What are Flow-Through Shares?
Mining stocks and oil & gas Flow-through limited partnerships provide an opportunity for Canadian investors to participate in the resource sector while enjoying significant tax benefits. A partnership invests exclusively in the Flow-through shares of Canadian resource companies.
Flow-through shares are common shares of Canadian resource companies issued to finance the exploration and development of resource properties. To encourage investment by these companies, the federal government allows exploration and development expenses incurred to be "flowed-through" to investors and deducted for tax purposes.
Eligible exploration expenditures have been 100% deductible from income from any source for at least two decades. These deductions effectively reduce or shelter before-tax income. Tax credits apply directly to reduce taxes payable.
The federal tax credit is non-refundable (the taxpayer has to pay taxes in order to use the claim). However, it can be carried back and applied against taxes paid in the previous three years. Unused tax credits may also be carried forward for a period of ten years.