Non-Canadian Resident Taxation
To download U.S. resident taxation information, please click here.
For Canadian taxation information, please click here.
Introduction
The following information is provided to assist individual U.S. unitholders in reporting 2007 Penn West Energy Trust (“Penn West”) distributions received on their Internal Revenue Service Form 1040, “U.S. Individual Income Tax Return” (“Form 1040”). This summary is of a general nature and is not intended to constitute legal or tax advice to any holder or potential holder of Penn West units. Readers should consult with their legal or tax advisors as to their particular tax consequences.
U.S. unitholders
The following summary applies if you are a unitholder who is a citizen or resident of the United States under the Internal Revenue Code (United States).
Trust units held within a Qualified Retirement Plan
If you hold your trust units within a Qualified Retirement Plan, NO AMOUNTS are to be reported on your 2007 IRS Form 1040-U.S. Individual Income Tax Return.
Trust units held outside of a Qualified Retirement Plan
The following table applies if you hold your trust units outside a Qualified Retirement Plan.
If |
Then |
You hold trust units through a broker or other intermediary… |
You will receive all necessary tax form(s) directly from your broker or intermediary, not from Penn West’s transfer agent or Penn West Energy Trust. |
You are a registered unitholder… |
You will receive Forms 1099-DIV and NR-4 forms directly from the transfer agent (CIBC Mellon). |
In consultation with its U.S. tax advisors, Penn West believes that the Penn West trust units should be properly classified as equity in a corporation rather than debt. The dividend component of the distributions is based on Penn West’s current and accumulated earnings and profits determined in accordance with U.S. income tax principles. These dividends should be “qualified dividends” for U.S. federal income tax purposes subject to the reduced rate of tax (15%) applicable to long-term capital gains. Accordingly, the amount included in Line 1b of the Form 1099-DIV should be reported as a “qualified dividend” on Line 9b of Form 1040, unless the factual situation of the individual U.S. unitholder determines otherwise. Commentary on page 23 of the Form 1040 Instruction Booklet for 2007 provides guidance in making this determination.
Trust distributions are subject to a 15% Canadian withholding tax that is withheld and remitted on behalf of U.S. unitholders. Where trust units are held outside of a qualified retirement plan, the full amount of withholding tax paid may be used to offset a portion of the U.S. tax liability. The amount of withholding tax included on Line 6 of Form 1099-DIV representing the amount of foreign tax paid should be reported on Form 1116, "Foreign Tax Credit (Individual, Estate, or Trust)". Information regarding the amount of Canadian tax withheld in 2007 should be obtained from your broker or other intermediary. This information is not available to Penn West.
Cash distribution schedule
The following schedule outlines for income tax purposes the cash distributions paid in 2007 and the taxable portion of each distribution per trust unit:
2007 Cash Distribution Information for U.S. Unitholders ($/unit) |
|||||||
Record Date |
Payment Date |
$CDN |
$US |
||||
Cash Distribution |
Qualified Dividend |
Return of Capital |
Exchange |
|
Return of Capital Amount $US |
||
Dec 29 2006 |
Jan 15 2007 |
0.34 |
0.34 |
0.00 |
.8581 |
0.291754 |
0.00 |
Jan 31 2007 |
Feb 15 2007 |
0.34 |
0.34 |
0.00 |
.8480 |
0.288320 |
0.00 |
Feb 28 2007 |
Mar 15 2007 |
0.34 |
0.34 |
0.00 |
.8547 |
0.290598 |
0.00 |
Mar 30 2007 |
Apr 13 2007 |
0.34 |
0.34 |
0.00 |
.8674 |
0.294916 |
0.00 |
Apr 30 2007 |
May 15 2007 |
0.34 |
0.34 |
0.00 |
.9036 |
0.307224 |
0.00 |
May 31 2007 |
Jun 15 2007 |
0.34 |
0.34 |
0.00 |
.9347 |
0.317798 |
0.00 |
Jun 29 2007 |
Jul 13 2007 |
0.34 |
0.34 |
0.00 |
.9404 |
0.319736 |
0.00 |
Jul 31 2007 |
Aug 15 2007 |
0.34 |
0.34 |
0.00 |
.9384 |
0.319056 |
0.00 |
Aug 31 2007 |
Sept 14 2007 |
0.34 |
0.34 |
0.00 |
.9466 |
0.321844 |
0.00 |
Sept 28 2007 |
Oct 15 2007 |
0.34 |
0.34 |
0.00 |
.1.0037 |
0.341258 |
0.00 |
Oct 31 2007 |
Nov 15 2007 |
0.34 |
0.34 |
0.00 |
1.0527 |
0.357918 |
0.00 |
Nov 30 2007 |
Dec 14 2007 |
0.34 |
0.34 |
0.00 |
.9992 |
0.339728 |
0.00 |
Total per unit |
4.08 |
4.08 |
0.00 |
- |
3.79015 |
0.00 |
|
*Source – Bank of Canada nominal noon exchange rate on record dates ($CDN/$US). These rates will apply for registered unitholders. Non-registered unitholders should use other appropriate exchange rates.
Note: The taxable portions of the 2007 distributions for U.S. residents were determined to be 100%, and the return of capital portion was 0%.
Basis of units for capital gains purposes
Any return of capital portion of distributions affect the basis in your units. Since the return of capital for 2007 is nil, there should be no effect on cost basis. Please contact your broker or financial advisor for exact calculations.
Disclaimer
This information letter is a general guideline and not intended to be legal advice to any particular holder or potential holder of Penn West. This information is not exhaustive of all possible U.S. income tax considerations.
Unitholders or potential holders of Penn West should consult their own legal and tax advisers as to the particular tax consequences of holding their Penn West units.
What are the tax implications on distributions for non-Canadian residents?
The following is provided for general information only. Unitholders who are not residents of Canada for income tax purposes are encouraged to seek advice on distribution taxation from a qualified tax advisor in his/her country of residence.
A portion of monthly distributions (the taxable portion) made to non-residents of Canada is generally subject to a 25 percent withholding tax in accordance with the Income Tax Act of Canada. Some countries, such as the United States , have a tax treaty with Canada and are subject to a reduced withholding tax of 15 percent. Also, for US residents, Penn West distributions are considered "qualifying dividends" as Penn West Energy Trust is considered a "qualified foreign corporation" under the US Internal Revenue Code (IRC) and therefore US unitholders are entitled to a reduced (15%) tax rate in the United States .
On December 6th, 2004 the Government of Canada announced significant legislative changes to the non-resident withholding tax provisions that became effective January 1, 2005 . A new 15 percent withholding tax will be applied to the trust distributions (income and return of capital ) paid to non-residents of Canada . This withholding tax is not modified or overridden by any existing reciprocal tax treaties with Canada.
The effect of this new legislation on residents of the U.S. is that trust distributions will be subject to a 15% withholding tax. U.S. resident investors will currently qualify for a U.S. foreign tax credit on this withholding tax and will then be subject to the 15% tax rate on "qualifying dividends" from a "qualified foreign corporation".
To see historical taxation information, please click here.
