The following information is provided to assist individual Canadian resident unitholders of NAL Oil & Gas Trust in the preparation of their 2009 Canadian Income Tax Return. The information is of a general nature only and does not address Canadian provincial or local tax treatment, and is not intended to constitute legal or tax advice to any particular holder of NAL units. Canadian resident unitholders should consult their own legal or tax advisors as to their particular tax consequences of holding NAL units.
Of the $1.12 per trust unit in cash distributions declared to unitholders in 2009 and to be included in the 2009 T3 Supplementary Information slips (T3), 100 percent is considered to be income (taxable) and no portion is considered to be return of capital.
Trust units held within an RRSP, RRIF,TFSA or DPSP: Unitholders who hold their Trust units in an RRSP, RRIF, RESP, RPP, TFSA or DPSP do not need to report any amounts for tax purposes.
Trust units held outside of an RRSP, RRIF, TFSA or DPSP: Unitholders who received distributions in 2009 outside of an RRSP, RRIF, RESP, RPP, TFSA or DPSP will receive a T3 from their broker. Canadian registered unitholders who hold their units outside of a registered plan will receive a T3 from Computershare Trust Company of Canada.
The deadline for mailing all T3 Supplementary Information slips to unitholders for the 2009 year is March 31, 2010. The income amount shown on the T3 must be reported as income by such unitholders for the 2009 year.
For U.S. tax purposes, NAL has not elected to be a partnership and, according to its U.S. tax advisors, should be treated as a corporation by its U.S. resident unitholders, with the result that under U.S. federal tax law, 100 percent of the Trust’s 2009 distributions should be considered dividends for U.S. income tax purposes.
Based on advice it has received from its U.S. tax advisors, NAL believes that the 2009 distributions paid to U.S. resident unitholders should be treated as qualified dividends under the Jobs and Growth Tax Relief Reconciliation Act of 2003 and, generally, these dividends should be eligible for the maximum U.S. federal tax rate of 15 percent applicable to qualified dividends. However, each particular U.S. resident unitholder’s situation must be considered before making this determination.
Unitholders who are resident in the U.S. for treaty purposes are subject to a 15 percent Canadian withholding tax on the distributions received from NAL. U.S. resident unitholders should receive a NR4 statement regarding, among other things, the aggregate distributions NAL paid for the year and the amount of Canadian withholding tax withheld from such distributions. Canadian withholding taxes should generally qualify for a foreign tax credit or deduction for the purposes of computing U.S. federal income taxes.
The above information is of a general nature only and does not address U.S. state or local tax treatment, and is not intended to constitute legal or tax advice to any particular U.S. resident holder of NAL units. U.S. investors should consult their own legal or tax advisors as to their particular tax consequences of holding NAL units, including the proper U.S. federal income tax treatment of distributions from NAL.