Restrictions Applicable to Certain Investment Trusts with Respect to Stapled Securities

An entity that is a specified investment flow-through trust (SIFT trust) or a real estate investment trust (REIT) cannot claim in calculating its income a deduction for an amount paid or payable, as applicable:

  • as interest on a debt or an obligation that is a stapled security, unless each reference security of the stapled security is also a debt or an obligation;
  • to a REIT or a subsidiary of a REIT (or to a person or partnership that pays an amount, or has an amount paid, to such a REIT or to a subsidiary of a REIT), if a security of the entity or of one of the subsidiaries of the entity, or of an entity of which the entity is a subsidiary, is a reference security of a stapled security issued by the REIT or a subsidiary of the REIT.

This restriction applies to amounts paid or payable by the trust in question after July 19, 2011, unless those amounts relate to the trust's transition period.

Generally, if a security held on July 19, 2011, fits the definition of “stapled security,” we consider that the trust's transition period began on July 20, 2011, and ended on July 20, 2012. However, under the law, the period could end earlier if certain events took place.

If the trust had a stapled security on October 31, 2006, the transition period ends on January 1, 2016. However, under the law, the transition period can end earlier if such a security was held before October 31, 2006, and certain events took place.

If neither of these situations applies to the trust, and the trust was the subsidiary of another entity on July 20, 2011, and that entity has its own transition period, the trust's transition period ends on the earliest of the following days:

  • the day on which the transition period of the other entity ends;
  • the day on which the trust ceases to be a subsidiary of another entity; or
  • the day on which a security of the trust becomes a stapled security.
Note

If a security of the trust ceased to be a stapled security and then became stapled once again, and the trust claimed the above-mentioned deduction in the period during which the security was no longer a stapled security (referred to as the “period of unstapling”), the trust must include in its income the amount of the deduction.

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