Beaubier T.C.J.:
1 THE REGISTRAR: Before the Court for judgment case No. 97-43 (IT)I between Daniel G. Erwin, appellant, and Her Majesty the Queen, respondent, for the 1993 taxation year. Ms. Michele Rosser representing the appellant, Ms Shalene Curtis-Micallef representing the respondent.
2 THE COURT: This appeal pursuant to the informal procedure was heard in London on August 18, 1997. No evidence was called. The appellant's counsel admitted paragraph's 1 to 8 inclusive of the reply to the notice of appeal. Paragraph's 1 to 6 inclusive of the notice of appeal read:
1. By Notices of Reassessment dated May 26, 1995, Revenue Canada has determined taxes payable to be $9,495.20. The taxpayer calculated payable to be $7,348.22.
2. The Minister reassessed the taxpayer's return to allow a federal foreign tax credit of $1,393.02. The foreign tax credit was calculated based on foreign income of $8,549.00. In completing his 1993 tax return, the taxpayer claimed a federal foreign tax credit of $2,807.63 based on foreign income of $16,729.60.
3. Revenue Canada has confirmed the assessment for the year 1993 by way of Notice of Confirmation dated October 9, 1996.
4. The taxpayer was an employee of Dow Canada from January 1, 1993 through to August 16, 1993. During this period the taxpayer worked 26 of the 150 work days in the United States at the parent company's location. On September 15, 1993, the taxpayer moved to the United States to work permanently for the parent company and ceased to be a resident of Canada at that time.
5. Based on an apportionment of days worked in Canada and days worked in the United States, the taxpayer earned employment income in the amount of $8,180.00 or for services rendered in the U.S. during the period January 1, 1993 through to August 16, 1993.
6. The taxpayer filed the appropriate 1993 U.S. federal and state personal tax returns. Copies of the U.S. Form 1040 and Michigan Form MI-1040 supporting U.S. taxes paid for 1993 were delivered to Revenue Canada at the time of filing of the taxpayer's Notice of Objection.
3 Paragraphs 1 to 8 inclusive, the Reply to the Notice of Appeal read:
1. He admits the facts in paragraphs 1, 2, 3 and 6 of the Notice of Appeal.
2. Except for the 150 days worked, he admits the facts alleged in paragraph 4 of the Notice of Appeal.
3. With respect to paragraph 5 of the Notice of Appeal, he admits the paragraph and he adds that the amount of $8,180 (the “Amount”) was received by the Appellant from his Canadian employer for work performed for his Canadian employer in the U.S.A.
4. He denies all other allegations of fact in the Notice of Appeal.
5. In computing income for the 1993 taxation year, the Appellant reported the Amount as foreign income earned in the Untied Stated and claimed the amount of $2,807,63 as a foreign tax credit.
6. The Minister assessed the Appellant for the 1993 taxation year, Notice thereof mailed June 30, 1994, to allow a foreign tax credit in the amount of $1,139.01 and treated the Amount as Canadian source income.
7. The Minister reassessed the Appellant for the 1993 taxation year, Notice thereof mailed May 26, 1995 to increase the Appellant's foreign tax credit from $1,139.01 to $1,393.00.
8. In so reassessing the Appellant, the Minister made the following assumptions of fact:(a) the facts admitted hereinbefore;
(b) in the 1993 taxation year, from January 1 to August 15, the Appellant was employed by a Canadian Company (the “Canadian Company);
(c) in the 1993 taxation year, from August 16 to December 31, the Appellant was employed by a U.S. company located in Michigan, U.S.A. (the “U.S. Company);
(d) in the 1993 taxation year, during the period in which the Appellant was employed by the Canadian Company, he was required to travel from time to time to the U.S. Company, which was the parent of the Canadian Company;
(e) in the 1993 taxation year, during the period in which the Appellant was employed by the Canadian Company, the Appellant worked at the U.S. Company's location for approximately twenty six days on behalf of the Canadian Company;
(f) the Canadian Company paid the Amount to the Appellant for the twenty six days he worked at the U.S. Company location;
(g) the Amount was Canadian source income;
(h) in the 1993 taxation year, the Appellant's U.S. Source income was as follows:
| Employment income from the U.S. Company | $6,501 |
| Interest Income | $2,048 |
| Total | $8.549 |
- (i) in the 1993 taxation year, the Appellant's foreign tax credit was $1,393, determined as follows:
Income from U.S. Sources X Canadian Tax otherwise payable Total Canadian Taxable Income
($6,501 + $2,048) ÷ $44,741× $7,290 = $1,393
4 The issue is whether the appellant's employment income for 26 days that he worked in the United States while resident in Canada and paid by a Canadian resident corporation employer was income from a source in the United States of America.
5 Article 15 of the Canada XV of the Canada-U.S. Tax Convention (1980) refers to Dependent Personal Services. It reads:
1. Subject to the provisions of Articles XVIII (Pensions and Annuities) and XIX (Government Service), salaries wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting States. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.
2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in a calendar year in the other Contracting State shall be taxable only in the first-mentioned State if:(a) Such remuneration does not exceed ten thousand dollars ($10,000) in the currency of that other State; or
(b) The recipient is present in the other Contracting State for a period or periods not exceeding in the aggregate 183 days in that year and the remuneration is not borne by an employer who is a resident of that other State or by a permanent establishment or a fixed base which the employer has in that other State.
3. Notwithstanding the provisions of paragraphs 1 and 2, remuneration derived by a resident of a Contracting State in respect of an employment regularly exercised in more than one State on a ship, aircraft, motor vehicle or train operated by a resident of that Contracting State shall be taxable only in that State.
6 The Appellant fails both tests described in Article XV, paragraph 2. Pursuant to Section 114 of the Income Tax Act, subsection 2(1) imposes Canadian income taxes on the Appellant. Sections 114 and 2 read as follows:
Section 114: Individual resident in Canada for only part of year.
Notwithstanding subsection 2(2), where an individual is resident in Canada throughout part of a taxation year and throughout another part of the year is non-resident, the individual's taxable income for the year is the amount, if any, by which the total of(a) the individual's income for the period or periods in the year throughout which the individual is resident in Canada, computed as though that period or those periods were the whole taxation year and
(b) the amount that would be the individual's taxable income earned in Canada for the year if at no time in the year the individual had been resident in Canada, computed as though the part of the year that is not in the period or periods referred to in paragraph (a) were the whole taxation year,
- (c) the total of
(i) such of the deductions permitted for the purpose of computing taxable income as can reasonably be considered wholly applicable, and
(ii) such part of any other of those deductions as can reasonably be considered applicable to the period or periods referred to in paragraph (a),
except that the total of all amounts included in computing the total determined under paragraph (c) and all amounts deducted because of paragraphs 115(1)(d) to (f) in respect of the individual for the year shall not exceed the total of the amounts that would have been deductible in computing the individual's taxable income for the year had the individual been resident in Canada throughout the year.
Section 2: Tax payable by persons resident in Canada.
(1) An income tax shall be paid, as required by this Act, on the taxable income for each taxation year of every person resident in Canada at any time in the year.
(2) Taxable Income. The taxable income of a taxpayer for a taxation year is the taxpayer's income for the year plus the additions and minus the deductions permitted by Division C.
(3) Tax payable by a non-resident persons. Where a person who is not taxable under subsection (1) for a taxation year(a) was employed in Canada
(b) carried on a business in Canada, or,
(c) disposed of a taxable Canadian property,
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