Widely-held BCE has followed the announcement by Telus, that it plans to convert common equity into trust units. With a combined market value of $50 billion, these two issues will alter the trust market significantly by enlarging it by roughly one quarter and the business trust sector by half. The news has retriggered rhetoric and media hype focused on the supposed “need” for the federal government to take action to stop tax leakage caused when companies like this transfer their tax burden to owners.

It is confusing to investors, particularly when calculations made to determine tax and economic impacts are focused on business trusts to the exclusion of the majority of value resident in the Canadian income trust market in the form of oil and gas producers and real estate investment trusts. Furthermore, it may be confusing to investors that negative statements about income trusts focus on business trusts to the exclusion of other kinds of income products and flow through entities.  So the calls for new taxation gain headlines, but constitute practical and political challenges.

The income trust market is now 20 years old and may well handle large size and widely held stocks better than many might imagine.

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