A deduction and tax credit against income earned this year.
You pay tax at the top marginal rate. The structure provides a deduction against your income plus a tax credit in the current tax year. Buy and sell take place moments apart at a price you already approved. The buyer of the shares carries the share-price and illiquidity risk. Issuer risk remains, but it’s limited. If your deduction is reduced, the issuer is contractually required to pay you an amount equal to the resulting tax. Before any transaction proceeds, WCPD carries out thorough due diligence on the issuer’s finances.
For the technical detail, including adjusted cost base, AMT and capital gains planning, read the Primer →
Who this is for
You are an accredited investor with significant income, generally $300K+, taxed at the top marginal rate.
If your income falls too far below the top bracket, the benefits diminish. And if you’re looking for an investment return rather than tax relief, this likely isn’t for you - and I’ll tell you so.
What changes
A direct flow-through investment (i.e. buying shares directly from the issuer) gives you the same deduction but your shares must be held for a minimum of four months and a day and your result, win or lose, depends on what the share price does in that window. With our structured transaction the shares are sold moments after you buy, at a price agreed to before you commit. You keep the deduction. You never take on the share price or illiquidity risk.
What it doesn’t do
It doesn’t remove issuer risk. The issuing (mining) company has an obligation to spend the proceeds on eligible exploration expenses within a specified time period. If it doesn’t, the tax benefits can be reduced or denied, in whole or in part.
It doesn’t help if you don’t have much tax to reduce. This is a deduction, not an investment looking for a return.
Questions
Start with the Primer.
A practical guide to how the transaction works, its tax treatment and its risks. It answers much of what people ask me at the start of their investigation.
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If you’d rather I speak with your accountant first, send them the For Accountants page. I’m happy to take it from there.
