A couple of months ago I wrote a few posts on Flow Through Shares (and limited partnerships). For a brief explanation of what a Flow Through Share is, click here to read my original post. Additionally, you can read a follow up post on one way some aggressive investors have incorporated them into their portfolios through 2 year ladders.
First, I want to re-iterate that any flow-through investment is generally a very risky proposition – so make sure to consult with a qualified financial advisor if you want more information – they are certainly not for the faint of heart!
There are a couple of notes that I wanted to add to the original discussion: 1) The difference between Flow Through Shares and Flow Through Limited Partnerships and 2) The difference between Flow Through Shares and Super Flow Through Shares.
A Flow Through Share is just an investment in one company. A Flow Through Limited Partnership is a group of companies that qualify for the tax credits that are lumped together for the investment issue. When you look at the prospectus for a flow through share, there will be a lot of information on the one company you would be investing in. On the other hand, with a flow through limited partnership prospectus, you are normally given stats and performance of the manager of the limited partnership (who invests in a portfolio of companies eligible for the special credits). You can get more diversification with the limited partnership; you can get more information about the actual investment with a flow through share.
With respect to Flow Throughs versus Super Flow Throughs: A flow through allows for a 100% deduction against all sources of income of the investor. A super flow through allows for MORE than a 100% deduction – in fact it can be as high as 150% (in Quebec). This is due to an additional 15% federal exploration tax credit and (depending on the issue) additional provincial credits and deductions.
If you like this blog, you might like my book:
RRSPs: The Definitive Book on Registered Retirement Savings Plans