/NOT FOR DISSEMINATION IN THE UNITED STATES OF AMERICA/
CALGARY, March 6 /CNW/ - Cathedral Energy Services Income Trust (the "Trust" - TSX: CET.UN) is pleased to provide the following information to assist Canadian and U.S. holders of trust units ("Unitholders") of the Trust in the preparation of their income tax returns. This information is of a general nature only and is not intended to be, nor should it be construed to be, legal or tax advice to any Unitholder, or potential Unitholder of the Trust. Unitholders and potential Unitholders should consult with their own tax advisors with respect to their particular circumstances.
Canadian
The following information provided by the Trust is intended to assist Canadian resident Unitholders who are individuals in reporting distributions from the Trust for preparation of their 2008 T1 Personal Income Tax Return. Distributions declared by the Trust for 2008 will be comprised of a combination of: i) taxable trust income (86.90000%); ii) taxable foreign non-business income (11.67143%); and iii) capital gains (2.67143%) less foreign non-business tax paid (1.24286%), except as described below. No portion of the declared 2008 distributions is considered a return of capital.
The information contained herein is based on the Trust's understanding of the Income Tax Act (Canada) ("Act") and the regulations there under, and is provided for general information only. Unitholders are advised to consult their personal tax advisors with respect to their particular circumstances.
The Trust qualifies as a mutual fund trust under the Act and as such, trust units are qualified investments for registered retirement savings plans ("RRSPs"), registered retirement income funds ("RRIFs"), registered education savings plans ("RESPs"), and deferred profit sharing plans ("DPSPs"), all as defined in the Act. Unitholders who hold their trust units in a RRSP, RRIF, RESP, or DPSP need not report any income related to trust unit distributions on their 2008 Income Tax Return. A Unitholder that does not hold his or her trust units in an RRSP, RRIF, RESP or DPSP, must report taxable amounts allocated by the Trust in 2008 to the Unitholder in the Unitholder's 2008 Income Tax Return.
This taxable amount will be reported on a "T3 - Statement of Trust Income and Allocations and Designations" ("T3 Slip") that should have been issued and mailed to all Unitholders on or before March 31, 2009. Canadian Unitholders who hold their trust units through a stockbroker or other intermediary should receive tax reporting information from that stockbroker or other intermediary.
During 2008, taxable distributions (based upon Record Date) totaled $0.84 per trust unit and all distributions were paid in cash.
United States
The following information is being provided to assist U.S. individual Unitholders in reporting distributions received from the Trust during 2008 on their Internal Revenue Service ("IRS") Form 1040, "U.S. Individual Income Tax Return" ("Form 1040").
This summary is of a general nature only and is not intended to be legal or tax advice to any particular Unitholder or potential Unitholder. Unitholders or potential Unitholders should consult their own legal and tax advisors as to their particular tax consequences of holding the Trust's units.
The Trust has not received an IRS letter ruling or a tax opinion from its tax advisors on these matters.
Qualified Dividends
In consultation with its U.S. tax advisors, the Trust believes that its trust units should be properly classified as equity in a corporation, rather than debt, and that dividends paid to U.S. individual Unitholders should be "qualified dividends" for U.S. federal income tax purposes. As such, the portion of the distributions made during 2008 that are considered dividends for U.S. federal income tax purposes should qualify for the reduced rate of tax applicable to long-term capital gains. However, the individual taxpayer's situation must be considered before making this determination.
Trust Units Held Outside a Qualified Retirement Plan
With respect to cash distributions paid during the year to U.S. individual Unitholders, 100% percent should be reported as "qualified dividends".
The portion of the distributions treated as "qualified dividends" should be reported on Line 9b of Form 1040, unless the fact situation of the U.S. individual Unitholder determines otherwise. Commentary on page 21 of the Form 1040 Instruction Booklet for 2008 with respect to "qualified dividends" provides examples of individual situations where the dividends would not be "qualified dividends". Where, due to individual situations, the dividends are not "qualified dividends", the amount should be reported on Schedule B - Part II - Ordinary Dividends and Line 9a of Form 1040.
U.S. Unitholders are encouraged to utilize the Qualified Dividends and Capital Gain Tax Worksheet of Form 1040 to determine the amount of tax that may be otherwise applicable.
The taxable portion (for Canadian income tax purposes) of the distributions is subject to a minimum 15% Canadian withholding tax that is withheld prior to any payments being distributed to Unitholders. Where trust units are held in a cash account, we believe the full amount of the withholding tax should be creditable, subject to numerous limitations, for U.S. tax purposes in the year in which the withholding tax is withheld. Where Trust units are held in qualified retirement account, the same withholding tax applies but the amount is not creditable for U.S. tax purposes.
The amount of Canadian tax withheld should be reported on Form 1116, "Foreign Tax Credit (Individual, Estate, or Trust)". Information regarding the amount of Canadian tax withheld in 2008 should be determined from your own records and is not available from the Trust. Amounts over withheld, if any, should be claimed as a refund from the Canada Revenue Agency no later than two years after the calendar year in which the payment was paid and should not be claimed as a credit against your tax liability.
Investors should report their dividend income in accordance with this information and subject to advice from their tax advisors. U.S. individual Unitholders who hold their Trust units through a stockbroker or other intermediary should receive tax reporting information from their stockbroker or other intermediary. We expect that the stockbroker or other intermediary will issue a Form 1099-DIV, "Dividends and Distributions" or a substitute form developed by the stockbroker or other intermediary. The Trust is not required to furnish such Unitholders with Form 1099-DIV. Information on the Forms 1099-DIV issued by the brokers or other intermediaries may not accurately reflect the information in this notice for a variety of reasons. Investors should consult their brokers and tax advisors to ensure that the information presented here is accurately reflected on their tax returns. Brokers and/or intermediaries may or may not be required to issue amended Forms 1099-DIV.
Trust Units Held Within a Qualified Retirement Plan
No amounts are required to be reported on a Form 1040 where the Trust units are held within a qualified retirement plan.
-------------------------------------------------------------------------
Certain statements in this news release including (i) statements that may contain words such as "anticipate", "could", "expect", "seek", "may" "intend", "will", "believe", "should", "project", "forecast", "plan" and similar expressions, including the negatives thereof, (ii) statements that are based on current expectations and estimates about the markets in which the Trust/Cathedral operates and (iii) statements of belief, intentions and expectations about developments, results and events that will or may occur in the future, constitute "forward-looking statements" and are based on certain assumptions and analysis made by the Trust/Cathedral. Forward-looking statements in this news release include, but are not limited to, statements with respect to future capital expenditures, including the amount, nature and timing thereof; oil and natural gas prices and demand; other development trends within the oil and natural gas industry; business strategy; expansion and growth of the Trust's/Cathedral's business and operations and other such matters. Such forward-looking statements are subject to important risks and uncertainties, which are difficult to predict and that may affect the Trust's/Cathedral's operations, including, but are not limited to: the impact of general economic conditions; industry conditions; government and regulatory developments; oil and natural gas product supply and demand; competition; and the Trust's/Cathedral's ability to attract and retain qualified personnel. The Trust's/Cathedral's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do transpire or occur, what benefits the Trust/Cathedral will derive therefrom. Subject to applicable law, the Trust disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
All forward-looking statements contained in this document are expressly qualified by this cautionary statement. Further information about the factors affecting forward-looking statements is available in the Trust's current Annual Information Form and Annual Report which have been filed with Canadian provincial securities commissions and are available on www.sedar.com.
%SEDAR: 00018316E