Article 6


Placrefid Ltd. v. The Queen, 92 DTC 6480 (FCTD)

A Canadian mortgagee of a Montreal property whose owner was in default granted the taxpayer, a non-resident corporation, an option to purchase whatever interest the mortgagee acquired in the property with the mortgagee retaining the right to rescind that option agreement by paying the taxpayer a lump sum of $250,000. That sum, when received by the taxpayer following rescission of the agreement by the mortgagee, did not constitute income of the taxpayer from immovable property for purposes of the Canada-Swiss Convention given that the mortgagee did not own the property at the time of the negotiations but merely held a hypothec on the property, i.e., "it was not a jus in rem which would have entitled the defendant to specific performance in the event of default" (p. 6486).

Locations of other summaries Wordcount
Tax Topics - Treaties - Income Tax Conventions - Article 4 54

The Queen v. Arnos, 82 DTC 6165, [1982] CTC 186 (FCA)

Since "recaptures of capital cost allowances are of the same nature as the revenue from the property in respect of which the capital cost allowances has been deducted", recaptured capital cost allowance was characterized as "rentals from real property" so as to benefit from the favourable treatment accorded to such income by Article XIIIA of the 1942 Canada-U.S. Convention.

See Also

Resource Capital Fund IV LP v Commissioner of Taxation, [2018] FCA 41 (Federal Court of Australia), rev'd on various grounds [2019] FCAFC 51

Art. 6 extends common law meaning of real property

Art. VI of the Australia-U.S. Convention defined real property to include “rights to exploit or to explore for natural resources.” In connection with an analysis that treated mining leases as real property for purposes of Art. VI, Pagone J noted (at para. 98):

In TEC Desert Pty Ltd v Commissioner of State Revenue (WA) (2010) 241 CLR 576 the High Court in a joint judgment observed that the position at common law was that a right to mine land gave no interest in the land, saying at 587, [29]:

This treatment of mining tenements in the Australian statutory system had been foreshadowed by the law in England. The general position under the common law in England with respect to the grant by a freeholder of a licence to work a mine was described by Page Wood V-C in London and North-Western Railway Co v Ackroyd as follows:

“[A] licence to work a mine is only a licence to get the minerals, and when you have got them, you have done all you have a right to do, and you have no interest in the land.”

Words and Phrases
real property
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Shares private equity fund LP with 5-year holding objective realized share gain on income account 167
Tax Topics - Income Tax Act - Section 115 - Subsection 115(1) - Paragraph 115(1)(a) - Subparagraph 115(1)(a)(ii) gains of a NR PE fund from disposals of Australian share investments that were managed in part in Australia were derived from Australia 411
Tax Topics - Treaties - Income Tax Conventions - Article 3 each U.S.-resident partner of a Caymans PE LP carried on a U.S. “enterprise” 222
Tax Topics 386
Tax Topics - Treaties - Income Tax Conventions - Article 13 exclusion in Art. 13 of Aust.-U.S. Treaty for real property dispositions extended to shares of Australian holding company holding mining leases through grandchild
Tax Topics - General Concepts - Stare Decisis lower court not bound by a point of law that was assumed rather than examined by a higher court 272
Tax Topics - Income Tax Act - Section 152 - Subsection 152(1) assessment of partnership was assessment of partners 83
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Taxable Canadian Property - Paragraph (d) shares of lithium mining and processing company were derived principally from the processing rather than mining operation and, thus, were not taxable Australian real property 500
Tax Topics - Income Tax Act - Section 218.3 - Subsection 218.3(1) - Canadian Property Mutual Fund Investment shares of Australian mining company were primarily attributable to the processing rather than mining operations 140
Tax Topics - General Concepts - Fair Market Value - Other processing assets of mining company were more valuable than its mining assets 234

Administrative Policy

23 January 2015 External T.I. 2013-0509771E5 - Oil & gas payments made to U.S. resident

negative CCDE gain from grant of oil and gas royalty not exempt under US Treaty

Mr. A, a U.S. resident, grants the right to drill for or take the oil & gas from his Canadian freehold property to a Canadian company, in consideration for an upfront bonus of $100,000, and annual royalties payable out of any oil & gas production.

After noting that these transactions result in a negative cumulative Canadian oil and gas property expense ("CCOGPE") pool, that any resulting credit balance would be deducted from his cumulative Canadian development expense ("CCDE") pool under variable L, and any negative balance CCDE balance for the year is added to his income pursuant to ss. 66.2(1), 59(3.2)(c) and 115(1)(a)(ii) or (iii.1), CRA quoted from the definition of "real property" in the Canada-U.S. Treaty and in the Income Tax Conventions Interpretation Act, and stated:

Therefore, if Mr. A has an amount included in income under paragraph 115(1)(a) with respect to the disposition of CRP as described above, the ITCIA and Article VI of the Treaty preserve Canada's right to tax the income without limit.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 115 - Subsection 115(1) - Paragraph 115(1)(a) - Subparagraph 115(1)(a)(iii.1) negative CCDE pool for non-resident individual 176
Tax Topics - Income Tax Act - Section 66.4 - Subsection 66.4(5) - F FMV addition and subtraction where drilling rights are granted for royalty 143
Tax Topics - Income Tax Regulations - Regulation 805 application to resource royalties 252
Tax Topics - Treaties - Income Tax Conventions - Article 12 non-application of Art. 12 of US Treaty to resource royalties 142

1 February 2012 External T.I. 2011-0431571E5 - Canadian resource royalty received by US resident

oil royalty payments are covered by Art. VI, para. 2 of the Canada-US Convention ("amounts computed by reference to the amount or value of production from...resources") rather than by Art.XII, para. 4 ("payments...for...the use of...tangible personal property") and, accordingly, are not subject to the Treaty-reduced withholding tax rate.