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.
September 27, 1983
K.B. Harding
Mr. R.A. Short General Director Tax Policy and Legislation Branch Department of Finance 26th Floor Place Bell Canada 160 Elgin Street Ottawa, Ontario K1A OG2
Dear Mr. Short:
Re: Canada-United Kingdom Income Tax Convention Article XIII(4)(a)
Attached is a copy of a letter which we received from XXXXXXXX concerning the interpretation of the above article.
In determining whether a taxpayer is taxable in Canada on the alienation of shares deriving their value directly or indirectly from immovable property situated in Canada, XXXX has outlined two basic methods which may be used to ascertain whether a particular situation is taxable in Canada.
It is our view that Revenue Canada, Taxation, should probably use the gross method in determining whether or not a particular taxpayer is subject to tax in Canada on the disposition of such shares since the gain generally arises from the increase in the price of the immovable property rather than as the result of the debt outstanding against the property. However, we do recognize that a good argument can be made in some cases that the value of the property may be affected by the financing outstanding at the time of sale provided the debt follows with the property. In addition, the gross method ensures that two taxpayers in identical situations (except that one taxpayer borrows money to purchase the assets while the other taxpayer uses available cash) would receive the sate tax treatment under the treaty.
We request your views on the matter and particularly your Department's intention at the time this paragraph was initially included in the Canadian draft treaty.
Yours sincerely
Director Provincial and International relations Division
Attachment FBH/jb
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