The information contained herein is not intended to be an exhaustive discussion on all possible income tax consequences but a general guideline. It is not intended to constitute legal or tax advice to any holder or potential holder of trust units. Holders or potential holders of Daylight Energy common shares should consult their own legal or tax advisors as to their particular tax consequences of holding Daylight Energy common shares after the conversion has taken place.
Implications of corporate conversion for Canadian non-taxable accounts (registered accounts including RRSP accounts)
For investors holding Daylight units in TFSAs, RRSPs, RRIFs, RESPs or DPSPs, Daylight common shares are not expected to be treated any differently than Daylight trust units and the conversion should not result in an immediate tax impact. Investors holding Daylight trust units in a registered account should not need to report any amount for capital gains as a result of conversion to a corporation or income from dividends once the expected conversion takes place.
Implications of corporate conversion for Canadian taxable (non-registered accounts)
For most investors, Daylight's conversion from a trust to a dividend-paying corporation should not be considered to be a taxable event and should not trigger a capital gain or loss. The adjusted cost base prior to the conversion should continue,as the go-forward adjusted cost base for the calculation of capital gains upon a future sale of Daylight common shares for most investors. Subsequent to the conversion to a corporation, Daylight expects to pay eligible dividends to shareholders on a regular basis which should be eligible for favorable Canadian Dividend Tax Credit treatment. Implications of corporate conversion for US taxable accounts
The conversion is expected to be a tax-free rollover, so no capital gains should be triggered for most typical US investors. In the US, Daylight Energy's future qualified dividends for 2010 are not expected to be treated any differently than Daylight's trust unit distributions prior to the conversion. Both the distributions and future dividends are generally taxed at a flat 15% tax rate. For non-residents of Canada, dividends from Canadian mutual funds are generally subject to a 15% withholding at source. Starting in 2011, new tax legislation is expected to be in place in the US regarding dividends. Please consult your own tax advisor regarding these and other future changes.
Implications of corporate conversion for US non-taxable accounts
No amounts are generally required to be reported on a US Form 1040 where Daylight trust units are held within a qualified retirement plan. This is expected to be the same for Daylight common shares and future dividends in 2010.