Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Halloween Massacre

What it is:

In the investing world, the Halloween Massacre occurred in October 2006, when Canada began taxing all income trusts in the country.

How it works (Example):

Many oil companies created income trusts in Canada, and they issued popular high-yield securities. Before the change, the income trusts could distribute their profits to shareholders on a pretax basis.

After that date, the Canadian government began taxing the trusts like corporations and applied tax rates that were sometimes more than 30%, dramatically reducing the amount of the distributions to investors.
 

Why it Matters:

The Halloween Massacre was a big increase in tax revenue for the Canadian government, but it wildly devalued the investments and consequently decimated many investors' portfolios. According to one report, the Canadian energy sector lost $30 billion of value overnight.