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Donations of Flow-Through Shares

Make a substantial donation at a relatively low cost.

        

Who is this type of giving for?

Anyone with publicly listed flow-through shares in their portfolio. For donations made through an intermediary: anyone with a high taxable income and the financial capacity to make a significant initial contribution.

        

Donor benefits

  • Immediate gift at a lower cost.
  • Donation of flow-through shares (FTSs) acquired before March 21, 2011: No capital gains tax applicable at the federal or provincial level.
  • Donation of FTSs acquired after March 21, 2011: Tax-exempt status is limited to the accrued value compared with the actual purchase cost. However, for shares in Quebec businesses that meet specific criteria, an additional deduction makes the entire capital gain exempt from provincial tax.
  • See the immediate impact of your donation.
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Additional information

Certain corporations in the mining, oil and gas, and renewable energy sectors may issue flow-through shares (FTSs) to help finance their operations. Among the tax incentives for investors are several deductions and credits that reduce the cost of acquisition for taxation purposes to zero.

In March 2011, the federal budget introduced measures to limit capital gains exemptions on the donation of FTSs. Under these provisions, only the portion of the gain exceeding the original cost of the shares is now eligible for an exemption in a donation scenario. These conditions apply to FTSs acquired by way of an agreement entered into after March 21, 2011. Investors who held these types of shares prior to this date can still take advantage of the old rules.

The Quebec government has harmonized its own measures in this regard but maintained the capital gains deduction resulting from the disposal of FTSs.

There are additional provincial deductions available to Quebec residents if the exploration activities being financed are based in Quebec. Note, however, that a reduction in these deductions was announced in the budget speech of June 4, 2014.

Some market intermediaries will assume the donor’s risk in exchange for a fee to be applied when the shares are sold. The net cost of the donation would therefore be contingent on the applicable tax deductions and the intermediary’s fees. It is important to point out, however, that in many cases the initial investment for these arrangements requires more than twice the capital outlay compared with the amount of the donation.

Donors should also be aware of the potential application of the alternative minimum tax (AMT).

Besides the AMT, several other taxation-related considerations must be taken into account to maximize tax deductions and special tax credits. It is therefore essential to ensure that the transaction is planned properly. Please talk to your accountant or tax advisor before proceeding.

The HEC Montréal Foundation does not provide financial or legal advice. The examples used here are for illustrative purposes only. Please consult your financial or legal advisor to ensure that the selected donation option takes into account your specific circumstances as well as all applicable legal and tax implications.


The HEC Montréal Foundation does not provide financial or legal advice. The examples used here are for illustrative purposes only. Please consult your financial or legal advisor to ensure that the selected donation option takes into account your specific circumstances as well as all applicable legal and tax implications.

Questions about planned giving?

Contact :

Mireille Lafond

Mireille Lafond HEC 1979
Major and Planned Gifts Advisor

mireille-c.lafond@hec.ca
514-340-7735

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