Income Tax Severed Letters - 2015-07-22

Principal Issues: Whether Part XIII withholding tax applies to a royalty payment made from Canada to a non-resident taxpayer and whether Article XII of the Canada-US Tax Convention would apply to exempt the payment from withholding.

Position: The answer would depend upon the facts surrounding the payments received from Canada.

Reasons: Questions of fact.

Principal Issues: TREATMENT OF PROPERTY HELD IN JOINT OWNERSHIP AT DEATH

Position: LEGAL DETERMINATION REQUIRED

Reasons: TAX TREATMENT DEPENDS ON LEGAL & BENEFICIAL OWNERSHIP OF THE PROPERTY. IF SECONDARY PERSON IS ONLY A NOMINEE ON THE PROPERTY WITH NO OWNERSHIP RIGHTS, THE DISPOSITION OF THE ENTIRE PROPERTY WOULD BE DEEMED UPON THE DEATH OF THE PRIMARY TAXPAYER. IF THE PROPERTY WAS A TRUE JOINT OWNERSHIP, THE TREATMENT IS DIFFERENT.

Principal Issues: 1) Are distributions from a Roth IRA to a resident in Canada subject to tax? 2) Will the conversion of a traditional IRA to a Roth IRA while non-resident in Canada jeopardize the election under ITTN-43?

Position: 1) Yes. 2) No.

Reasons: 1) According to Art. XVIII 3(b) of the Canada-US Tax Convention, a distribution from a Roth IRA is subject to tax to the extent it is included in taxable income if the individual was resident in the US. 2) The deferral outlined in ITTN-43 is only relevant to individuals resident in Canada and does not impact non-resident individuals.