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Park Lawn buries conversion

Cemetery operator Park Lawn Income Trust announced yesterday it is putting its planned conversion to a corporate structure on hold as a result of changes to federal tax law.

Cemetery operator Park Lawn Income Trust announced yesterday it is putting its planned conversion to a corporate structure on hold as a result of changes to federal tax law.

The Toronto-based trust announced the planned conversion in early March under an arrangement with a subsidiary of LMS Medical Systems (Canada) Ltd., an inactive company.

Many of Canada’s income trusts have switched to dividend-paying corporations in response to federal plans to wipe out the tax advantages such trusts enjoy. Commonly, they have done so by entering into arrangements to buy the tax losses of other companies to offset the taxes they will now have to pay as corporations.

Small development companies are particularly attractive as deal partners because they often have years of losses as they research and develop new products and can’t use those losses to offset taxes until they start earning profits, often years down the road.

In its recent budget, Ottawa said, effective immediately, trusts acquiring a business with big tax losses will be restricted in their ability to use those losses to shelter earnings.

Tax experts say if a trust acquires a company in the same industry, the tax pools should be eligible.