Flow through shares explained
As we approach the end of the calendar year, we see an increase in the number of flow-through shares being offered by resource companies. But what exactly are flow-through shares and what is their tax treatment?
Essentially, resource companies are allowed to deduct expenses for prospecting, sampling, drilling and other costs. But if they don't have any revenue, these deductions are effectively wasted. In a rare moment of generosity more than two decades ago, the Federal Government created legislation allowing certain companies to pass on these deductions to taxpayers that can use them. This was designedto stimulate resource exploration in Canada and improve access to capital for smaller companies.
By issuing flow-through shares, a company gets greater access to money to finance its exploration work, and the investor can claim up to 100% of his investment as a tax deduction. To access these credits, an investor purchases flow through shares directly from a resource company, and the resource company uses these specific funds to incur qualifying Canadian Exploration Expenses or CEE.
For further explaination of flow-through shares, watch the video here:
https://www.investmentpitch.com/video/0_bkthrrd2/Investment-Education-Flow-Through-Shares