2 February 1988 Income Tax Severed Letter 5-5206 - [Article X, Paragraph 6 of the 1980 Canada-U.S. Income Tax Convention]

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.

XXXX
T.B. Kuss
                     (613) 957-2117

February 2, 1988

Dear Sirs:

Re: Article X, Paragraph 6 of the 1980 Canada-U.S. Income Tax Convention (the "Convention")

This is in reply to your letter dated December 1, 1987 in which you requested a technical interpretation of the above-referenced provisions of the Convention within the context of the following hypothetical situation.

Opco is a corporation resident in the U.S. and not resident in Canada for purposes of the Convention and the Income Tax Act (the "Act").

For a number of years Opco has carried on business in Canada through a permanent establishment; some of this period was prior to the Convention becoming effective.

In 19XX, subsequent to the Convention becoming effective, Opco ceased to carry on business in Canada and sold all of its assets which were used in that business. For the year in which Opco ceased to carry on business in Canada, the amount by which the aggregate of the amounts described in paragraphs 2XXXX(a) to (c) of the Act exceeded the aggregate of the amounts described in paragraphs 2XXXX(d) to (k) of the Act was less than $500,000 Canadian.

No tax pursuant to section 219 of the Act has previously been payable by Opco, as a result of amounts claimed pursuant to paragraph 2XXXX(h) of the Act.

Opco is not and has not been associated (within the meaning of subparagraph 6(d) of Article X of the Convention) with another company nor has it previously deducted any amounts in respect of subparagraph 6(d) of Article X of the Convention.

We provide the following comments.

In the above hypothetical situation it is our view that for the year Opco ceased to carry on business in Canada no tax pursuant to section 219 of the Act would be payable by Opco, by virtue of the application of paragraph 6 of Article X of the Convention.

We hope these comments are of assistance.

Yours truly,

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