Tax efficient charitable_giving

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  • The Social Strategy Group
  • The Social Strategy Group
  • Tax efficient charitable_giving

    1. 1. Tax Efficient Charitable Giving with Mineral Fields
    2. 2. <ul><li>The most important day for Charities and their fund-raising efforts, as well as, for donors wanting to give. </li></ul><ul><li>WHY? </li></ul><ul><li>Capital gains tax was eliminated for donations of publicly listed securities (e.g. stocks, bonds and mutual funds) </li></ul>
    3. 4. <ul><li>If an investor donates cash they only receive tax savings through federal and provincial donation tax credits. </li></ul><ul><li>But if an investment is made in a flow-through limited partnership the investor receives a tax deduction as well as tax credits in the year of investment, and then again when the LP is rolled over tax-free into a mutual fund they receive additional tax deductions by donating the mutual fund shares in-kind to their preferred registered charity or foundation of choice. </li></ul>
    4. 5. <ul><li>Flow-through securities are one of the few remaining tax-assisted investments available to Canadian Investors. </li></ul><ul><li>Flow-through investments exist, in part because they help the government achieve a specific policy objective which is financing the exploration and development of Canada’s natural resources. </li></ul><ul><li>Canadian resource companies are allowed to fully deduct specific exploration expenses, known as Canadian Exploration Expenses (CEE) and Canadian Development Expenses (CDE). These companies issue flow-through securities to raise capital and in turn renounce the CEE to these shareholders. The renounced CEE is fully deductible against any sources of income. </li></ul>
    5. 6. <ul><li>Investors can invest in flow-through securities indirectly through LPs. </li></ul><ul><li>LPs provide professional management and diversification. </li></ul><ul><li>LPs own a diversified portfolio of shares. </li></ul><ul><li>Most LPs have terms of less than two years. At maturity, investors exchange their partnership interests for shares in open-ended mutual fund shares. </li></ul><ul><li>The adjusted cost base of the mutual fund shares is generally zero and any tax liability is deferred until redemption of the mutual fund shares. </li></ul><ul><li>Investing in flow-through LPs is an important tool in tax planning. They can be used to reduce income tax, offset capital losses incurred on other holdings and in other ways - most notably for charitable donations. </li></ul>
    6. 7. <ul><li>Mining Exploration and Development </li></ul><ul><li>Oil and Gas Exploration and Development </li></ul><ul><li>Combination of these two </li></ul>
    7. 8. <ul><li>Pursuant to the 2006 Federal Budget, the Government of Canada introduced legislation, effective May 2, 2006, to eliminate the capital gains inclusion on donations of publicly-listed securities to public charities. </li></ul><ul><li>Pursuant to the 2007 Federal Budget, the Government extended this to Private Foundations to put all Charities on equal footing. </li></ul><ul><li>There is no capital gains inclusion for the donor at the time of donation if transferred “in-kind”. </li></ul><ul><li>The resulting mutual fund units typically have a zero adjusted cost base and generally there will be a capital gain when you sell them. You can avoid payment of tax on the gains and help a charity at the same time, if you donate the shares. A win-win for you and the Charity. </li></ul>
    8. 9. <ul><li>Below is an illustration of an Accredited Ontario investor in the top marginal tax bracket (46.41%) comparing the cost of donating $10,000 cash or investing $10,000 in a MineralFields Flow-Through Limited Partnership and donating the rollover proceeds after the investment value declines 25%, stays the same or gains 25%. </li></ul>1. Amounts are approximate. Does not factor in Alternative Minimum Tax. 2. Canadian Exploration Expense (CEE) deductions. 3. The investor’s total gifts for the year is assumed to be less than 75% of their total income in the same tax year and other donations of at least $200 have already been made. Investment values shown are for illustration purposes only and not meant as a forecast of future valuations. The mutual fund shares donated have an assumed ACB equal to zero.
