Federal Finance Minister Michael Wilson has ruled that parties in a flow-through share agreement have up to 60 days after entering the agreement to set the price of the shares.
This marks a change from a recent income tax regulation which stipulated that a share was not eligible for flow-through if its price was set after the agreement was entered into to issue the share.
The change is intended to help the orderly marketing of flow-through shares, Wilson said.
The flow-through share program was overhauled in May, as part of the federal tax reform. On Jan 1, 1989, the popular $1.33 writeoff is to be reduced to $1 for every dollar invested by an individual in Canadian mineral exploration. (For corporations, the tax writeoff will fall to $1.16 on Jan 1, 1989, and to $1 on Jan 1, 1990.)
At the same time that the new dollar-for-dollar deduction takes effect, a new system of grants will be implemented. Under this scheme, called the Canadian Exploration Incentive Program, any corporation that uses flow- through may apply for a grant. If a company can show that it has incurred its exploration expenses, a grant amounting to 30% of those expenditures will be paid. CEIP will only provide up to $3 million per corporation per year (a ceiling of $10 million is placed on the corporation’s eligible expenses).
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