EXHIBIT 8(a)
BURNET, DUCKWORTH & PALMER LAW FIRM
Denbury Resources Inc.
17304 Preston Road, Suite 200
Dallas, Texas 75252
Dear Sirs:
Re: Form S-4 Registration Statement under the Securities Act of 1933 of
Denbury Resources Inc. ("Denbury")
Attached hereto as Schedule "A" is our opinion as to the Material Canadian
Federal Income Tax Considerations generally applicable to Denbury and its
shareholders of Denbury's change of corporate domicile and merger. Such opinion
is subject to the comments and qualifications specifically referenced therein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration statement and to reference being made to our firm under the caption
"Legal Matters" and "Moving the Corporate Domicile-Material Canadian Federal
Income Tax Consequences of the Move of Corporate Domicile and Merger" in the
Prospectus.
BURNET, DUCKWORTH & PALMER
1400, 350 - 7 Avenue S.W.
Calgary, Alberta T2P 3N9
Phone: (403) 260-0100
Fax: (403) 260-0332
www.bdplaw.com
Frank L. Burnet Q.C. (1890-1982)
Thomas J. Duckworth Q.C., Counsel
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Schedule A
Material Canadian Federal Income Tax Consequences of the Move of Corporate
Domicile and Merger
In the opinion of Burnet, Duckworth & Palmer, Canadian counsel to Denbury,
the following is a summary of the material Canadian federal income tax
considerations under the Income Tax Act (Canada), the "Canadian Tax Act", with
respect to the move generally applicable to Denbury and to you if, for purposes
of the Canadian Tax Act, hold your shares of Denbury Canada's common shares and
will hold your Denbury Delaware common stock as capital property and who deal at
arm's length with Denbury. This opinion does not apply to you if you are or will
be a foreign affiliate of any person resident in Canada, or to whom Denbury will
be a foreign affiliate following continuation within the meaning of the Canadian
Tax Act. This opinion is also not applicable to a corporation which is a
"specified financial institution" or to whom the mark-to-market provisions of
the Canadian Tax Act otherwise apply.
Shares will generally be considered to be capital property to you unless
such shares are held in the course of carrying on a business or are acquired in
a transaction considered to be an adventure in the nature of trade. You should
consult your own tax advisors regarding whether you hold your shares of Denbury
Canada's common shares as capital property and will hold your Denbury Delaware
common stock as capital property for the purposes of the Canadian Tax Act. If
you are resident in Canada and your shares might not otherwise qualify as
capital property, you may be entitled to obtain this qualification by making an
irrevocable election under Subsection 39(4) of the Canadian Tax Act prior to the
continuance. If you do not hold your shares as capital property, you should
consult your own tax advisors regarding their particular circumstances.
This opinion is based on the current provisions of the Canadian Tax Act,
the regulations thereunder, the Canada-United States Income Tax Convention,
1980, as amended, the "Tax Treaty", and counsel's understanding of the current
administrative practices published by Revenue Canada, Customs, Excise and
Taxation: "Revenue Canada". This opinion takes into account specific proposals
to amend the Canadian Tax Act and regulations publicly announced by the Minister
of Finance prior to the date of the Proxy Statement/Prospectus, collectively the
"Tax Proposals", and assumes that all Tax Proposals will be enacted in their
present form. However, no assurances can be given that the Tax Proposals will be
enacted in their present form. This opinion does not take into account or
anticipate any other changes in the law, nor does it take into account
provincial, territorial or foreign income tax legislation or considerations,
which may differ from the Canadian federal income tax considerations described
herein. No ruling has been obtained from Revenue Canada to confirm the tax
consequences of any of these transactions.
These opinions are based on the assumptions that shares of Denbury continue
to be listed on a stock exchange which is prescribed for the purposes of the Tax
Act, and Denbury Canada common shares and the Denbury Delaware common stock may
not reasonably be considered to derive their value, directly or indirectly,
primarily from portfolio investment in shares, debt, commodities or any other
similar properties.
This summary does not discuss all aspects of Canadian federal income
taxation that may be relevant to you. You should consult your own tax advisors
with respect to the tax consequences of these transactions in your particular
circumstances.
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Taxation of the Company. Upon the continuance, Denbury will be deemed to
have disposed of all of its property for fair market value immediately prior to
the continuance. Denbury will be subject to tax under the Canadian Tax Act on
any income and net taxable capital gains that result. Denbury will also be
subject to an additional tax at the rate of five percent on the amount by which
the fair market value of Denbury's assets, net of liabilities, exceeds the
paid-up capital of the Denbury's issued and outstanding shares. However, if one
of the main reasons for Denbury changing its residence to the United States was
to reduce the amount of such additional tax or Canadian withholding tax, the
rate of such tax would be 25 percent. Denbury will not be resident in Canada
after the continuance for the purposes of the Canadian Tax Act. The management
of Denbury, in consultation with some of its advisors, has reviewed Denbury's
assets, liabilities and paid-up capital and has advised counsel that no Canadian
federal taxes should be due and payable by Denbury under the Canadian Tax Act as
a result of the continuance. Based upon key representations made by Denbury,
counsel is of the opinion that no Canadian tax liability will result from the
continuance. The representations of Denbury which this opinion is based are that
the fair market value of Denbury's assets is less than the aggregate value of
the paid-up capital of all of Denbury's issued and outstanding shares and all of
the liabilities of Denbury, and the deemed disposition of all of Denbury's
assets at fair market value upon the continuance will not create income in
excess of the Canadian tax deductions available to Denbury.
