Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: Can a loss be claimed when no expenses are renounced with respect to flow-through shares?
Position: No
Reasons: FTS have an acb of nil
2002-012843
XXXXXXXXXX Mohamud Jivraj
(613) 957-9796
August 27, 2002
Dear XXXXXXXXXX:
Re: Flow Through Special Warrants
This is in response to your facsimile enquiry of March 12, 2002. You ask whether deductions may be claimed in respect of special warrants that are flow-through shares ("FTS"), within the meaning of subsection 66(15) of the Income Tax Act ("ITA") when the issuer of the FTS fails to renounce any expenses to the owner of the FTS.
As discussed with you and your husband, no deductions may be claimed in the situation described above. Since no resource expenses were renounced to the FTS owner, the owner has no resource expenses to claim. Since the ITA deems the cost of a FTS to be nil, no loss can arise on the disposition of the FTS.
We are not in a position to comment on your specific situation as we are not aware of all of the relevant facts. Your concerns arise due to a completed transaction. Your local Tax Services Office should be consulted if you want to know if the above applies with respect to your transaction. For example, we are not in a position to know if a FTS was in fact issued. You stated that you did not receive any share certificates from the company. However, as a certificate is evidence of a share rather than being the share itself, the fact that you did not receive share certificates is not determinative of whether the shares were issued to you. If you paid the subscription price for shares that were never issued, you may have had a debt receivable from the company. If that debt became uncollectible, a loss may be available in respect of its disposition. These are aspects of your transaction that can only be ascertained by your local Tax Services Office after a review of all the relevant facts.
We hope that this will be of assistance.
Yours truly,
For Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
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