Reducing Tax While Supporting the Economy and Your Favourite Charities

What is the best and most efficient way to give?

Our clients are among the most generous people in society. Many want to know – what is the best and most efficient way to give? 

We have found the answer to that question is through public flow-through shares with a liquidity provider. 

When you donate to a registered charity, you receive a charitable receipt resulting in a credit against your income tax.  Roughly speaking, for every dollar you give to charity, you save 50 cents of tax.  Therefore, your net cost to give $1 to charity, is 50 cents.

But, for those with high personal incomes, there is a way to give more to charity with the same money out of pocket.  Or put another way, you can give to charity with your net cost being much less than 50 cents on the dollar.

Since 1954, Canada Revenue Agency (CRA) has offered a significant tax deduction on flow-through shares, which are stock issued by junior mining companies in Canada to fund drilling and exploration. The government offers this tax incentive due to the mining industry’s important role in the Canadian economy.

To unlock the tax benefits, clients purchase these public flow-through shares and donate them to charities of their choice. The shares are then immediately sold at a discount to an institutional buyer, or liquidity provider, for cash. This liquidity provider takes on the stock market risk which is a key benefit for our clients. The charity receives the cash proceeds and issues a donation receipt to the donor, generating a second tax deduction. 

By combining these two tax policies, our clients can reduce their taxes, support Canada’s mining industry, and give more to charitable causes that they care about.

To find out if this is a suitable strategy for you, feel free to reach me at mark@covenant.ca.