On July 14, 2008 the Minister of Finance released draft
legislative proposals that implement certain measures from the
2008 federal Budget together with certain previously announced
tax changes, including certain proposals to amend the rules
relating to specified investment flow-through (SIFT) trusts and
partnerships that were announced in December 2007.
In addition, the proposals contain the rules for allowing a
SIFT trust to convert into a publicly traded corporation
without adverse consequences for the trust or its
The SIFT conversion rules generally allow the unitholders of
a SIFT trust to transfer their units of the trust to a
corporation in exchange for shares of the corporation on a tax
deferred basis. While such a transfer is possible under the
current rules in the Income Tax Act, the new rules
allow this tax deferred transfer to be effected without the
need for a joint election to be filed by the unitholder and the
corporation. In addition, the new rules will allow the trust
and its subsidiary trusts to be subsequently wound up into the
corporation without adverse tax consequences and will permit
the flow-through of certain tax attributes of the trust and its
subsidiary trusts to the corporation. Alternatively, a SIFT
trust (or a subsidiary trust of a SIFT trust) whose only asset
is shares of a taxable Canadian corporation may wind-up and
distribute the shares of the corporation to its beneficiaries
on a tax deferred basis.
The SIFT conversion rules will apply to conversions that are
effected after July 14, 2008 and before 2013 and, on election,
may also apply to conversions occurring after December 20, 2007
and prior to July 14, 2008.
The content of this article is intended to provide a
general guide to the subject matter. Specialist advice should
be sought about your specific circumstances.
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The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
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