Despite the recent bloodbath in Canadian income trusts, the sector may still be overvalued by 28 per cent or a total of $20-billion, according to a new study that blames "abuses" in trust accounting and salesmanship. The $20-billion potential loss is in addition to the $10-billion stock market decline in the sector since the federal government announced its tax review of income trusts in September, Accountability Research Corp., an affiliate of Rosen and Associates forensic accountants, said in the study released yesterday. "Much of the overvaluation stems from abuses in the financial reporting, valuation and marketing of business trusts," the study said, adding that the tax advantage of the trust structure has been overstated as the motivation for the mass conversion into trusts of corporations outside the energy and real estate sectors. "Rather, it has been the opportunity for selling owners to receive inflated prices well above what strategic industry buyers and professional investors alone would be willing to pay," the report said. CP
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