FAQ

The following provides answers of a general nature only to tax related questions our investors often have with respect to their investment in the Flow-Through Limited Partnerships. As such, the following is not intended to be, and should not be construed to be, legal, business or tax advice to any particular investor. Investors should consult with their own investment advisor or tax consultant to determine the tax consequences to them of a Flow-Through Limited Partnership investment.

  1. What is CEE?
  2. How Do Flow Through Shares Work?
  3. When will I receive my T5013/R15 tax forms? Will I receive a copy in the mail? When and where do I claim my tax deductions or credits?
  4. When and how do I report my capital gains?
  5. When do the shares roll over to the Mutual Fund?
  6. What are some of the provincial incentives? Am I eligible to deduct them?

What is CEE?

The resource industry faces unique business challenges. Canadian federal and provincial governments recognize these challenges and the need to encourage and support new and continuing exploration for Canadian oil, gas, and mineral resources and they do so through the provision of a number of tax deductions, allowances and credits to taxpayers engaged in qualifying mining activities. One such deduction is for expenditures known as Canadian Exploration Expenses (CEE). CEE represents certain expenditures incurred in the exploration and development stages of the mining life cycle, including expenses incurred for the purpose of determining the existence, location, extent, or quality of an oil, gas, or mineral resource in Canada, or for the purpose of bringing a new mine in Canada into production. CEE does not include expenses related to a mine that is in commercial production. For more detailed information on CEE, please consult your tax advisor.

How Do Flow Through Shares Work?

Canadian companies that meet certain criteria and are engaged in resource exploration are permitted to write off 100% of qualifying CEE incurred in carrying out their activities or, as a means of raising capital for exploration, "flow-through" CEE incurred by the company to investors in a certain class of its shares known as "flow-through" shares. The result is that qualifying, tax-deductible CEE incurred by the company effectively becomes tax deductible CEE to the "flow-through" share investor.

When will I receive my T5013/R15 tax forms? Will I receive a copy in the mail? When and where do I claim my tax deductions or credits?

For a given year, the information necessary for producing Form T5013/R15 is compiled and forwarded to your advisor's back office no later than March 31 of the following year. Your advisor's back office will then prepare and mail the T5013/R15 to you. If you haven't received a copy of your T5013/R15 or believe you may be missing some information, you should contact your financial advisor to request a copy. To assist investors with the tax reporting of "flow-through" share investments, we have produced a Tax Guide for Flow-Through Shares that is updated each year and contains useful tips on how to report deductions and credits, if any, on your income tax return. If you did not receive a copy in the mail, you can visit the "Tax Information" section of either the CMP® Resource LP or Canada Dominion Resource webpage to download a copy. For more detailed regarding the preparation of your income tax return, please consult your tax advisor.

When and how do I report my capital gains?

The cost of a "flow-through" share to an investor is deemed to be nil. In most circumstances, "flow-through" shares will be considered capital property to the investor. Accordingly, the investor will realize a capital gain on a disposition thereof equal to the disposition proceeds. Since the "flow-through" shares purchased by the limited partnership are deemed to have an adjusted cost base of zero, any shares sold by the limited partnership will give rise to capital gains which will be allocated to limited partners. Capital gains realized by the limited partnership in a given year are reported on the T5013/R15 produced by your advisor's back office and mailed to limited partners in March of the following year. Capital gains realized by the partnership (together with any dividends, interest, business losses and other expenses) allocated to limited partners will result in an adjustment to each limited partner's adjusted cost base of the partnership units. After the partnership has "flowed through" the CEE to its limited partners, partnership assets are transferred on a tax-deferred basis to a mutual fund ("Rollovers"), currently DMP Resource Class, part of Dynamic Managed Portfolios Ltd., (the "Fund"), in exchange for units of the Fund. The partnership is then dissolved, also on a tax-deferred basis and the former limited partners become unitholders in the Fund. Unitholders will be informed of their ACB of the Fund units received shortly after the transfer of the assets. ACB information in respect of historical limited partnership offerings and subsequent Rollovers can be found under the "Tax Information" section of either the CMP® Resource LP or Canada Dominion Resources webpage. Should an investor sell their units in the Fund, or contribute them to their RRSP, the investor will be considered to have disposed of their Fund units and, accordingly, will realize a capital gain or loss. For additional information, please consult your tax advisor.

When do the shares roll over to the Mutual Fund?

The limited partnerships have a mandatory holding period of up to 2 years. Limited partnership units are not traded on any recognized exchange during this time, and can only be transferred in certain situations (see the prospectus for examples of when transfers are permitted). Once the holding period expires, partnership assets are transferred into a mutual fund on a tax-deferred basis and the limited partnership is dissolved. Units of the mutual fund are distributed to former limited partners within two months of the date of transfer.

What are some of the provincial incentives? Am I eligible to deduct them?

Some provinces offer additional tax incentives over and above CEE deductions. Though the bulk of the deductions come from CEE, there may be additional deductions and/or credits offered by various provinces which may also be claimed by limited partners. These amounts will be reported on your T5013/R15 for the appropriate tax year. Residents of Saskatchewan will require a copy of the SK-METC form from their broker in order to file for any eligible investments made in the province in that year. For additional information please consult your tax advisor.

Note: In order to claim these additional credits or deductions, you must be a resident of the province in question. So, for example, if there are additional credits offered by the province of Saskatchewan for qualified investments, you would need to be a resident of Saskatchewan in order to file for those credits on your provincial income tax return.