Sometimes the decisions of what type of account to use are complicated. Here is a little piece I wrote for someone awhile ago (which has now come true!)

For example, let's assume you bought $5000 worth of WEL at .05, and then the price of WEL goes to .20. Three scenarios (all discussion in this post assumes someone is in the top marginal tax rate of 46% for a high-income earner):

a. Non-registered account: Invest $5000 Grows to $20,000 Capital gain is $15000, of which half is taxable - estimated taxes: $3450.
b. RSP account: Invest $5000 (get tax reduction of $2300). Grows to $20,000 and withdraw. Tax is on $20,000 - estimated tax: $9200 (less original tax reduction of $2300 = total net taxes of $6900)
c. TFSA: Invest $5000 Grows to $20,000 Withdraw the funds tax free.

I did not add the Flow-through scenario at that time, but can add it now:
d. Buy Flow-through: Invest $5000 (get tax reduction of $2300 and tax credits of $750 - the next year you would have to pay tax of $345 on the tax credits received in the prior year). The cost base on the Flow-through shares is now ground down to zero. Share prices then rise so the shares become worth $20,000 and you sell. You now have a capital gain of $20,000 of which half is taxable at 46%. Therefore, net tax is $4600 - original savings of $2300 - net of tax credits $405 = $1895. [In Manitoba, we have another provincial tax credit of 20% on Flow-through money invested in Manitoba exploration (e.g. Wildcat), so the picture is even better.]

Which is best? TFSA is best, IMO. After that, flow-through to the extent that you can use the tax credits. RSP is okay in that it saves you some taxes when you put the money in and it can grow in a tax-free environment - so it doesn't trigger tax everytime you buy and sell, but you get taxed at full rate when it comes out (you lose the capital gains advantage in an RSP). The idea of the RSP was that you would withdraw from it when you retire and have a lower annual income after leaving employment. However, many folks still have higher incomes in their later years and withdrawals from the RSP are getting taxed at relatively high tax rates (especially if they continue to be active in the investment world). Also, if you have money in an RSP or RIF when you pass away, ALL the gains as valued at your passing come into income in the year of your passing and is taxed at the highest tax rate, so 46% of the accumulated value goes to the government (when the first spouse passes away, it rolls over to the surviving spouse, but when the second person passes away - then the tax grab happens). So the RSP seems nice but it does have some nasty sides to it.

One way in which I am planning to use an RSP, and I have a lot of unused room to use from previous years, is to effectively clear my house mortgage tax free. For example (not real numbers), let's assume I owe $80,000 on my house mortgage. Between my spouse and myself, I have enough RSP contribution room left to contribute $80,000 to our RSP's. I then make investments in stocks and, as I make capital gains, I put half the capital gains into my RSP and reinvest them, and I use the other half to pay down my mortgage. By way of illustration, let's assume that I have $50,000 cash to work with. I could partially pay down my mortgage, but instead I invest it in a non-registered account. In the first year I make gains of $20,000. I normally would have to pay income tax on half of the gain, so potentially $4600 of tax if I am in the top bracket. Instead, I contribute $10,000 to my RSP and get to reduce my taxable income by $10,000 as a result - completely offsetting the $10,000 taxable amount of the capital gain - meaning there is no tax to pay on the gain. I then reinvest the $50,000 I started with in the non-registered account, I also invest the $10,000 that is in my RSP, and apply the other $10,000 to pay down my mortgage. Over a few years time, I plan to clear my entire mortgage debt this way without paying any tax on the gains I am making, without needing to use the $50,000 of cash I started with, adn without needing to tap into my employment income. This is how I am seeing the RSP working for me.

I hope this might be helpful to some in thinking about which way is best to invest. From the newspaper article, it sounds like there may be some Wildcat Flow-through shares offered yet this year.

Note that if anyone does not already have a TFSA account open, you are missing out on a great opportunity -- DO IT NOW before the year-end comes and you miss out on $5000 worth of contribution room. You do not need to contribute much now if you can't afford it -- but by opening the account this year, you will not lose the $5000 of room that comes to you just for having had the account started in the year 2009.

NL