SIFT Conversion Rules Announced

Copyright 2008, Blake, Cassels & Graydon

LLP

Originally published in Blakes Bulletin on Income

Trusts, July 2008

On July 14, 2008, the Minister of Finance released draft

amendments to the Canadian Income Tax Act to

facilitate the conversion of specified investment flow-through

(SIFT) entities, commonly known as income trusts, and real

estate investment trusts into corporations.

The Canadian Income Tax Act generally permits

trusts and partnerships to avoid tax at the trust or

partnership level by flowing their income out to their

unitholders. This flow-through treatment is not available to

publicly listed or traded SIFT trusts or partnerships, subject

to a grandfathering provision for SIFTs that were in existence

on October 31, 2006 and which do not exceed the Department of

Finance "normal-growth guidelines." Grandfathered

SIFTs will continue to be entitled to flow-through tax

treatment until 2011. Once a SIFT becomes subject to the SIFT

tax, it will pay tax at the appli...

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