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1980, T.I.A.S. 11087, prohibits, as double taxation, the
limitation of section 59(a)(2).3 More specifically, petitioners
contend that application of section 59(a)(2) violates article
XXIV(4)(b) and article XXIX(2) and (3) of the U.S.-Canada Treaty.
Article XXIV(4)(b), Elimination of Double Taxation,
provides, in pertinent part, "For the purposes of computing the
United States tax, the United States shall allow as a credit
against United States tax the income tax paid or accrued to
Canada". Article XXIX(2) provides, in pertinent part, that
nothing in the U.S.-Canada Treaty shall prevent the United States
or Canada from taxing its citizens as if there were no convention
between the U.S. and Canada with respect to income taxes on
income and on capital. Article XXIX(3) provides, however, that
the provisions of paragraph (2) shall not affect the obligations
undertaken by the two countries with respect to article XXIV,
Elimination of Double Taxation.
Petitioners conclude that the above U.S.-Canada Treaty
provisions forbidding double taxation of income override the
provisions of section 59(a)(2). Citing Lindsey v. Commissioner,
98 T.C. 672 (1992), affd. without published opinion 15 F.3d 1160
(D.C. Cir. 1994), respondent contends that the limitations of
3 The treaty became effective on Aug. 16, 1984, having been
signed on Sept. 26, 1980, and amended on June 14, 1983, and
Mar. 28, 1984, and was in effect during 1987. The treaty was
further amended on Aug. 31, 1994, but that amendment had not been
ratified as of the date of this opinion.
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