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.
Please note that the following document, although believed to be
correct at the time of issue, may not represent the current
Position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut
ne pas représenter la position actuelle du ministère.
Principal Issues:
Whether the deemed gain resulting from the application of
subsection 107(5) would be exempt from withholding tax by virtue
of Article XXII of the Canada-U.S. Tax Convention.
Position:
No.
Reasons:
The deemed gain is considered to arise in Canada.
963670
XXXXXXXXXX (613) 957-8953
Attention: XXXXXXXXXX
December 3, 1996
Dear Sirs:
Re: Article XXII of the
Canada-U.S. Income Tax Convention ("Article XXII")
This is in reply to your letter of November 1, 1996 concerning the above-noted subject.
You have asked whether an amount in respect of a deemed taxable capital gain arising as a consequence of the application of
subsection 107(5) of the Income Tax Act (the "Act") would be exempt from withholding tax under the Act by virtue of Article XXII.
In our opinion, the amount would not be exempt from withholding tax under the Act. Article XXII would only be applicable to the extent that the income distributed to the U.S. resident arises outside Canada. Income resulting from the application of subsection 107(5) of the Act is considered to arise in Canada.
Please note that on October 2, 1996, the Minister of Finance announced that certain changes will be made to the Act effective as of that date where, among other things, property is distributed to non-residents. Draft legislation has not yet been released.
We trust our comments will be of assistance to you.
Yours truly,
T. Murphy
A/Section Chief
Trusts Section
Resources, Partnerships and Trusts Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch
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