FLOW THROUGH SHARES

Flow-through shares are a financing vehicle used in the oil and gas and mining industries. These shares are issued by companies that need cash but do not need tax deductions. Most these companies are new in business but sometime well settled companies also need cash so these companies also issue flow thru shares. The investors in these issues receive the tax deductions. The investors can use the deductions to offset against other income. Because investors receive tax deductions, the shares acquired are deemed to have a cost base of nil. In the event of death, there is no provision in the Act to pass unused deductions on to the deceased’s estate or beneficiaries. At the time of investor death, the shares are deemed to be sold for fair market value.