[...] individual investors, there are attractive incentives in place.  Canadians benefit from “flow-through” shares, allowing those investors write off (against income) all of the acquisition costs in certain [...]

Seems to me that you get exactly the same rate of return whether you’re in a high or a low bracket. Exactly to the dot.

After reading your post the idea of purchasing some flow through shares has come to mind. They may not create huge profits but every bit counts especially when you are saving for something big.

I wonder how well they will go compared to the normal shares. Whether they are relatively secure like long-term shares in businesses.

Difference between long-term and short-term shares:
http://www.financiallyenhanced.com/2008/07/01/difference-between-long-term-and-short-term-shares/

[...] “How flow through shares work.” Posted by Maureen Flynn-Burhoe Filed in Measuring Money, Policy Development, Public Policy, Risk Management, Risk Society, UHNW, moral mathematics, policy research, wealth disparities in OECD Tags: Canadian development expenses (CDE), Canadian exploration expenses (CEE), charities at-risk of sanctions, flow-through shares, revocation of charitable status [...]

My reason for doing SFTS is the tax benefit (100% write off + the fed & prov tax credit) and any rollovers to RRSP, Mutfunds or reinvestment into another SFTS.

Mineral Fields is the one that I chose. It generally gives back on maturity not less than 100% of the initial investment, at least the ones that I have done.

The general idea with SFTS is on maturity of the particular fund you invested in, is that you take you could take the proceeds with further options.

i) you’d pay captial gain, which is approximately equal to the Prov & fed tax credits) leaving you with a gain of whatever tax you got back.

ii) Reinvest the money into another SFTS

iii) Put it into an RRSP and some into a TFSA

In the case of MF, it has the option on maturity to roll over to their mutual funds with zero tax and capital gains tax. This gives the benefit of further growth. Then should you want to redeem (part or whole) at that point tax is payable. But what you could do I suppose on redemption out of the mutual fund is make that a deposit into an RRSP.

Past practice is that SFTS keep getting approved in the Governments spring budget, with the current ones approved to March 2009

they mention that tax credits can be carried back 3 years. Is this for the additional SFTS tax credit or any FTS offering? The reason I ask is that for the first time in many years I have to pay additional tax for 2007 and in 2008 I expect to move into a slightly lower tax bracket. If I can make an investment in 2008 that will allow me to get a bigger refund by applying it 2007 vs. 2008 I’m all for it.

I know that a lot of people will roll over the gains from flow-through into a charity and this gives a little more bang on your buck and is great for a legitimate charity too. But what about rolling the gains into the RRSP?

What is recommended?

Thanks

I have had good and bad experiences, timing is everything and brokers (who I dislike) flog what is best for them.

There is a risk to flow throughs in that will you get thetax credits but you ‘MAY’ be a winner after they mature, with the possible rollover to an RRSP for a second tax deduction.

The only ones (narrow minded me) that I have been doing that provides me with any success for the past several years is the Mineral Fields Super Flow Throughs (SFTS), direct, no fees, no broker charges, minimum $10k lots

There are huge tax savings depending on which province it is that you live in, for me its Ontario, and from experience I have found that Mineral fields (MF) generally do not to mature theirs in the same tax year.

For example, if you were to purchase in April this year they would unlikely mature till 12-18 months.

From experience, the last ones I did that matured, I bought in December 2006, matured in 10-months at 120% of the intial cost, because MF trys to mature them as early as 6-months once they are over the $10k purchase lot price, but not within the same tax year. Once the MF’s mature you have a choice tax free to roll over to their mutual funds, tax free growing till you withdraw.

I currently have $60k in SFTS that will mature this tax year which I shall simply rollover and buy again.

For those that go the SFTS, you have to watch the fed’s, since the budget keeps letting then continue just year on year.

SFTS give me the tax return plus the tax credits, also benefitting from deducting the interest to purchase them.

There is a recapture on the capital gains and CEE in year two, but generally I net a nice positive ROI on this type of investment strategy when I combine this with a double bang RRSP (50/50 in out in the same tax year) to get as much of the tax back that is taken from my wages at source. This year (just filed 2007)it will be as close to every penny back, since my tax at source was $26K. The goal is to get back as much income tax back that you paid at source, thus the bonus allows you to do whatever with it.

With the SFTS, this is outside of other passive incomes in a numbered company.

Be weary of an investment product of such a high risk. So high, in fact, that the government is willing to write it off fully, as it would a donation to a registered charity. Same write-off…but you’re not donating your money…you’re investing it.

‘Z’

[...] How Flow Through Shares Work [...]

[...] you get more comfortable with investing, consider investing a small portion of your portfolio in Flow Through Shares.  Here is another article on Flow Through Share [...]

[...] June FrugalTrader05:00 am1 Comment In my article “How Flow Through Shares Work“, I didn’t give many examples of actual flow through shares or mutual funds that hold them. [...]

I created a spreadsheet and tried to compare the Management, Preformance, and Expenses of these Limited Partnerships (LP’s). I was able to compare the Prospectus of 10 LP’s that I downloaded from TD’s Webbroker Initial Offerings site.

The problem I found is that when these LP’s record their preformance they always use after tax dollars. So I compared their Closing Net Asset Value Per Unit at the time of rollover to their Original Unit price. I also looked at the number of years that the LP had Offerings and the number of times that Net Asset Value per Unit was greater than the Original Unit Price.

What I found is that out of the 10 LP’s I compared, only 3 LP’s had a Net Asset Value per Unit that was greater than the Original Unit Price before the tax deductions on a offering over offering basis. Some of them, like Sentry Select NCE LP’s only had 1 out of 17 offerings that had been positive. Creststreet LP had 2 out of 10 offerings that were positve. 2 LP’s that you might want to think twice about, before giving them your money.

There were 2 that stood out from the rest. CMP Resource LP and Canada Dominion Resource LP are by far the best when comparing Preformance, Expenses and Management. Both of these LP’s are now owned by DMP Ltd. Both are also managed buy Dynamic Funds which is also owned by DMP Ltd.

CMP Resource LP has the best preformance record. They had 9 out of 10 offerings that had been positive. Their Offerings are normally $1000 per Unit with a minimum of $5000 buy in. But their Average Asset Value per Unit on those 10 offerings was $1242.74. That works out to be a 24% return on your money before taxes. I calculated their Average After-Tax Rate of Return on Transfer Date ends up being 95%.

Canada Dominion Resource LP would be my second choice based on their consistancy and management. They had 11 out of 16 offerings that had been positive. They are also owned and managed buy the same companies as CMP. Dynamic Funds is listed as a top preformer on TD’s Webbroker Fund Selector, and they have one a number of Lipper Awards for Consistancy and Preformance.

My Third Choice would be Mavrix Explorer LP. They had 5 out 9 offerings that were positive. They are in the lower half of the group in Expenses.

It’s important to realize that if you are investing in one of these LP’s, you are most likey going to lose money. But with the Tax deductions you may come out ahead. If you are not comfortable with the risk, then I would say, just pay your tax bill.

Never Invest in something just because you are looking for a tax deduction. You should only Invest in something that makes sense to you and that you have a good chance that you are going to make money.