can anyone advise why Canada Energy partners would/must elect to be classified as a passive company....per their investor notice....is it an option they make....the government assigns...their size?

Special U.S. Federal Income Tax Election is Available Regarding Your Investment in

A U.S. shareholder does not have to make this election

for shares held in his or her retirement account.

A U.S. shareholder who makes a QEF election is required to annually include in his or her

income his or her pro rata share of the ordinary earnings and net capital gains of Canada

Energy, whether or not Canada Energy distributes any amounts to its shareholders.

Canada Energy did not have ordinary earnings or net capital gains for its taxable year

ended April 30, 2007 and based on current business plans and financial projections,

believes that it will not have ordinary earnings or net capital gains in any future years in

which it may be a PFIC.

If you do not elect to treat Canada Energy as a QEF, then if Canada Energy is a PFIC for

any year during your holding period, then you would be subject to the PFIC rules, which

could result in adverse tax consequences to you. For example, if you were to receive a socalled

“excess distribution” or if you sell your Canada Energy stock in the future at a gain,

you could be required to allocate such distribution or gain, as the case may be, ratably over

the time period during which you held your stock while Canada Energy was a PFIC, and

pay tax at the highest rate (rather than, if otherwise applicable, the long-term capital gain

rate) on ordinary income in effect for each year to which the gain is allocated plus interest

on the tax.

The QEF election is made by completing and attaching Form 8621 to a U.S. federal income

tax return filed by the due date of the return, as extended.