Investors

Paramount Energy Trust Tax Information

Unitholder Tax Information

THIS SUMMARY IS OF A GENERAL NATURE ONLY AND IS NOT INTENDED TO BE, NOR SHOULD IT BE CONSTRUED TO BE, LEGAL, BUSINESS OR TAX ADVICE TO ANY PARTICULAR HOLDER. PARAMOUNT ENERGY TRUST RECOMMENDS THAT CANADIAN AND U.S. AND NON-RESIDENT UNITHOLDERS CONSULT THEIR OWN TAX ADVISORS REGARDING THE INCOME TAX CONSIDERATIONS APPLICABLE TO THEM IN THEIR PARTICULAR CIRCUMSTANCES.

Paramount Energy Trust announces annual tax breakdowns via press release on or about March 1st of every year.  For previous years' tax information, please follow the link to our News Room archives.

TAX INFORMATION - Canadian Residents

Paramount Energy Trust qualifies as a mutual fund trust under the Canadian Income Tax Act and its Trust Units may be included as investments for Registered Retirement Savings Plans (RRSPs), Registered Retirement Income Funds (RRIFs), Registered Education Savings Plans (RESPs) and Deferred Profit Sharing Plans (DPSPs).

Under the Canadian Income Tax Act, Paramount Energy Trust is entitled to claim various deductions from its net income for tax purposes including Canadian Oil and Gas Property Expense (COGPE), resource allowance and expenses of issuing Trust Units. Such deductions will generally result in a portion of PET's distributions being considered a "return of capital" for income tax purposes. Such amounts reduce the cost base of the Units acquired and thus defer the related tax for Canadian resident Unitholders until the Units are sold.

Paramount Energy Trust has a December 31 income tax year end and each year will perform an income tax calculation and advise Unitholders as to the taxable and tax-deferred portion, if any, of distributions paid throughout the year. PET further advises that it expects its distributions to Unitholders to be 100 percent taxable for the foreseeable future.

Units held within a RRSP, RRIF, RESP or DPSP
No amount is to be reported in respect of Trust Units held within a Registered Retirement Savings Plan (RRSP), Registered Retirement Income Fund (RRIF), Registered Education Savings Plan (RESP) or Deferred Profit Sharing Plan (DPSP).

Units held outside an RRSP, RRIF, RESP or DPSP
Unitholders who hold Trust Units outside a RRSP, RRIF, RESP or DPSP and received one or more cash distributions during a calendar year will receive a "T3 Supplementary Slip". T3 slips are mailed in the month of March (deadline of March 31). Taxable income reported on the T3 slip is reported as "Other Income".

Adjusted Cost Base ("ACB") Reduction
The Adjusted Cost Base ("ACB") is used in calculating capital gains or losses on the disposition of Trust Units held as capital property by a Unitholder. The ACB of each Trust Unit is reduced by the portion of distributions received, which is not reported on the T3 slip (the "tax-deferred amount described above"). Should a taxpayer's ACB ever be reduced below zero, that negative amount is deemed to be a capital gain of the individual and the ACB is deemed to be nil. The capital gain must be reported on Schedule 3 of your T1 return.

To calculate your adjusted cost base, use the formula below:
ACB = Total cost of Units / # of Units Bought -  Return of Capital portion of per unit Distributions received to date

TAX INFORMATION - U.S. and Non-Residents

This information is of a general nature only and is not intended to be legal or tax advice to any particular holder or potential holder of Paramount Energy Trust Units. Holders or potential holders of PET Trust Units should consult their own legal and tax advisors as to their particular tax consequences of holding Tust Units.

Canadian Non-Residents

A distribution of income of Paramount Energy Trust to a Unitholder not resident in Canada will be subject to Canadian withholding tax at a rate of 25%, unless such rate is reduced under the provisions of an income tax convention between Canada and the Unitholder's jurisdiction of residence.

Information regarding the amount of Canadian tax withheld should be available from your stockbroker or other intermediary and is not available from Paramount Energy Trust.

U.S. Residents

The following information is being provided to assist individual U.S. Unitholders of Paramount Energy Trust in reporting distributions received from Paramount Energy Trust on their IRS Form 1040 - U.S. Individual Income Tax Return.

Withholding taxes
The Return on Capital taxable portion (for Canadian income tax purposes) of the distributions to U.S. Unitholders is subject to a minimum 15% Canadian withholding tax that is withheld prior to any payments being distributed to Unitholders. Beginning in 2005, the Return of Capital portion (for Canadian income tax purposes) of the distributions is also subject to a 15% withholding tax that is withheld prior to any payments being distributed to Unitholders.

Trust Units held within a Qualified Retirement Plan
No amounts are required to be reported on an IRS Form 1040 - U.S. Individual Income Tax Return.

Trust Units held outside of a Qualified Retirement Plan
Paramount Energy Trust, in consultation with its tax advisors, is of the view that the distributions paid to non-corporate Unitholders who are U.S. residents are "Qualified Dividends" under the Jobs and Growth Tax Relief Reconciliation Act of 2003.  Commentary in the IRS 2003 Form 1040 instruction booklet 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 11 - Ordinary Dividends, Line 9a of your U.S. Federal Income Tax return. PET has not received an IRS letter ruling or a tax opinion from its tax advisors on these matters.