning in 2011, trusts will be taxed more like corporations. Experts were still deciphering the government's announcement last night, but the net effect seems to be that paying taxes will leave trusts with less money to dole out to their investors. In turn, this will undermine the rationale under which scores of seniors and others have bought these investments — at a time when bonds and guaranteed investment certificates pay barely 4 per cent, trusts offered returns of 5 to 10 per cent or more through their monthly or quarterly cash distributions.
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And from a different article (wow a third)
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Canada energy trust bosses warn output will suffer
Tue Oct 31, 2006 9:47 PM EST
By Jeffrey Jones and Scott Haggett
CALGARY, Alberta (Reuters) - Canadian oil executives said they were blindsided by Ottawa's plan to start taxing income trusts and warned the move threatens the country's ability to maintain oil and gas output.
The energy sector has been by far the most fertile ground for income funds over the past decade, and companies that have converted to the trust structure now account for as much as a third of Canadian crude oil and natural gas output
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It's worth recalling that when the Liberals announced a review of their trust policy a little more than a year ago, the resulting uncertainty cost the trust market about $23-billion in value.
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Regarding pensioners
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Income-splitting for pensioners will provide more than $1-billion in tax relief per year, according to the federal Finance Department. Will that take the edge off the chaos to come in the trust market? No chance. Trusts are found in mutual funds, pension funds, individual investment accounts and registered retirement accounts. All kinds of investors are going to be hurt, and the pain will be unavoidable as the stock markets adjust to the uncertain new future for trusts. Better brace yourself.
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