Taxes & Flow-Through - Help Required!

[theikon]

Good evening everyone,

I am hoping someone can help me with a tax question that I have. Tis the season.

Three years ago I purchased flow through in a private company. This company was subsequently bought by Daylight last year. Obviously, the flow-through came with a full tax benefit, which I claimed 3 years ago. Now that the company has been sold to Daylight, and I have sold all my Daylight shares - what tax implication does it have.

My understanding is that my cost base for my Daylight shares would be zero, and I would be responsible for paying capital gains on the full amount. Is that correct?

Here is the email my accountant sent me. I'm not sure he is clear about this

AS FOR THE DAYLIGHT, YOU DO NOT HAVE COST AND YOUR STATEMENT THAT YOU DID NOT PAY ANYTHING AND GOT FOR FREE IS TO YOUR DISADVANTAGE. YOU WILL TRIGGER A GAIN OF xxxx WE HAVE TO BRING IN SOME COST. APPARENTLY AT THE TIME OF TAKEOVER BY DAYLIGHT, THERE WAS A EXCHANGE VALUATION PLACED BY DAY LIGHT FOR YOUR OLD SHARES. SUBSEQUENTLY THEN THERE WAS SOME COST INVOLVED SUCH AS LAWYERS FEE ETC AND THIS COSTS HAS TO BE ADDED ON TO THE COST OF SHARES AS ADJUSTED COST. THIS WILL BRING YOUR PROFIT DOWN A BIT.

Thoughts? Any help would be appreciated!

[onetwo_threefour]

Originally Posted by theikon

Good evening everyone,

I am hoping someone can help me with a tax question that I have. Tis the season.

Three years ago I purchased flow through in a private company. This company was subsequently bought by Daylight last year. Obviously, the flow-through came with a full tax benefit, which I claimed 3 years ago. Now that the company has been sold to Daylight, and I have sold all my Daylight shares - what tax implication does it have.

My understanding is that my cost base for my Daylight shares would be zero, and I would be responsible for paying capital gains on the full amount. Is that correct?

Here is the email my accountant sent me. I'm not sure he is clear about this

AS FOR THE DAYLIGHT, YOU DO NOT HAVE COST AND YOUR STATEMENT THAT YOU DID NOT PAY ANYTHING AND GOT FOR FREE IS TO YOUR DISADVANTAGE. YOU WILL TRIGGER A GAIN OF xxxx WE HAVE TO BRING IN SOME COST. APPARENTLY AT THE TIME OF TAKEOVER BY DAYLIGHT, THERE WAS A EXCHANGE VALUATION PLACED BY DAY LIGHT FOR YOUR OLD SHARES. SUBSEQUENTLY THEN THERE WAS SOME COST INVOLVED SUCH AS LAWYERS FEE ETC AND THIS COSTS HAS TO BE ADDED ON TO THE COST OF SHARES AS ADJUSTED COST. THIS WILL BRING YOUR PROFIT DOWN A BIT.

Thoughts? Any help would be appreciated!

Why is your accountant yelling at you?

j/k

I can't help you. At first blush it sounds like your accountant is giving you reasonable advice, but I'm not sure about the taxation of the flowthrough and the full tax benefit you mentioned. However, if you are correct that you need to pay Capital Gains on the whole value of the shares, he's clearly trying to suggest ways that you might be able to increase your ACB from zero based on reasonable expenses incurred to convert the shares to Daylight.

[MoneyGuy]

You're more comfortable taking the advice of people you don't know on the Internet than believing your accountant? Okay....