The little book of BIG TAX SAVINGS

One of the most powerful tax strategies explained in simple language.

Understand why the Government is giving over a Billion dollars of income tax deductions in 2011. Bernie Doyle
Disclaimer This, like all of our publications, is designed to provide authoritative information in regard to the subject matter covered. Although great effort has been made to provide accurate information, the author, and Pope & Company Ltd. assume no responsibility for errors, inaccuracies, omissions, or any inconsistencies herein. This document is not an offer to buy or sell any investments, or to hasten an individual to participate in any type of transaction. Always consult with an investment professional before making investment decisions.

Income Taxes can be reduced legally if you know how. Paying Income Taxes is not enjoyable; in fact it is a pain. Giving up 43-46% of your income is a painful task indeed. But you don t have to. The very wealthy know how to protect their money from unnecessary taxes and they do it legally. Their methods are available to everyone; the only thing you need to do is make yourself aware of how to do it. One of the most powerful tax deductions available goes mostly unnoticed. Even though people go to great lengths to reduce or defer their taxes. With the cost of living going up, tax strategies are more important today than ever before. If you want to grow your wealth, being skilful in reducing income taxes is essential. If you like to pay taxes then the following information will be of no use to you. But if you are interested in a legal and tested way to reduce your income tax then read on.
Top income earners pay the majority of the nations income taxes
2

Here s the story... Anyone can get these tax deductions. The Government gives 100% tax deductions. They are called Flow-through tax deductions. Q. The government loves to collect taxes, so why do they give these big tax deductions? A. The tax deductions are part of the Flow-through program. Flow-through helps several Canadian industries stay at the forefront of the global economy. The Canadian Government has a very strong interest in maintaining a world leadership role in sectors like Natural Resources and Green Technologies. As a nation we have no choice but to strive to stay a world leader in these sectors. The Global Economy is super competitive. For Canada to maintain its position we need to stimulate the industries where we can succeed. When you participate in this stimulation ( Flow-through ) you get powerful tax deductions.

How it works... In short, the Canadian Government offers very large tax deductions to stimulate industries that they want to see grow. The Canadian Government gives tax payers 100% tax deductions by channelling them through the industries that they want to see grow and flourish. Industries like the Natural Resources Sector. First, an investment is made into Flow-through eligible equities (shares). Next, the investor is then allowed to deduct the entire amount as non-taxable income in the same year as the investment. At a later date the equities are sold and the investor gets their money back.* Flow-through shares can be bought for an individual exploration company. Or a basket of different companies can be bought, much like a mutual fund, which has a diversity of different exploration companies. Either way, the entire amount invested is tax deductable.
*The amount the investor receives for the sale of the equities is dependent on the market value of the equities. Flow-through shares are usually speculative; there is no guarantee of the price that the share can be sold for.

How to get your tax deduction... There are at least 25 different companies in Canada that focus on delivering Flow-through tax deductions to Canadian citizens. The Flow-through industry follows the regulations set out the Canadian Revenue Agency. The tax deduction is entered into your T1 tax form on line number 224, indicating the Canadian Exploration Expenses that are 100% deductable. The amount of the tax deduction depends on you and which Flow-through company you work with. The tax deductions work against the income that you earned in the year you decided to participate. It is still possible to get tax deductions for 2011. Some Flow-through companies offer tax credits in addition to the 100% tax deduction which can total up to 120% for Ontario residents. These are known as Super Flow-thoughs .

Example:
Tax Considerations and Calculations. Purchase Economics shows that with Flow-through eligible shares it only costs you $540 to get $1000 worth of stock.

Sale Economics shows that upon redemption capital gains tax will be incurred. This results in after tax proceeds of $770 for a $540 net cost.

In this simplified calculation an after tax return of 42.6% can be realized on the buying and selling of a stock that has no change in value between the purchase and sale. In this example you bought for $1000 and sold for $1000. Fundamentally, you are taxed at a capital gains level (23%) instead of marginal tax rate (46%) and the difference between the two is where the return is made. The Purchase and Sale Economics reveal the fundamental the tax advantages that the Canadian government is offering. After Tax Return

Return on Investment $770 - $540 = $230

Divided by Investment $230/$540 =.4259

% After Tax Return .4259 x 100 = 42.6%

Assumptions: 1.Tax savings assume total deduction of $1000 for every $1000 invested. 2.Adjusted Cost Base: The rules governing flow-through shares set out in the Income Tax Act (Canada) generally speaking, provide that tax deductions associated with flow-through shares reduce the Adjusted Cost Base of a flow-through investment. As a result, when a flow-through investment is sold, the full proceeds of disposition are taxed as a capital gain. 3. Calculations use marginal tax rate of 46%.

The History of Flow-through tax deductions Flow-through tax deductions have existed in one form or another since 1954. The tax benefits of the Flow-through program are written specifically in provisions within the Income Tax Act. It s similar to an RRSP contribution. The Government has granted many billions of dollars in tax deductions over the years to people who participate in the Flow-through program. Flow-through tax deductions are completely legal and have survived the test of time as a sound useful tax strategy for thousands of Canadians like you. As mentioned before, the Flow-through program stimulates different industries that the Government wants to see grow and flourish. A history of over 50 years proves that it works in assisting industry as well as Canadian s who want tax deductions.

Bernie Doyle For years Bernie has worked to bring the most robust and flexible tax deductions to his clients. In my opinion, the Flow-through program offers one of the best tax deduction and tax deferral opportunities for Canadians. If nothing else, all tax payers should be aware of the tax advantages available to them from the Flowthrough program. Bernie is an investment advisor with Pope & Company Ltd., one of the oldest member firms of the Toronto Stock Exchange. For a recommendation of which Flow-through company is right for you or for a free copy of the 12page booklet Flow-through investing simply call or email Bernie. For general questions please call or email. Bernie Doyle 416-593-5546 bd@popecompany.com
Pope & Company Ltd. 40 University Ave. Suite 420, Toronto, ON, M5J 1T1