Daylight Energy Ltd.
TSX : DAY
TSX : DAY.DB.C
TSX : DAY.DB.D

Daylight Energy Ltd.

March 02, 2011 17:55 ET

Daylight Energy Provides 2010 Tax Information for U.S. Shareholders

CALGARY, ALBERTA--(Marketwire - March 2, 2011) - Daylight Energy Ltd. ("Daylight") (TSX:DAY) is pleased to provide 2010 tax information for its U.S. shareholders.

The following information is being provided to assist U.S. individuals in reporting distributions and dividends received during 2010 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 investor or potential investor. Readers should consult their own legal and tax advisors as to their particular tax consequences and reporting obligations.

On May 7th, 2010, Daylight Resources Trust (the "Trust") converted from a trust to a corporation, named Daylight Energy Ltd. Unitholders of the Trust received, for each trust unit held, one common share of Daylight. For U.S. taxpayers, the conversion is expected to be a tax-free rollover, so no capital gains are expected to be triggered for most typical U.S. investors. Following the conversion, the Trust discontinued cash distributions and Daylight commenced paying cash dividends with the final trust distribution paid on May 17, 2010 to unitholders of record on April 30, 2010.

DIVIDENDS PAID AS A CORPORATION

In consultation with its U.S. tax advisors, Daylight has determined that dividends paid to individual U.S. shareholders should be considered "qualified dividends" for U.S. federal income tax purposes and be eligible for the reduced tax rates applicable to long-term capital gains.

From June to December 2010, Daylight paid "qualified dividends", before withholding tax, as outlined below.



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Taxable
Qualified
Dividend Conversion Dividend
Record Date Payment Date ($CDN) Rate (1) ($US)
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May 31, 2010 June 15, 2010 $0.05 0.9720 $0.048600
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June 30, 2010 July 15, 2010 $0.05 0.9613 $0.048065
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July 30, 2010 August 16, 2010 $0.05 0.9586 $0.047930
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August 31, 2010 September 15, 2010 $0.05 0.9726 $0.048630
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September 30, 2010 October 15, 2010 $0.05 0.9893 $0.049465
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October 29, 2010 November 15, 2010 $0.05 0.9935 $0.049675
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November 30, 2010 December 15, 2010 $0.05 0.9965 $0.049825
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Total $0.35 $0.342190
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(1) Bank of Canada Noon Rate

DISTRIBUTIONS PAID AS A TRUST

From January to May 2010, Daylight paid cash distributions, before withholding tax, as outlined below.



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Taxable
Qualified Return of
Record Payment Distribution Conversion Distribution Dividend Capital
Date Date ($CDN) Rate (1) ($US) ($US) ($US)
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December January
31, 2009 15, 2010 $0.08 0.9721 $0.077768 $0.00 $0.077768
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January February
29, 2010 15, 2010 $0.08 0.9542 $0.076336 $0.00 $0.076336
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February March
26, 2010 15, 2010 $0.08 0.9788 $0.078304 $0.00 $0.078304
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March 31, April
2010 15, 2010 $0.08 0.9986 $0.079888 $0.00 $0.079888
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April 30, May 17,
2010 2010 $0.08 0.9611 $0.076888 $0.00 $0.076888
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Total $0.40 $0.389184 $0.00 $0.389184
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(1) Bank of Canada Noon Rate

Units Held Outside of a Qualified Retirement Plan

The cash distributions the Trust paid from January to May 2010 to U.S. individual unitholders represent a 100% return of capital.

For U.S. federal income tax purposes, in reporting a return of capital with respect to distributions received, U.S. unitholders are required to reduce the cost base of their trust units by the total amount of distributions received that represent a return of capital. This amount is non-taxable if it is a return of cost base in the trust units. If the full amount of the cost base has been recovered, any further return of capital distributions should be reported as capital gains.

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.

U.S. 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. Daylight does not provide unitholders with Form 1099-DIV. Information on the Form 1099-DIV issued by the brokers or other intermediaries 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. Brokers and/or intermediaries may or may not be required to issue an amended Form 1099-DIV.

The information in this release is provided for general information only and is not intended to be an exhaustive discussion of all possible income tax consequences. Investors are encouraged to seek advice from a qualified tax advisor in their country of residence to obtain guidance with respect to the appropriate tax treatment of their distributions.

Units Held Within a Qualified Retirement Plan

No amounts are required to be reported on an IRS Form 1040 where Daylight units are held within a qualified retirement plan.

CANADIAN WITHHOLDING TAX

For Canadian income tax purposes, 100% of distributions and dividends payable to non-residents of Canada are normally subject to a 25% Canadian withholding tax. However, the withholding tax for residents of the United States is reduced to 15% in accordance with a reciprocal tax treaty between Canada and the United States.

Where shares are held outside a qualified retirement account, U.S taxpayers may be eligible for a foreign tax credit with respect to the Canadian withholding taxes paid. Where shares are held in a qualified retirement account, the same withholding taxes apply but the amount is not creditable for U.S. tax purposes. U.S. taxpayers may apply for a reimbursement of withholding taxes from Canada Revenue Agency by completing Form NR7-R "Application for Refund of Part XIII Tax Withheld" where shares are held in certain qualified retirement accounts.

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 2010 should be determined from your own records and is not available from Daylight. Amounts over withheld, if any, from Canada should be claimed as a refund from the Canada Revenue Agency no later than two years after the calendar year in which the tax was withheld and should not be claimed as a credit against your U.S. income tax liability.

Daylight is a growing intermediate oil and natural gas producing company with a high quality suite of resource play assets in Western Canada. Our highly focused team utilizes our technical expertise in exploitation, development, and acquisitions to create long-term value for our shareholders. Our team has developed a multi-year inventory of repeatable, low risk exploitation resource play projects with substantial potential reserve additions on assets we currently own and control in the premier Pembina Cardium light oil fairway and in the premier Deep Basin area of Alberta and British Columbia.

Daylight has approximately 210 million common shares outstanding which trade on the TSX under the symbol DAY. Daylight Series C and D convertible debentures trade on the TSX under the symbols DAY.DB.C and DAY.DB.D, respectively.

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