    9. 10. <ul><li>1. Investors purchase units in a flow-through limited partnership. </li></ul><ul><li>2. The limited partnership uses the proceeds to purchase flow-through shares from a variety of resource companies. </li></ul><ul><li>3. The resource companies use the capital raised from the shares on exploration expenses that qualify for the Canadian Exploration Expense (CEE) deduction. </li></ul><ul><li>4. The CEE is renounced by the resource companies and passed onto the flow-through limited partnership. </li></ul><ul><li>5. The limited partnership then allocates it to investors in proportion to their investment allowing them to claim the CEE against taxable income, amounting to a 100% tax deduction. Additional federal and provincial tax credits increase an investor ’ s tax savings further. </li></ul><ul><li>6. After 4-12 months, the limited partnership is dissolved or rolled-over into a mutual fund issuing equivalent units to investors, where they may donate the units to any registered Canadian charity or foundation and claim donation tax credits with a charitable donation receipt issued by the charity or foundation. </li></ul>
    10. 11. <ul><li>MineralFields and Pathway Asset Management are committed to achieving outstanding returns for investors in Canada’s mining and energy sectors with the highest possible income tax incentives. </li></ul><ul><li>As one of Canada’s fastest growing companies, Pathway- MineralFields has raised over $846 million, since our inception in 2002 and has launched almost 100 flow-through limited partnerships along with a diversified family of five corporate class mutual funds called Pathway Multi Series Fund Inc. </li></ul><ul><li>Pathway- MineralFields continues to be the preferred choice for quality, tax efficient investment solutions. We endeavor to provide maximum tax savings through mining flow-through limited partnerships and initiate early rollovers when it is most advantageous for limited partners. As a result of our unique five layered due diligence team, Pathway- MineralFields has achieved the top performance return (NAV) for three of the past five years. </li></ul>
    11. 12. <ul><li>To fulfill investors’ long term financial goals, Pathway Asset Management offers a selection of five professionally-managed and diversified corporate class mutual funds including Canadian Flex™ Series, Resource Flex™ Series, Flex Dividend and Income Growth™ Series, Explorer Series and Energy Series. These allow investors the flexibility to switch between different investment objectives or risk levels without incurring taxable consequences. </li></ul><ul><li>Our expertise in the natural resource sector comes from a team of leading industry specialists, including our two full-time mining analysts, our portfolio management team from Pathway Investment Counsel Inc. and strategic affiliations with Mueller Behavioural Analytics Inc. and Watts, Griffis and McOuat. </li></ul><ul><li>Pathway- MineralFields resource flow-through offerings are available by offering memorandum through most mutual fund and investment advisors as well as exempt market dealers across Canada. </li></ul>
    12. 18. <ul><ul><li>Disclaimers: </li></ul></ul><ul><ul><li>Flow-through Shares are considered speculative in nature. Aside from tax benefits, investors should consider whether the Units have sufficient merit solely as an investment. In addition, the purchase of units involves significant risk factors as set out in the prospectus or offering memorandum. </li></ul></ul><ul><ul><li>The comments included in the publication are not intended to be a definitive analysis of tax law: The comments contained herein are general in nature and professional advice regarding an individual’s particular tax position should be attained in respect of any person’s specific circumstances. </li></ul></ul><ul><ul><li>The opinions, estimates and projections contained herein are those of the author as of the date hereof and are subject to change without notice. This document contains certain forward-looking statements, relating to Pathway Flow-Through Limited Partnership’s (the “Partnership”) business, operations and the environment in which it operates, which are based on the Partnership’s operations, estimates, forecasts and projections. All statements other than statements of historical fact may be forward-looking statements. These forward-looking statements are often, but not always, identified by the use of words such as “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “predict”, “potential”, “respecting”, “intend”, “could”, “might”, “should”, “believe” and similar expressions. These statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that are difficult to predict, or are beyond the Partnership’s control. </li></ul></ul><ul><ul><li>A number of important factors could cause actual outcomes and results to differ materially from those expressed in these forward-looking statements. Consequently, readers should not place undue reliance on such forward-looking statements. In addition, these forward-looking statements relate to the date on which they are made. The Partnership disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. </li></ul></ul>

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