Stocks, Bonds etc. -> Investing Tax Issues -> Flow-through shares

Tax treatment of income from investments in flow-through shares

This information is regarding investments which are held outside of RRSPs or other registered accounts.

When investors purchase shares or units of flow-through shares or flow-through limited partnerships, they are generally able to deduct the entire cost of these shares against their taxable income over a period of 2 or more years.  The adjusted cost base (ACB) of the shares is reduced by the amount deducted from income, generally being reduced to zero.  The shares in the flow-through entity are usually converted on a tax-deferred basis to mutual funds once the expenses have all been "flowed through".  When these mutual funds are sold, the entire amount is taxed as a capital gain, because of the zero ACB.

Tax tip:  Base your investment decision for flow-through shares on quality of investment as well as tax advantages.