Although flow-through limited partnerships are not suitable for all investors, they can be used to defer tax payable in the year of a capital gain. Because flow through shares provide deductions against taxable income (typically within the first two years of purchase), the deductions can be used to offset taxable income resulting from a capital gain.

Note that the flow-through limited partnership units will have an adjusted cost base (ACB) of $0, meaning that capital gains tax will be payable when you ultimately sell your units. Flow-through limited partnership units normally reduce the ACB of the units. In some cases, alternative minimum tax (AMT) may apply – particularly where there is excessive use of flow-through limited partnerships.

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