Are you still paying a high marginal tax rate? Fortunately, there is an investment vehicle that can help you reduce taxes and build a stronger portfolio: flow-through shares. Flow-through shares are common shares in a resource company that grant shareholders the option to deduct 100 percent of the cost of the shares from their taxable income. To help you learn more about this often-under-utilized tax-saving resource, The Financial Post recently spoke with Sightline Wealth Management for insight.
“Flow-through shares offer possibilities for minimizing taxes, even beyond the basic [Canadian exploration expenses (CCE)] deduction, especially for investors who are being taxed at the highest marginal rates,” says Sightline Senior Investment Advisor Paul de Sousa.
However, while the entire cost of a flow-through share is tax deductible in the year it is purchased, it is important to note that any profits from the disposition of those shares do become taxable as capital gains. “If I buy $10,000 worth of flow-through shares, the cost base is counted as zero, as though I paid nothing for it,” explains de Sousa. “So, there are capital gains incurred when you sell those shares at any price.”
When considering incorporating flow-through shares in your retirement portfolio, de Sousa tells the publication that it might be a good idea to work with an experienced investment advisor to ensure you select the right flow-through limited partnership that can grant you the best possible results.
“We can direct investors to specific flow-through limited partnerships,” he says. “These vehicles aim to mitigate the risk of investing in resource flow-through shares by working to assemble a professionally managed, well-diversified portfolio of junior resource companies operating in that space.”
Sightline Wealth Management LP (“Sightline”) is not a tax advisor. Please consult your respective accountant for more information.
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