an allowance in respect of an industrial mineral mine or a 
right to mine an industrial mineral mine for a previous year. If 
the taxpayer has not been granted an allowance or right for 
a previous year, the rate is based on the capital cost of the 
mine, the residual value of the mine, and the number of units 
of commercially mineable material estimated as being in the 
mine when the mine or right was acquired (or the number 
of units subject to the right where a right to remove only a 
specified number of units was acquired). Where an allowance 
has been granted in a prior year, the same rate is used unless 
it has been established that: 

• the number of units of material remaining to be mined in 

the previous taxation year was in fact different from the 
quantity that was employed in determining the rate for the 
most recent year for which an allowance was granted, or 

• the capital cost of the mine or right is substantially different 

from the amount that was employed in determining the rate 
for the previous year.

The disposition of an industrial mineral mine is considered to 
be on income account or on account of capital, depending on 
the facts in the particular case. 

Flow-Through Shares

The flow-through share provisions are an exception to the 
basic scheme of the ITA providing that only the taxpayer that 
incurs an expense may deduct the expense. 

The concept of a flow-through share is that an investor enters 
into an agreement with a principal-business corporation to 
subscribe for shares of the corporation, and the corporation 
uses the subscription funds to incur qualifying CEE or 
qualifying CDE, which it then renounces to the investor. 
In most arm’s-length situations, an investor will want only 
CEE, because of the rapid write-off available for these 
expenses in contrast to the comparatively slow write-off for 
CDE. Therefore, in an arm’s-length agreement between the 
corporation and the investor, the corporation will warrant that 
it will incur CEE and renounce those expenses to the investor. 

© 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms 
affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

 

Deductions, Allowances, and Credits 

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