Tom and Louise Kappus - Page 6




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          into force on August 16, 1984.  Article XXIV of the U.S.-Canada             
          treaty generally prohibits double taxation by the United States             
          and Canada, where one country has a right to tax income as the              
          country of source and the other country may tax on the basis of             
          residence.  The U.S. foreign tax credit allowed by the treaty               
          applies to certain taxes imposed by Canada with respect to income           
          from Canadian sources.  Paragraph 1 of Article XXIV provides the            
          general rule as follows:6                                                   
                    In the case of the United States, subject to the                  
               provisions of paragraphs 4, 5, and 6, double taxation                  
               shall be avoided as follows:  In accordance with the                   
               provisions and subject to the limitations of the law                   
               of the United States (as it may be amended from time                   
               to time without changing the general principle hereof),                
               the United States shall allow to a citizen or resident                 
               of the United States, or to a company electing to be                   
               treated as a domestic corporation, as a credit against                 
               the United States tax on income the appropriate amount                 
               of income tax paid or accrued to Canada * * * [U.S.-                   
               Canada treaty, art. XXIV, par. 1.]                                     
          Paragraph 4 of Article XXIV provides the following rule                     
          applicable to U.S. Citizens who are residents in Canada:                    
               4.  Where a United States citizen is a resident of                     
               Canada, the following rules shall apply:                               
                    (a)  Canada shall allow a deduction from the                      
               Canadian tax in respect of income tax paid or accrued                  

               5(...continued)                                                        
          Protocol).                                                                  
               6    This portion of art. XXIV, par. 1, as cited herein, was           
          not amended by the First or Second Protocol.  Under the First               
          Protocol, we note that the only change to paragraph 1 was the               
          deletion of the last sentence defining “appropriate amount”.  The           
          Second Protocol made no amendments to art. XXIV.                            





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