On November 21, 2005 the Canadian government announced a reduction in the tax on dividends in an effort to neutralize the tax system’s bias in favour of income trusts. Eleven months later, on October 31, 2006, a new government changed direction and eliminated the tax deductibility of income trust distributions altogether. Exempted from this change in policy was the real estate investment trust (REIT) sector. This present study examines the return behaviour of both Canadian and U.S. REITs around the time of these announcements in an effort to inform the ongoing discussion about REIT taxation design in the United States and abroad. Ordinary least squares with dummy variables are used to estimate Canadian REIT returns using a variant of the market model on the event date and the day after. Both equally-weighted and value-weighted portfolios are created in order to check the robustness of the results. In addition, the relationships between Canadian REIT returns and U.S. REIT returns are examined for each event. Test results indicate statistically significant abnormal returns for the Canadian REITs relative to their U.S. counterparts on both dates.