Prospectus re Admission to the Official List - Heritage Oil

advance income tax ruling has been sought or obtained from CRA to confirm the taxconsequences of any of the transactions described herein.This summary also assumes that the Company is and will remain a non-resident of Canada forthe purposes of the ITA.For the purposes of the ITA, all amounts relating to the acquisition, the holding and thedisposition of the Ordinary Shares, including dividends, adjusted cost base and proceeds ofdisposition must generally be determined in Canadian dollars at applicable exchange rates.(vii) Dividends on Ordinary SharesDividends received or deemed to be received on Ordinary Shares by a CanadianShareholder who is an individual will be required to be included in computing theCanadian Shareholder’s income for the purposes of the ITA and will not be subject to thegross up and dividend tax credit rules applicable to dividends received from taxableCanadian corporations under the ITA.Dividends received or deemed to be received on Ordinary Shares by a CanadianShareholder that is a corporation will be required to be included in computing theCanadian Shareholder’s income for purposes of the ITA and will generally not bedeductible in computing its taxable income.(viii) Disposition of Ordinary SharesCost Averaging of Identical PropertyThe ITA provides for a cost averaging rule for ‘‘identical properties’’, such as shares issuedby a company (including any fractional share) that are of the same class or series.Generally, when a person acquires a property that is identical to one or more otherproperties already held by the person, the person’s adjusted cost base of each identicalproperty will be equal to the quotient obtained when the aggregate of the adjusted costbases of all the identical properties previously held by the person and the cost of the newlyacquired identical property is divided by the number of all such identical properties held atthat time. Accordingly, at any time, the cost to a Canadian Shareholder of an OrdinaryShare will be averaged with the adjusted cost bases of any other Ordinary Shares held bythe Canadian Shareholder as capital property at that time.Acquisition and Disposition of Ordinary SharesA disposition or deemed disposition of Ordinary Shares (including on the purchase of theOrdinary Shares for cancellation by the Company) by a Canadian Shareholder willgenerally result in a capital gain (or capital loss) to the extent that the proceeds ofdisposition exceed (or are less than) the aggregate of the adjusted cost base to theCanadian Shareholder of the Ordinary Shares immediately before the disposition and anyreasonable cost of disposition.One half of any capital gain (the ‘‘taxable capital gain’’) realised by a CanadianShareholder will be included in its income for the year of disposition. One half of anycapital loss (the ‘‘allowable capital loss’’) realised by a Canadian Shareholder may bededucted by that person against taxable capital gains for the year of disposition subject toand in accordance with rules contained in the ITA. Any excess of allowable capital lossesover taxable capital gains for the year of disposition may be deducted in any of the threepreceding taxation years or carried forward indefinitely and deducted in any subsequenttaxation year against net taxable capital gains realised in such year to the extent andsubject to the limitations prescribed in the ITA. Any capital loss resulting from thedisposition of Ordinary Shares may, in certain circumstances, be reduced by the amount ofdividends previously received or deemed received on Ordinary Shares, to the extent andunder the circumstances described in the ITA. Capital gains realised by an individual ortrust, other than certain trusts, may give rise to alternative minimum tax under the ITA.(ix) Refundable TaxA Canadian Shareholder that is a ‘‘Canadian controlled private corporation’’ (as suchterm is defined in the ITA) may be liable to pay a refundable tax on certain investmentincome, including taxable capital gains and dividends paid on Ordinary Shares.290