Madam X vowed she would share her findings on Flow-Through Shares with her readers but she thinks it all might be a teensy bit technical for umm… most. We have persevered, taken clear information and possibly obscured this clarity with context.

Too Much Money?

Let us pretend we make too much money.

We, or our accountant, find that if we could write $20,000.00 off our income, our taxes would be lower. Enter Flow Through Shares. Now, Flow-Through Shares may be flowing thick on the ground but Madam X has never knowingly mired a stiletto in such a fashion, she likes the high ground, yet we know they exist and could be found in a pinch.

Diamonds Dahling

Let’s imagine a geological type from DeBeers Diamonds is tooling along Blue Sky Road, exercising his Harley when he notices an odd land formation. He slows, turns to his blonde, non-gender specific companion and exclaims, “Looks like a diamond pipe to me!”

The blonde removing helmet and shaking out curls sighs. “Why is it always about you. And your company would have to buy the land, make test drills and assess the findings. Could take months or years. It’s all too mind-numbing.”

“Flow-Through Shares”, offers the geological type phlegmatically.

“Speaking of DeBeers”, yawns the blonde, “let’s find a dark pub and have some.”

Fast Forward Two Years – same cast

“The technicals on Blue Sky Diamond mines are looking hot. Could have been a dog.”

“I love it when you talk technical, Honey”, croons our blonde doctor who now sports dark, chemically enhanced roots. “You, who lured me into Flow-Through.”

“But you have been receiving technical progress reports form DeBeers on Blue Sky since the program began”, exclaims the geologist, easing out of his leathers.

“Too mind-numbing. Leave the leathers on. I bought $20,000.00 worth of Blue Sky and they are shooting sparks, but under the contract I have to hold the Shares until next month”, pouts the doctor. “They’ve soared on early reports.”

“Bummer. The good part is: you can write off the $20,000.00 from your income but the capital cost base of a Flow-Through Share is deemed to be zero so you pay capital gains on the full price of the share when you sell it.”

“Luckily”, the brunette/blonde undulates just beyond the geologist’s reach, “I pay tax on only 50% of the capital gains as if it were a non Flow Through. Are you happy to see me or is that a big diamond in your pocket?”

Dallying with Donations

“If you donate your Flow Through Shares to a registered charity, a disposition is deemed to have occurred and you get a tax receipt for the value of the stock”, the geological type flexes his arm watching the tattooed diamonds dance. “Iridescent tattoos are coming along. I imagine your charity will love you. The hospital?”

“So, I write off my original investment, pay capital gains on the full price of the stock when I make the donation and then get a tax receipt for the value of the stock at the time of the donation. At the end of the day, maybe my real cost is $5,000.00. The hospital? No way. The Humane Society needs the money. I’ll take hamsters over humans any day.”

“You’re just a self promotion machine! Thinking of diamond studded collars?“

“Trying to think of how to keep this diamond in my navel.”

Further research reveals the well established DeBeers would not raise money by issuing Flow Through. Flow through shares are for junior, or cash shy, exploration companies.