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If the excess distribution regime discussed above applies to the sale or disposition of our common shares,
the rules regarding the taxation of excess distributions will generally apply upon a sale or other disposition of the
common shares.
If the excess distribution regime discussed above does not apply to the sale or disposition of our common
shares, the difference between the amount received and the adjusted tax basis of the common shares will be a gain or
loss. If, as usually is the case, the common shares are a capital asset in the hands of the U.S. Holder, such gain or
loss will be a capital gain. If the U.S. Holder has made a QEF election with respect to the shares, the adjusted basis
will be increased by the U.S. Holder’s proportionate share of income and capital gains taken into account each year
as a result of the QEF election. If the U.S. Holder has made a mark-to-market election with respect to the shares, the
adjusted basis will be increased by the net income recognized on the common shares as a result of the mark-to-
market election. Capital gain or loss with respect to common shares generally will be long-term capital gain or loss
if the holding period for the shares giving rise to such gain or loss exceeds one year. Under current law, long-term
capital gains realized by individual U.S. Holders are taxed at reduced rates. Short-term capital gains are taxed at
ordinary income rates. The deductibility of capital losses is subject to significant limitations.
Distributions
We do not expect to pay dividends in the foreseeable future. However, subject to the PFIC rules discussed
below, a U.S. Holder must include in gross income as dividend income the gross amount of any distribution
(including the amount of any Canadian withholding tax thereon) paid by the Company out of its current or
accumulated earnings and profits (as determined for U.S. federal income tax purposes) with respect to our common
shares. A distribution on our common shares in excess of current or accumulated earnings and profits will be treated
as a tax-free return of capital to the extent of the U.S. Holder’s adjusted basis in such common shares (thus reducing,
but not below zero, the adjusted tax basis of such common shares), and thereafter as gain from the sale or exchange
of common shares. See “Sale or Other Disposition of Our Common Shares” above.
If we are a PFIC in the taxable year in which we pay a dividend or the immediately preceding taxable year,
dividends received by individual U.S. Holders generally will be taxed at ordinary income tax rates, subject to the
rules that apply to excess distributions from PFICs, as discussed above.
If we are not a PFIC in the taxable year in which we pay a dividend or the immediately preceding taxable
year, dividends received by individual U.S. Holders will be taxed to such U.S. Holder at the rates applicable to long-
term capital gains as “qualified dividend income.” However, dividend income will not be qualified dividend income
(and will be taxed at ordinary income rates) if (i) the U.S. Holder has not held its common shares for at least 61 days
during the 121-day period beginning 60 days before the ex-dividend date; (ii) our common shares are not readily
tradable on an established securities market and we are not eligible for benefits of the U.S.-Canada income tax
treaty; or (iii) the Company is a PFIC for the taxable year in which the dividend is paid or in the preceding taxable
year.
Dividends paid to a corporate U.S. Holder will be taxed as ordinary income and will not generally be
eligible for the dividends received deduction.
Surcharge on Net Investment Income; Other Tax Rules
A surtax of 3.8% (the “unearned income Medicare contribution tax”) is imposed on the “net investment
income” of certain U.S. citizens and resident aliens, and on the undistributed “net investment income” of certain
estates and trusts, in each case in excess of a certain threshold amount. Net investment income generally includes
dividends and net gain from the disposition of property (other than property held in a “non-passive” trade or
business). Net investment income is reduced by deductions that are properly allocable to such income. Special
rules determine when the unearned income Medicare contribution tax applies to distribution or income with respect
to PFICs. U.S. Holders should consult with their U.S. tax advisors concerning how these rules would apply to an
investment in our common shares.