Which of the following statements best describes income trusts?
A) As income trust cash distributions are taxed at each unitholder's full tax rate, a higher tax liability results.
B) The administrative costs can be higher with an income trust structure relative to a corporate counterpart.
C) Income trust units cannot be held as equity securities.
D) Cash flows distributed to unitholders are paid after the corporate taxes.

Question

Quizplus · Accepted Answer

Income trusts have higher administrative costs because they require additional reporting and compliance requirements compared to corporate structures. The other statements are incorrect. Income trust distributions are typically taxed at a lower rate due to tax-saving measures, income trust units can be held as equity securities, and cash flows are distributed to unitholders before corporate taxes are paid.

Which of the Following Statements Best Describes Income Trusts