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To: sammy™ -_- who wrote (1376)	11/24/2006 2:32:05 PM
From: sammy™ -_-	Respond to of 1939

TimberWest Forest Corp (TSX: TWF.UN, OTC: TWTUF) has actually gained ground, by a mere 1 percent, since Finance Minister Jim Flaherty issued his surprise Halloween announcement. One reason, It’s managed to buck the trend of falling unit prices because it isn't technically a trust. It acts like one and is motivated by similar concerns. It pays unitholders a regular cash distribution and minimizes its corporate tax payments. Yet it does this through a hybrid structure, one that trusts could look to adopt or modify. A hybrid structure could get around the new rules but has the potential to spark another battle between Bay Street and Ottawa. The trick is in the structure. Trusts pay out most of their cash flow to unitholders in the form of monthly or quarterly distributions, like a dividend, so there’s little to be taxed at the corporate level. TimberWest units, by contrast, include a piece of equity and a piece of debt stapled together. They trade as one security, but the company pays an interest payment on the debt to its unitholders each quarter. The interest payment is tax-deductible, minimizing the company's tax hit. For trusts that are loath to return to a conventional corporate structure, this could be an alternative. Ottawa will probably grandfather TimberWest but attempt to block other companies from following suit by denying preferential tax treatment on these stapled units. There’s still another option, something called Income Depository Securities (IDSes), which have been used to help US companies convert into quasi-income trusts and list their units in Canada. Lawyers for Centerplate (AMEX: CVP), a catering company, are convinced that it isn't affected by changes to Canadian tax law. There are about a dozen companies like Centerplate, similar to TimberWest, but with one key difference: Theoretically, investors can separate the equity and debt portions of their unit and trade them individually, although practically this never happens. In this way, an IDS is comparable to a regular company whose equity and debt trade in the public markets. This makes it more difficult for Ottawa to scrap the structure without creating a ripple effect. IDS structures could be attractive to many firms, though Bay Street will be cautious about pitching the idea until it gets more clarity from Ottawa. It might make sense for income trusts to collapse their trust structure and then distribute debt and equity directly to unitholders, much as TimberWest and these IPS structures have done. stockcharts.com