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Oct12
Canadian Income Trusts

Yesterday Bell Canada announced it was changing its corporate structure into an income trust and doing away with its holding company.  Why would they do that?

In Canada, the Income Trust structure provides for a tax advantage.  If a company organized as an Income Trust distributes most of its profits it does not have to pay corporate taxes.  The owners of the company, called unit holders instead of shareholders, are taxed individually on the distributions, avoiding double taxation.

Without corporate taxation, Income Trusts have higher profit margins and can thus compete more efficiently against their taxable peers. 

On the downside, the government of Canada loses tax revenue.  The company does not have as much retained earnings to reinvest in the business.  If a company is in a fast growing, capital intensive business, an Income Trust may not be the optimal corporate structure.

Going forward will Bell Canada be more like a regulated utility with slow steady growth and revenue or will they be more entrepreneurial investing in new businesses and changing infrastructure.  I believe the answer to that question will determine the success of their change in corporate structure. 
On a sad note, this may be my last week as a blogger.  The target audience of business owners apparently does not really need me and my words of wisdom.  My publishers are changing their compensation policy to make it more in line with their revenue.  I fear that will result in a significant drop in per blog compensation that is at the dizzying rate of $7.50 per blog.  With my research time, responding to comments and the time it takes to write the blog I am already making significantly below minimum wage per hour.  As more details become available I will keep you posted.

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4 Comments/Trackbacks




In the immortal words of my personal hero, General "Vinegar Joe" Stillwell, "Illegitimanti Non Carborundum" (Don't Let the Bastards Grind You Down).

Your many educational and insightful contributions to this blog, contrasted against my own frequently insipid counterpoint commentary, have together been worth every penny of minimum wage pay scale. There is stuff contained in your postings that only a handful of astute financial professionals ever knew, before reading it here first. Be proud of what you've given to all of us through your authorship of this blog, and also be thankful you didn't give up your day job!

Geesh that sucks, I finally find a good blog with some real info (non-sponsered) information that is and the writer gets killed off... Grrr

In the words of Arnold, "I'll be back". I'm writing a book using material from the site and hopefully it will drive enough traffic to the site to make it worthwhile to post. At $3.50 per post, I can't justify the time.

What other blogs do you post for if any? I'm working on starting a new canadian investment website and if you're intersted I'm trying to find some experienced writters like yourself. Drop me an e-mail if you'd like to chat about it.

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