Types of investments

There are two ways that you can invest in flow-through shares (FTSs):

• directly by purchasing FTSs from a principal-business corporation (PBC); or
• indirectly by purchasing an interest in a partnership (including a limited partnership) that purchases FTSs from one or more PBCs.

What kind of share qualifies?
Private and public offerings
Shares and partnership units
What is a partnership?
What is a limited partnership?
How does the FTS program work with limited partnerships?

What kind of share qualifies?

The shares must be newly issued shares that have the attributes generally attaching to common shares of the PBC. FTSs also include a right to purchase FTSs, usually known as flow-through warrants (FTWs).

Prescribed shares do not qualify as FTSs.

Private and public offerings

A resource company may issue shares through private placements of new shares or public offerings to investors at large.

Shares and partnership units

You can benefit from the FTS program by either investing in the shares of a PBC or by investing in a partnership (which includes a limited partnership) that in turn invests in one or more PBCs. A person would generally invest in a partnership by acquiring units of such a partnership.

What is a partnership?

The Income Tax Act does not define a "partnership", but a partnership is usually the relationship between persons who conduct a business in common with the belief they will make a profit. See S4-F16-C1: What is a Partnership?.

What is a limited partnership?

It is a partnership where typically, the general partner manages the business and the limited partners contribute capital and share in the profits and losses but do not actively participate in the business. The limited partners generally have limited liability for debts of the partnership.

How does the FTS program work with limited partnerships?

Investors acquire units in a limited partnership. The funds are then used to purchase the FTSs of one or more PBCs. The PBCs will renounce qualifying expenses to the partnership by issuing T101 slips, Statement of Resource Expenses, in the name of the partnership. The renounced expenses cannot be used as a deduction in computing the partnership's net income. The partnership must then allocate the renounced expenses among the partners by issuing Form T5013A, Statement of Partnership Income for Tax Shelters and Renounced Resource Expenses.