Denbury's representations are based on the trading value of Denbury's
securities and the price at which securities are to be issued to TPG, and
counsel can express no opinion on matters of factual determination. The facts
underlying Denbury's assumptions and conclusions may also change prior to the
effective date of the continuance. Denbury has not applied to Canadian federal
tax authorities for a ruling as to the amount of federal taxes payable by
Denbury under the Canadian Tax Act as a result of the continuance and does not
intend to apply for such a ruling given the factual nature of the determinations
involved. It is possible that the Canadian federal tax authorities will not
accept the valuations or the positions that Denbury has adopted. Accordingly, it
is possible that the Canadian federal tax authorities will conclude after the
8(a) - 3
effective date of the continuance that Canadian federal taxes are due under the
Canadian Tax Act as a result of the continuance.
Taxation of Shareholders Resident in Canada. The following portion of the
opinion applies to you if you are resident in Canada for the purposes of the
Canadian Tax Act.
You will not be considered to have disposed of your Denbury Canada common
shares or to have realized a taxable capital gain or loss solely due to the
continuance. The continuance will also have no effect on the adjusted cost base
to you of your Denbury Canada common shares.
Following the continuance, dividends received by you on shares of Denbury
Delaware common stock will be included in computing income and will generally
not be deductible if you are a corporation, and, if you are an individual, such
dividends will not receive the gross-up and dividend tax credit treatment
generally applicable to dividends on shares of taxable Canadian corporations.
Also, following the continuance, shares of Denbury Delaware common stock
will be a qualified investment for trusts governed by deferred profit sharing
plans, registered retirement saving plans and registered income funds,
collectively "Deferred Income Plans", provided such shares remain listed on a
prescribed stock exchange. Such shares will be foreign property after the
effective date of the continuance, and accordingly, the holding of such shares
by Deferred Income Plans or by other tax-exempt entities including registered
investments and registered pension plans may subject such holders to penalty
taxes under the Canadian Tax Act. However, these holders of Denbury shares at
the time of the continuance may be entitled to avail themselves of a provision
of the Canadian Tax Act to eliminate such penalty tax for up to 24 months
following the continuance. This permits Deferred Income Plans and other tax
exempt persons to either dispose of their shares on a orderly basis, or to
re-balance their portfolios to fall within the limits placed in ownership of
"foreign property". Such holders are urged to contact their own tax advisors to
determine the potential applicability of such penalty taxes to them.
Taxation of Dissenting Shareholders. Pursuant to the administrative
practices of Revenue Canada, the amount paid to you if you dissent should be
treated as proceeds of your common shares. Accordingly, you would recognize a
capital gain, or a capital loss, to the extent that the amount received, net of
any reasonable costs of disposition, exceeds, or is less than, the adjusted cost
base of such holder's common shares. If you are a corporation, any capital loss
arising on the disposition of common shares may in certain circumstances be
reduced by the amount of any dividends which have been received on such share,
and analogous rules apply to a partnership or trust of which a corporation is a
member or beneficiary. You will be required to include three-quarters of any
capital gain in computing your income for purposes of the Canadian Tax
8(a) - 4
Act and will be entitled to deduct three-quarters of any capital loss only
against taxable capital gains in accordance with the Canadian Tax Act.
Taxation of Shareholders Not Resident in Canada. The following portion of
this summary applies to you if for purposes of the Canadian Tax Act you:
o are not resident or deemed to be resident in Canada at any time when
they held or hold Denbury Canada common shares;
o do not use or hold and are not deemed to use or hold their Denbury
Canada common shares in the course of carrying on a business in Canada;
or
o carry on an insurance business in Canada and elsewhere, and establish
that Denbury Canada common shares are "designated insurance property".
You will not be considered to have disposed of your Denbury Canada common
shares or to have realized a taxable capital gain or loss solely due to the
continuance. The continuance will also have no effect on the adjusted cost base
of your Denbury Canada common shares. After the effective date of the
continuance, dividends received by a shareholder on Denbury Delaware Common
stock will not be subject to Canadian withholding tax.
Provided that a Denbury Canada common share is not "taxable Canadian
property" to you at the time of disposition of such share, you will not be
subject to Canadian tax on any capital gain arising by reason of the disposition
of such Denbury Canada common share. After the effective date of the
continuance, based on the present activities of Denbury Delaware, Denbury
Delaware Common stock will not generally be "taxable Canadian property" to a
shareholder at any particular time.
Pursuant to the administrative practices of Revenue Canada, the amount paid
to you if you dissent should be treated as proceeds of disposition of his or her
Denbury Canada common shares. Provided that such shares are not taxable Canadian
property for the purposes of the Canadian Tax Act, such proceeds of disposition
will not be subject to Canadian tax. You should consult your own tax advisors in
this regard.
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