Saving Tax in the Exempt Market

As a former financial advisor, I tried to curtail the mad rush of RSP contributions in February. Many investors feel the only way to save money on their taxes is to make a sizable contribution to their RSPs before the deadline.

In fact, the Exempt Market has a number of ways to allow you to save tax, but many of the activities require action before the year-end, NOT before RSP season ends. Here are a few ways that the Exempt Market provides solutions to lower your tax bill:

  • Flow Through Shares:

Investing in flow through shares allows the investor to claim additional tax deductions. A flow through share itself carries with it expenses for exploring and operating a company that is in the mining, oil/gas or alternative energy sector. These expenses “flow through” to the investor and could give her the ability to deduct the expenses personally.

  • Principal re-payment:

Many offerings give the investor the opportunity to receive back their own money instead of distributions, thus deferring any tax consequences until the investment comes to fruition.

  • Business losses

An offering that is in a limited partnership structure may be able to flow through business expenses to the investor. Many investors have been able to deduct these business expenses from their income in the year the expenses were spent.

 

As always, I recommend seeking professional tax advice. As the exempt market continues to grow in prominence, more and more accountants will start to seek alternative ways to bring their clients tax bill down by investing in the exempt market.

 

Marty Gunderson is an expert who helps companies navigate through the Exempt Market. He has served in a variety of leadership positions in the industry, from sales to issuer to dealer. To contact Marty, please email marty (at) idealeader.ca