16 October 1986 Income Tax Severed Letter 5-2004 - [Article XIII, Paragraph 8 of the Canada U.S. Income Tax Convention, 1980]

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.

Revenue Canada Taxation Head Office

Attention: XXXX

T.B. Kuss (613) 957-2120

October 16, 1986

Dear Sir::

Re: Article XIII, Paragraph 8 of the Canada U.S. Income Tax Convention, 1980

This is in reply to your letter of July 29 regarding the above-referenced subject. You have requested our opinion as to whether Article XIII, Paragraph 8 of the Canada-U.S. Income Tax Convention, 1980 (the "Convention") would apply in a situation where a Canadian resident individual elects under subsection 85(1) of the Act on the transfer of his interest in a U.S. partnership to his wholly-owned Canadian corporation. You have been advised by the U.S. competent authority that they have tentatively determined that, in this situation, Article XIII paragraph 7, rather than paragraph 8, would be more appropriate in the relief of double taxation.

It is our opinion that either paragraph could apply to this situation. Paragraph 7 deals with an election which may be made by an individual. The individual is under no requirement to make such an election. It is our opinion that if the individual chooses not to make the election under paragraph 7, this should not preclude him from requesting competent authority consideration under paragraph 8 should he otherwise meet the requirements of paragraph 8 providing he can show that double taxation would occur if the gain or income was not also deferred in the U.S.

While a strict reading of paragraph 8 indicates that the person acquiring the property should contact the competent authority of the other state (the U.S.), administratively the Canadian competent authority should be contacted who will then deal with the U.S. competent authority.

We have forwarded your file to the Canadian competent authority who should be getting in contact with you.

We hope these comments are of assistance to you.

Yours truly,

for Director Reorganizations and Non-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch