As the Canadian economy slowly recovers, Bennett Jones provides its predictions of trends that will influence Canadian business in 2010.

The mechanics and documentation required to convert an income trust to a corporation will vary depending upon whether the exchange method or distribution method is used to effect the conversion, as well as upon the structure of the income trust and its subsidiary entities and the terms of relevant contracts and other documents.

Once an income trust has made the decision to convert to a corporation, there are two structural options available under the tax rules providing for tax-deferred conversions: the exchange method and the distribution (or redemption) method.

Decisions with respect to any particular income trust will depend in part on the economic outlook for the economy as a whole and the relevant sector in particular.

By now trustees will have considered or be considering at least on a preliminary basis whether or not to convert now to a corporation or to postpone a conversion decision until closer to the end of 2010.

Determining whether to convert to a corporation or pursue another alternative is complex. In assessing the merits and timing of such a decision, management and trustees of an income trust must consider a number of factors, particularly strategic, tax, financial, market and legal considerations.