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HALPERN, J., concurring: I concur in the result reached by
the majority. Like the majority, I believe that this case turns
on an interpretation of Article VII of the United States-Canada
Income Tax Convention, Sept. 26, 1980, T.I.A.S. No. 11087, 1986-2
C.B. 258 (Canadian Convention). Unlike the majority, I do not
believe that this case turns on Article VII, paragraph 2
(paragraph 2). I believe that one need look no further than
Article VII, paragraph 1 (paragraph 1), to conclude that
petitioner prevails.
Section 842(b) is inconsistent with paragraph 1. The
imputation to a foreign insurance company of a notional amount of
investment income under section 842(b) (minimum ECNII), see
majority op. part I, contravenes the threshold requirement in
paragraph 1 that the business profits attributed to a permanent
establishment come from the pool of business profits of the
resident carrying on business through the permanent
establishment. Paragraph 1 provides:
The business profits of a resident of a Contracting
State shall be taxable only in that State unless the
resident carries on business in the other Contracting
State through a permanent establishment situated
therein. If the resident carries on, or has carried
on, business as aforesaid, the business profits of the
resident may be taxed in the other State but only so
much of them as is attributable to that permanent
establishment. [Emphasis added.]
The notion that there exists a pool of business profits of which
the business profits of the permanent establishment are a subset
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