What is a flow through share?	Flow through shares allow natural resource companies to give up certain expenses associated with their exploration activities (Canadian Exploration Expense) to the investor. They are generally issued by junior companies that are not taxable and cannot immediately use exploration expense as a deduction against their own income. The tax benefit is flowed through to the first subscriber. In addition to this basic benefit, certain classes of CEE attract additional tax benefits, Investment Tax Credits (ITCs) which are available to individual subscribers. Further, provinces enhance the provincial tax benefit to residents investing in companies resident in their province.  http://www.cra-arc.gc.ca/E/pub/tp/itnews-41/README.html>
What is a Flow Through Donation?	A Flow Through Donation is the donation of flow through shares issued to the donor under a subscription agreement. A properly structured Flow Through Donation is prearranged and gives the charity the ability to immediately sell the shares at an agreed price locking in the size of the donation and the after tax cost to the donor.
How did the June 2011 federal budget affect the donation of flow through shares?	Prior to the June 2011 federal budget, donors were exempt from paying capital gains tax on donations of publicly listed flow-through shares to registered Canadian charities. The amendments originally proposed in the March 22nd federal budget, and reintroduced in the June 6th budget, deny the exemption for the amount of the gain up to the original acquisition cost. Full details can be found on page 300 of the June 6th federal budget (click here for details). However, even after the amendments, the after-tax cost of giving is significantly less than that of making a cash donation in almost every province.
How does this affect Québec based donors?	Québec taxpayors are only subject to federal tax on the capital gain arising on a donation of flow through shares since it is the provisions of the Québec Taxation Act (QTA) that determine whether provincial capital gains tax is payable. As a result, the after tax cost of giving is now in the 16% range (unless a donor has capital losses to shelter the gain) and using our format remains a compelling fund raising tool.
Is this format applicable to corporate donations?	Under the June 6th budget proposals, the amount of a capital gain arising on the donation of flow through shares (up to the original acquisition cost) can no longer be added to a corporation's Capital Dividend Account (CDA) reducing the advantage associated with corporate donations.
What about the four month hold on Flow Through  shares for my charity?	Almost all Flow Through financings are completed under Private Placement without Prospectus and so there is a 4 month hold period restricting the sale of the shares through the market / exchange. However, securities legislation provides for off market sales within the 4 month hold period to Accredited Investors as defined in National Instrument 45-106. All the investors buying from charities are Accredited Investors and take the market risk during the hold period.
This sounds too good to be true, is it?	Any uncertainty as to tax appropriateness has been dispelled by a steady stream of Advance Income Tax Rulings from CRA and by broad adoption by prominent donors and leading charities.  PearTree principals sponsored the first CRA ruling in November 2007 and since sponsored 3 of 5 federal rulings.  We also sponsored the original and only Revenu Québec ruling in February 2010, including a positive GAAR ruling.
Best time to make a Flow Through Donation?	The final quarter of the year tends to be a typical time for donation granting and tax awareness and so Flow Through Donation requests increase proportionately.  This timing puts a donor at risk of market conditions within a short time span.  Greatest tax efficiency in fulfilling your pledge obligation is in the first two quarters when availability of flow through deals is significantly more likely.
Minimum participation?	The service is designed for major donors - minimum gift $ 100,000 with no maximum.
Who chooses the charity?	The donor is the sole decision maker. We also offer use of aDonor Advised Fund (DAF) and guarantee gift disbursement to your confirmed charities.  Using our DAF enables donor anonymity, simplifies the disbursement process and removes possible legal fees charged to a donor through their charity.
Can charities recommend the service?	Yes, we welcome the opportunity to work with public charities and private foundations. Many charities incorporate the PearTree service into their major gift fund raising strategy.  With smaller, less sophisticated organizations, we encourage use of the PearTree Donor Advised Fund as a tool.
What are the document requirements?	Involvement by donor and philanthropic advisors is encouraged. The document set is straight forward (1) Subscription Agreement for the purchase of Flow Through shares; (2) Deed of Gift under which the gift is made to the donor’s charity; and (3) Share Purchase Agreement under which the charity and end buyer agree to the purchase and sale of the shares. All documents are circulated by email, signed and returned in counterpart by fax or email / PDF to PearTree.
Do I have to wait until I file my tax return to benefit from the deductions?	For individuals making tax instalments, the advice of accountants is to immediately reduce these payments.  Under these circumstances, it is even more tax efficient to donate early in the year since a taxpayor can immediately benefit from the flow through of the exploration expenses, the resource Investment Tax Credits and the donation receipt to reduce tax instalments as early as the first instalment payment.  For those taxpayors who have deductions at source, a T1213 Request to Reduce Tax Deductions at Source form is submitted and it usually takes three to four weeks for the CRA consent.
Tax Shelter	As gifting arrangements, structured donations must be registered as a tax shelter under Federal tax law.  As a registered tax shelter promoter, PearTree ensures that each structured gifting arrangement complies with applicable tax shelter rules.
Reporting	Donors and charities are provided with a closing book, including a tax opinion from Wilson Vukelich (Robin MacKnight) LLP confirming the tax consequences of the transactions and that the transactions conform to and are consistent with the CRA Ruling precedents. The resource company and the charity provide tax information reporting directly to the participants. Peartree also reports to the participants as required by the Tax Shelter Rules.