Flow-through shares-a good deal better

"Recent amendments to the so-called ""flow-through share"" rules in our income tax legislation have given a new lease on life to this once popular investment vehicle.The original ""Dome funds"" for exploration in the Beaufort sea recognized the usefulness of flow-through share arrangements, but, by and large, flow-through shares have until recently not been able to compete effectively with other tax shelter instruments-mainly , limited partnership interests.This month, Tax Notes examines the new tax rules for investing in flow-through shares.IntroductionRecent income tax amendments have helped to rekindle investor and industry interest in so-called ""flow-through shares"" as a mechanism for mobilizing funds toward mineral exploration and development activities. In competing for investment funds, flow-through shares have historically placed a distant second in terms of investor popularity, being unable to compete with the more attractive features of limited partnership arrangements. However, primarily as a result of favourable changes to the income tax law, flow-through shares may be well poised for a comeback.This article examines the income tax considerations pertaining to issuing and investing in flow-through shares, and compares the former and the new income tax rules relating thereto. Of course, inasmuch as a flow-through share issue can involve various contractual arrangements between the investor and the issuer, there is a wide range of legal and business factors that generally have to be taken into account. A discussion of these matter s is beyond the scope of this paper, which is restricted to a summary of the special income tax factors attributable to flow-through shares."