October 31, 2006 - It was not a pretty sight!

To get into the Hallowe'en spirit, and tie it in with our UCU Investment Challenge lll which has gotten off to a great start, we thought it would be fun to go back in time.  On this day,October 31, in 2006, the then (and still now) Minister of Finance, Jim Flaherty, made a very scary announcement that there would be new taxation rules applied to Income Trusts.  It was all trick and no treat for Canadian investors.

The new rules basically removed the tax advantage income trusts had as a corporate structure, forcing them to convert to a regular corporate structure.  Prior to this announcement, income trusts (business trusts and energy trusts in particular) had become an extremely popular form of business for Canadian corporations, and their performance was driving a strong TSX Composite index during the year.  However, the income trust sector took it on the chin, and according to the Canadian Association of Income Trust Investors, the new rules cost investors $35 billion in market value of their holdings in income trusts.  Real Estate Investment Trusts (REITs) were sparred the new taxation rules.

Let's hope that we don't get anything so scary again from government or market regulators.