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Strategies & Market Trends : Ride the Tiger with CD
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To: sooner or later who wrote (207666)12/13/2011 4:58:42 PM
From: I_C_Deadpeople  Read Replies (2) of 312980
 
In simple terms, the cost of a flow thru share is 100% deductible and the cost base goes to zero. So, if you buy a flow thru for $10 that is a 100% deduction at a 50% tax rate the net cost $50. The cost base of the share then goes to $0, so if you sold it for $100 later and paid a 25% tax rate you would net $75. Thus, your $100 investment nets you $125.

The flow thru concept provides an instant tax break which is why they always sell for higher than the market price.
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