Alternatives to flow-through shares

Q – I read with interest your Q&A on flow through shares. I agree with you — they are highly risky, and what one may save on tax today, may be lost in principal invested down the road.

Do you have any favourite strategy for high-income earners with income from interest on bonds and dividends from preferreds, to defer tax? – P.G.

A – You might want to consider blending some REITs, royalty trusts, or income trusts mutual funds into your mix. Most of them provide income that is in part tax-deferred. Some are much more efficient than others, so you need to shop carefully, but some of these securities can defer taxes on more than half of the cash flow until the time when you sell the asset. At that point, you’ll only be taxed at the capital gains rate. Of course, there’s more risk involved with these than with government bonds, so you have to be prepared to make a trade-off. – G.P.