As of Jan. 1, 2011, tax-free income-distributing vehicles will begin being taxed like everyday corporations and trustees are starting to look at options in earnest. 'The government loved income trusts for a while until they became so popular it didn't want them anymore. In 2006, on Hallow'een, it announced a tax regime that would put them on the same footing as a public company', says Richard Bennett, a partner at the Vancouver office of Borden Ladner Gervais LLP (BLG).

The implications of the newly established government rules are that taxes will increase while distributions will decrease. And there are several options for trusts to consider before the Jan. 1, 2011 deadline including remaining a trust but paying taxes and making dividend-like distributions; putting itself up for sale; or being taken private by the trust's owners, a third party or management. With 20 months to go until the government-imposed deadline, BLG is briefing Canada's income trusts on their various options. 'Some may put themselves up for sale because it no longer makes sense to remain a public entity…or they may be forced to sell assets. Other funds will look to eliminate competition so you'll have strategic buyers,' says Warren Learmonth, a partner at the Vancouver office of BLG.