Baytex Energy Trust

Baytex Energy Trust

March 03, 2005 16:01 ET

Baytex Energy Trust Announces 2004 Canadian and United States Tax Information


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: BAYTEX ENERGY TRUST

TSX SYMBOL: BTE.UN

MARCH 3, 2005 - 16:01 ET

Baytex Energy Trust Announces 2004 Canadian and United
States Tax Information

CALGARY, ALBERTA--(CCNMatthews - March 3, 2005) - Baytex Energy Trust
("Baytex") (TSX:BTE.UN) of Calgary, Alberta is pleased to announce the
2004 tax treatment on distributions for unitholders in Canada and the
United States.

CANADIAN UNITHOLDERS

The information contained herein is intended to provide general guidance
to assist in 2004 income tax reporting for holders of Baytex trust units
who are Canadian residents. It is not intended to constitute legal or
tax advice to any holder or potential holder of Baytex trust units.
Readers should consult their own legal or tax advisors as to their
particular tax consequences of holding Baytex trust units.

For the 2004 taxation year, the treatment of distributions is 84.5 %
return on capital (taxable income) and 15.5% return of capital (tax
deferred) for Canadian unitholders.

For purposes of the Canadian Income Tax Act, Baytex Energy Trust (the
"Trust") is a mutual fund trust. Each year, an income tax return is
filed by the Trust with the taxable income allocated to, and taxable in
the hands of unitholders. Distributions paid by the Trust are both a
return of capital (i.e. tax deferred ) and a return on capital (i.e.
income). The allocation between these two streams is dependent upon the
tax deductions that the Trust is entitled to claim against royalty and
interest income received and any income the Trust earns directly. The
level of these tax deductions is primarily driven by the Trust's
resource property deductions.

Each year the taxable income portion, or return on capital, is
calculated and reported in the Trust's T3 return and allocated to each
unitholder who received distributions in that taxation year. T3
Supplementary forms are mailed to unitholders before March 31st.
Registered unitholders will receive a T3 Supplementary form directly
from the transfer agent. Beneficial unitholders will receive a T3
Supplementary form from their broker or other intermediary. The T3 form
will report only the taxable income component. This income is taxed in
the same manner as interest income. The tax deferred, or return of
capital, portion impacts the unitholder's original cost base of the
units. The Adjusted Cost Base (ACB) is used in calculating capital gains
or losses on the disposition of trust units. The ACB of each trust unit
is reduced by the return of capital portion of distributions received.
When a unitholder's ACB drops below zero during a taxation year, the
negative amount is considered by the Canada Revenue Agency (CRA) to be a
capital gain. Unitholders re-set their trust unit cost base to zero by
paying capital gains tax on the negative cost base portion.

Canadian unitholders who hold their investment in a Registered
Retirement Savings Plan, Registered Retirement Income Fund, Deferred
Profit Sharing Plan or Registered Education Savings Plan need not report
any income related to trust unit distributions on their 2004 income tax
return.

The following table sets out the tax treatment of the Canadian 2004
monthly distributions:



Record Payment Taxable Amount Tax Deferred Total
Date Date (Income) Amount Distributions
------------------------------------------------------------------------

Jan. 30/04 Feb. 16/04 $0.12675 $0.02325 $0.15
Feb. 27/04 Mar. 15/04 $0.12675 $0.02325 $0.15
Mar. 31/04 Apr. 15/04 $0.12675 $0.02325 $0.15
Apr. 30/04 May 17/04 $0.12675 $0.02325 $0.15
May 31/04 June 15/04 $0.12675 $0.02325 $0.15
June 30/04 July 15/04 $0.12675 $0.02325 $0.15
July 30/04 Aug. 16/04 $0.12675 $0.02325 $0.15
Aug. 31/04 Sept. 15/04 $0.12675 $0.02325 $0.15
Sept. 30/04 Oct. 15/04 $0.12675 $0.02325 $0.15
Oct. 29/04 Nov. 15/04 $0.12675 $0.02325 $0.15
Nov. 30/04 Dec. 15/04 $0.12675 $0.02325 $0.15
Dec. 31/04 Jan. 17/05 $0.12675 $0.02325 $0.15
----------------------------------------------
Totals $1.52100 $0.27900 $1.80
----------------------------------------------
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UNITED STATES UNITHOLDERS


This information is not exhaustive of all possible U.S. income tax
considerations, but is a general guideline and is not intended to be
legal or tax advice to any particular holder or potential holder of
Baytex units. Holders or potential holders of Baytex units should
consult their own legal and tax advisors as to their particular tax
consequences of holding Baytex units as well as to determine whether
claiming a credit or deduction for foreign income taxes is more
beneficial for you.

For the 2004 taxation year, the Trust has calculated that all 2004
distributions are taxable as dividends. None of the 2004 distributions
are a tax deferred reduction to the cost of units for tax purposes. The
Trust is of the view that the dividends qualify for the tax rate of 15%.

The Trust is treated as a corporation for United States tax purposes.
For unitholders resident in the United States, taxability of
distributions is calculated using U.S. tax rules which allow for various
deductions including accounting based depletion. The taxable portion of
the monthly distribution is determined annually by the Trust based upon
current and accumulated earnings in accordance with U.S. tax law. The
taxable portion is considered a dividend for tax reporting purposes and
U.S. unitholders should receive a Form 1099 or facsimile detailing the
total distribution received, the amount withheld, and the taxable
portion. The Trust is not required to file a Form 1099 and is providing
this information in lieu of that requirement. Some unitholders will
receive 1099s from their brokers and others may not. Information on the
1099s issued by the brokers may not accurately reflect the information
in this press release 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.

The non-taxable portion of the cash distribution, if any, is treated as
a return of the cost base. This cost base is reduced by this accumulated
amount when computing gains or losses at time of disposition. Once the
full amount of the cost base has been recovered, any additional
non-taxable distributions should be reported as capital gains.

Unitholders who are not residents of Canada for income tax purposes are
encouraged to seek advice from a qualified tax advisor in the country of
residence for the tax treatment of distributions. Under Canadian tax
legislation, monthly distributions payable to non-residents of Canada
are normally subject to a withholding tax of 25% as prescribed by the
Income Tax Act of Canada. This withholding tax may be reduced in
accordance with reciprocal tax treaties, and in the case of the Tax
Treaty between Canada and the United States, the withholding tax for
residents of the United States is normally reduced to 15%. U.S.
taxpayers may be eligible for a foreign tax credit with respect to the
Canadian withholding taxes paid.

Baytex Energy Trust is a conventional oil and gas income trust focused
on maintaining its production and asset base through internal property
development and delivering consistent returns to its unitholders. Trust
units of Baytex are traded on the Toronto Stock Exchange under the
symbol BTE.UN.

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Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Baytex Energy Trust
    Ray Chan
    President & C.E.O.
    (403) 267-0715
    or
    Baytex Energy Trust
    Dan Belot
    Vice-President, Finance & C.F.O.
    (403) 267-0784
    Toll Free Number: 1-800-524-5521
    Website: www.baytex.ab.ca