Less Favorable Rules for Donation of Publicly Listed Flow-Through Shares

 

Before the 2011 budget, when flow-through shares were donated to a charitable organization, the donor could receive generous tax credits and deductions that would result in little after-tax cost. This was due to the fact that the donor could take advantage of the deduction for the expenses flowed through from the corporation, the applicable federal and provincial mineral exploration flow-through tax credits, the charitable donations tax credit or deduction in respect of the value of the shares, and relief from capital gains tax, including tax on the portion of the gain attributable to the zero cost of the shares.

The budget proposed to change the rules with regards to shares acquired on or after March 22, 2011 to allow the exemption from capital gains tax only to the extent that the cumulative capital gains in respect of the disposition of the shares exceed the original cost of the flow-through shares.

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