Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Whether a qualified subchapter S subsidiary (QSSS) is a resident of the U.S. for the purpose of paragraph 1 of Article IV of the Canada-United-States Income Tax Convention?
Reasons: If it were not for the election provided for in the Internal Revenue Code, the QSSS would be taxed in the United States as a regular corporation on its worldwide income.
Sylvie Labarre, CA
January 28, 2008
Re: Qualified subchapter S subsidiary
This is in reply to your letter of July 20, 2005 in which you requested our views on whether a qualified subchapter S subsidiary (QSSS) is resident of the United States for purpose of paragraph 1 of Article IV of the Canada-United States Income Tax Convention (1980) (the "Convention"). We apologize for the delay in responding.
Confirmation of the income tax consequences of proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. To make such a request the advance income tax ruling must be submitted in accordance with the guidelines set out in Information Circular 70-6R5. However, if the situation relates to a completed transaction a request for the Canada Revenue Agency's views must be made to the International Tax Services Office. We can, however, provide the following general comments that do not constitute an advance income tax ruling and therefore, are not binding on the Department.
Our view that an S corporation may be a person resident in the U.S. for the purpose of paragraph 1 of Article IV of the Convention remains unchanged. We did not change the position we had regarding a QSSS. As long as our position regarding an S corporation remains unchanged, a QSSS may be considered a person resident in the U.S. for the same purpose.
We trust the above comments will be of some assistance.
Alain Godin, Manager
International and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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