INCOME TAX |
Income Calculation |
Capital Gains and Losses |
Haas Estate v. Canada
A-709-99
Rothstein J.A.
3/11/00
3 pp.
Kubicek Estate v. Canada (1997), 97 DTC 5454 (F.C.A.), leave to appeal denied [1997] S.C.C.A. No. 603 (QL) standing for proposition "gain" for purposes of 1984 Tax Convention between Canada and the United States gain subject to tax--For Canadian income tax purposes that makes December 31, 1971 (V-Day) relevant for purposes of Art. XIII(9)--While purpose of 1984 Tax Convention to avoid double taxation and while Convention to be reciprocal, will still be provisions of United States and Canadian law yielding different results in application for Canadian, United States' taxpayers--While Technical Explanation of 1984 Convention referring to "total gain", phrase cannot be read in isolation--In United States refers to period commencing on acquisition date because United States not exempting capital gains from taxation--In Canadian tax context, total gain only relevant to period when, absent tax treaty, United States' citizen liable for capital gains tax in Canada--That period commenced after December 31, 1971--Until 1984 United States', Canadian residents who disposed of real property in other country exempt from tax on any gain by other country--1984 Convention made United States, Canadian residents liable for capital gains tax, but only for gains arising after December 31, 1984--For United States residents disposing of Canadian real property, calculation of reduction beginning at point at which gain first began to accrue for Canadian income tax purposes--Therefore starting point for calculating reduction December 31, 1971, date after which Canada began to tax capital gains, for properties acquired prior to V-Day--Thus, calculating amount of reduction in such cases entailing subtracting V-Day value from proceeds of disposition and multiplying difference by number of months gain accrued from V-Day to 1985, divided by number of months gain accrued from V-Day to date of disposition--That was conclusion correctly reached in Kubicek--Canada-United States Tax Convention, 1984, S.C. 1984, c. 20, Sch. I, Art. XIII(9).