How risky are flow-through shares?
Are there risks? Once you purchase the flow-through shares and have taken the CEE deduction, you are relying on the company to spend the money correctly. If the total sum of the investment is not spent on exploration within the 24 months, you may be retroactively denied the CEE deduction.
How do I buy flow-through shares in Canada?
You can buy flow-through shares from an investment. + read full definition firm or directly from the company that issues the shares. You can also buy them through limited partnerships or mutual funds, which offer a diversified portfolio. May include stocks, bonds and mutual funds.
Who can issue flow-through shares?
Certain corporations in the mining, oil and gas, and renewable energy and energy conservation sectors may issue FTSs to help finance their exploration and project development activities. The FTSs must be newly issued shares that have the attributes generally attached to common shares.
What are super flow-through shares?
Flow-through shares are essentially common shares of an issuer which permit the initial purchaser to claim a deduction up to the amount of the share subscription price against any income in respect of resource expenses renounced by a publicly-traded issuer.
Can you sell flow-through shares?
It’s important to note that the adjusted cost base (ACB) of a flow- through share is deemed to be zero. This means that when you eventually sell your shares, the sale proceeds will be taxed as a capital gain.
How does flow-through shares work?
Flow-through shares invest in small start-up resource companies without enough profits to write off their expenses, but those companies are allowed to pass their expenses off to shareholders who can deduct them from their income.
What is Ontario flow through share tax credit?
The Ontario Focused Flow-Through Share (OFFTS) Tax Credit is intended to stimulate mineral exploration in Ontario and to improve access to capital for small mining exploration companies.
Can you buy flow-through shares in RRSP?
While flow-through shares are qualified investments for RRSPs, RRIFs, RESPs, TFSAs and RDSPs, you will not realize the associated tax benefits. Therefore it generally does not make sense to purchase flow-through shares in these vehicles.
How are flow-through shares taxed?
The shares in the flow-through entity are usually converted on a tax-deferred basis to mutual funds after two years. When these mutual funds are sold, generally the entire amount is taxed as a capital gain, because of the zero ACB, as indicated by CRA’s Reporting Your Investments for flow-through shares.
What is Ontario flow-through share tax credit?
What is the Oeptc credit?
The Ontario energy and property tax credit (OEPTC) is designed to help low- to moderate-income Ontario residents with the sales tax on energy and with property taxes.
What is flow through share premium liability?
b) flow-through share premium – recorded as a liability and equal to the estimated premium, if any, investors pay for the flow-through feature; and. c) share capital – the residual balance. Thereafter, as qualifying resource expenditures are incurred, these costs are capitalized to exploration and evaluation assets.
How much can you lose on flow through shares?
As mentioned above, flow through shares usually sell at a premium. You can lose up to a certain percentage of your investment, and STILL come out even due to the tax breaks. Below is a table from QIS Capital outlining the loss limits by tax bracket:
What are the tax benefits of flow through shares?
They can be very beneficial if you are in a higher tax bracket. For example, if you were to invest $10,000 in flow through shares, providing that they are eligible for the tax breaks, you can claim the full $10,000 on your tax return. If you are in the 40% tax bracket, that would equate to a $4,000 tax return for that year.
How long should you hold flow through shares?
Also, when you purchase flow through shares, you typically have to hold onto them for 18-24 months before you can sell them. As mentioned above, flow through shares usually sell at a premium. You can lose up to a certain percentage of your investment, and STILL come out even due to the tax breaks.
How much of your portfolio should be in flow through shares?
That being said, from an investing point of view, expert sources have said that flow through shares should not exceed 10%-15% of your portfolio.