Income Trust

Income Trust: An income trust is an entity that holds an underlying asset or group of assets. Most of the income produced by these assets is distributed to unitholders, as opposed to corporations that typically reinvest the majority of their net income in order to grow the business. An income trust structure is formed when an operating entity creates a trust which purchases the common shares and high-yield debt of the operating entity and then offers units of the trust to the public through an initial public offering (IPO). The combination of the trust's equity and debt holdings allows the income to flow through to unitholders on a tax-advantaged basis.