Principal Issues: (1) Whether Article IV(7)(b) of the Canada-US Tax Treaty applies in respect of a deemed dividend payments by a Canadian-resident entity that is fiscally transparent for US income tax purposes to a US-resident corporate parent? (2) Whether subsection 245(2) applies to the proposed transactions?
Position: (1) No. (2) Not in these circumstances.
Reasons: (1) Article IV(7)(b) does not apply because the deemed dividend is subject to the same treatment under the taxation laws of the US as it would be if the dividend payer were not fiscally transparent. (2) The proposed transactions do not frustrate or defeat the underlying purpose/rationale of Article IV(7)(b).
