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The most simple answer I have come across is that an income trust is basically a corporation that has to pay out most of its earnings as dividends while (in past) being able to dodge much of the taxation of its earnings. While I don't know all the specifics, I do know that the federal government has changed the rules to eliminate the tax advantage of income trusts (REITs excepted I think). I think this was done by imposing a tax on income trust profits in 2006.

The reason why income trusts had a tax advantage was that they were able to get around the double taxation of corporate dividends. The trust holding entity would somehow extract most of the earnings from the corporation (and the corporation would get a tax deduction) and distribute those earnings. In general, trusts do not pay tax on earnings distributed to their beneficiaries (the unit holders).

Despite the reduction or elimination of their tax advantage, not all income trusts are converting back to corporations. Many will continue more or less in their present form. They can still be good investments since they provide a steady stream of income, and generally have high dividend yields.
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