I’d recently put a bit of money into Canadian Royalty Trusts – the Canadian equivalent of REITs here in the US. Now, thanks to the socialist Finance Minister I’m down 10% today!
Toronto stock market tumbles after Ottawa moves to tax income trusts
Wed Nov 1, 12:34 PM
TORONTO (CP) – Finance Minister Jim Flaherty created havoc Wednesday on Bay Street and Main Street as income trust investors suffered massive losses following his Halloween surprise announcement that trusts will be taxed.
The Toronto stock market’s main composite index tumbled more than 300 points in early trading, and late in the morning was off 223.23 at 12,123.36, a decline of 1.8 per cent.
The loss was much steeper for trusts, with the S&P/TSX income trust index down 10 1/2 per cent.
“I’m put out, not to put too fine a point on it,” declared Brendan Caldwell, president of brokerage firm Caldwell Securities Ltd.
“I tell you, I’ve got seniors that have income trusts that are down $25,000 or $30,000 today. . . . They’re getting hit in a big way.”
Among major names, the Yellow Pages trust (TSX:YLO) faded 17 per cent, the CI Financial fund (TSX:CIX.UN) plunged 16 per cent and the Aeroplan fund (TSX:AER.UN) descended 12 1/2 per cent.
There also were big losses for Telus (TSX:T) and BCE Inc. (TSX:BCE), whose plans to convert into trusts – and the prospect that other major corporations would do the same – provoked Flaherty’s move. Telus was down 14 per cent and BCE lost 12 per cent.
The proposed rules would tax the money distributed to unitholders by newly formed income trusts, while existing trusts get a four-year transition period.
Income trusts pay much less tax than corporations as they distribute most of their cash flow to investors to be taxed in their hands.
Flaherty says changes are needed to prevent a shift in billions of dollars of the tax burden onto individuals and away from companies.
The Pox on you, Mr Flaherty!!!!
I’m surprised they announced this after they threatened last year and then reversed tune when the stock market tanked. I wouldn’t be surprised if they reneged on this announcement too.