Why are Trusts attractive to Investors?
The benefits of an Income Trust are two-fold: a) The periodic cash distribution of income Trusts greatly exceed typical dividend rates for dividend paying equities. Before they were “discovered” by the general investing populace, many income trusts were distributing cash equivalen to a 15% yield or more to its unitholders. b) The income Trust itself is structured to pay little to no coporate taxes. c) The cash distributions made by an income trust to the unit holder is treated as income, and not capital gains, and therefore, are taxed at the marginal rate of the individual unit holder. However, the unitholder has flexibility on how and when the tax will be applied. For example, if the unitholder holds the units of the income trust withing an RRSP, then no taxes will charged until the unitholder withdraws cash out of the the RRSP. Furthermore, some income trusts distribute a portion of the cash as a Return of Capital, so that taxes on it are deferred until the unit is sold. The deferral
