Tax Strategy for Accredited Investors, Entrepreneurs and Small Business Owners
Flow-through shares offer huge tax benefits to qualified Canadians. Created by the Canadian government to incentivize investment in Canadian resource exploration, purchasers of flow-through shares receive tax benefits that can significantly exceed the cost of their purchase and significantly higher in certain provinces.
Flow-through shares are issued by resource exploration companies with uncertain future prospects, hence, the share price can be extremely volatile. A loss on the sale of these shares can wipe out the value of the tax benefits and lead to an aggregate loss (ask me about personal experience with this). Additionally, the shares are issued subject to a minimum four-month restricted trading period, leaving the purchaser locked in and unable to sell during that period. Alternatively, purchasers of flow-through share limited partnership and mutual funds lock up the purchaser’s funds for a much longer period, often a year or more.
I work with Ber Tov Capital Corporation who originated and developed a structured flow-through share strategy that allows qualified Canadian investors to capture the tax benefits without the associated market risk and illiquidity. Since the company’s formation in 2006, Ber Tov has advised clients on the purchase and sale of almost $2 billion of flow-through shares. There are strategies for individuals and corporations looking for outright tax reduction, for owner managers who want to take money from their corporation at the lowest possible cost, and for philanthropists seeking to make large charitable gifts at a reduced cost.