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.
Canada-U.S. Income Tax Convention (New) - Articles VI and XIII(9)
September 4, 1985
C.G. Toussaint
XXXX
Dear XXXX
This is in reply to your letter dated August 15, 1985, following our reply to your letters dated May 9 and August 8, 1985, concerning the application of Article XIII(9) of the Canada-United States Income Tax Convention (1980) (Convention) to resource properties.
It is true that Revenue Canada has accepted the contention that the capital gains exemption in Article VIII of the 1942 Convention applied to the proceeds derived by United States resident persons from the disposition of Canadian resource properties. The justification for this was that in 1942 when the former convention was concluded, resource properties were in fact capital assets.
This justification would not be relevant for the application of the "safe-start" provision provided in Article XIII(9) of the Convention since that provision uses the expression "capital asset" and at the time the new treaty was concluded resource properties were quite clearly not capital assets for Canadian tax purposes. It is therefore our view that resource properties would not qualify for the benefits under Article XIII(9) of the Convention since they are not "capital assets" for the purposes of the Convention. This opinion is also shared by the Department of Finance.
We hope these comments will be satisfactory to you.
Yours sincerely,
Director Provincial and International Relations Division
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© Her Majesty the Queen in Right of Canada, 1985
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© Sa Majesté la Reine du Chef du Canada, 1985
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