Sprott Flow-Through Limited Partnerships
What are Flow-Through shares?
The Federal Government allows Canadian resource companies that invest in the oil and gas, mining and renewable energy sectors to fully deduct certain exploration expenses, known as Canadian Exploration Expenses (CEE). To raise capital for exploration, those companies often issue flow-through shares and pass along the rights to claim the CEE to the purchasers of those shares. The shareholders are then able to deduct the CEE against their own income.
What is a Flow-Through Limited Partnership?
Flow-through limited partnerships are professionally managed diversified portfolios of flow-through shares. The amounts invested in CEE are generally 100% deductible against taxable income in the year the investment is made.
The illustration below shows how flow-through limited partnerships work:
Tax benefits of flow-through limited partnerships
The cost of flow-through limited partnerships is 100% tax-deductible in the year the investment is made. In addition, the proceeds from the disposition of the partnership are treated as capital gains and taxable only at a rate 50% of regular income.
Investing in flow-through shares effectively converts income into capital gains, allowing investors to take advantage of any capital loss carry-forwards
The following summary is of a general nature only and is not intended to be, nor should it be construed to be, legal or tax advice to any particular purchaser of units of Sprott Flow-Through Limited Partnership (the “Partnership”). Purchasers acquiring units with a view to obtaining tax advantages should obtain independent tax advice from a tax advisor who is knowledgeable in the area of income tax law and is able to determine optimal use of an investor’s federal and provincial deductions and/or credits, as well as impact, if any, on an investor’s liability for alternative minimum tax.
This offering is only made by prospectus. The Partnership’s prospectus contains important detailed information about the securities being offered. Copies of the prospectus may be obtained from your IIROC registered financial advisor. Investors should read the prospectus before making an investment decision.
This is a speculative offering. The purchase of units involves significant risks. There is no assurance of a return on a subscriber’s initial investment. Please refer to the prospectus for the complete list of risk factors associated with an investment in the units.