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United States and Canada as set forth in the Canadian Convention
and satisfies the purpose of Article VII of the Canadian
Convention--to attribute income to a permanent establishment
based on its real facts, and, accordingly, we so hold.
Having found that petitioner is entitled to relief from
section 842(b) based on Article VII, paragraph (2) of the
Canadian Convention, we have no need to delve into the question
of whether petitioner is also entitled to such relief based on
Article XXV, paragraph (6).
Finally, we note that respondent did not contend that
section 482 applied in the instant case. Accordingly, our
decision in the instant case does not consider the application of
section 482 in those circumstances in which the Convention also
applies.
The Executive Branch with the advice and consent of the
Senate has the option of negotiating a new protocol with Canada
creating an exception similar to one included in subsequent
conventions. These conventions contain a general directive to
determine profits as if the taxpayer was a separate entity yet
also include explicit exceptions permitting each country to apply
its own internal methods of taxation to the business profits of
an insurance company's permanent establishment. See, e.g., art.
7(7), Tax Convention, U.S.-N.Z., 7/23/82, 35 U.S.T. (Part 2)
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