20 November 1989 Income Tax Severed Letter 5-8666 - [Article XIII of the Canada-U.S. Income Tax Convention (1980) (the "1980 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.

Revenue Canada Taxation Head Office

O. Laurikainen (613) 957-2125

Attention XXXX

NOV 20 1989

Dear Sirs:

Re: Article XIII of the Canada-U.S. Income Tax Convention (1980) (the "1980 Convention")

This is in response to your letter of September 7, 1989, wherein you have asked us to interpret the transitional provisions set out in paragraph 9 of Article XIII of the 1980 Convention, as they apply to a disposition by a U.S. resident of taxable Canadian property that had been acquired prior to December 31, 1971 ("V-day").

In our view the intent of paragraph 9 of Article XIII of the 1980 Convention was to effect a transition between the status of United States resident under the 1942 Convention and his status under the 1980 Convention. Since under the 1942 Convention a U.S. resident was exempted from tax on the full amount of the capital gain calculated under Canadian tax law, the notional calculation in paragraph 9 of Article XIII of the 1980 Convention was intended to exempt the portion of a capital gain calculated in accordance with Canadian tax law, that had accrued prior to the coming into force of the 1980 Convention. Accordingly, the reduction in paragraph 9 of Article XIII is equal to the proportion of the capital gain calculated under Canadian tax law that the number of months from V-day to December 31, 1984 is of the number of months from V-day to the date of disposition.

We trust that this is the information you require.

Yours truly,

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