Robert M. and Pamela Price - Page 13




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                 In support of their position that the application of                 
            section 59(a)(2) conflicts with the provisions of article                 
            XXIV, petitioners make three arguments.  First, petitioners               
            point out that paragraph 1 of article XXIV provides that                  
            the treaty is "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)".                          
            Petitioners argue that section 59(a)(2) is not only adverse               
            to the principle of the elimination of double taxation but                
            "repudiates" that principle in that it "subjects a certain                
            portion of a U.S. taxpayer's income to double taxation".                  
            Thus, they argue that section 59(a)(2) is not an amendment                
            of U.S. law that is compatible with article XXIV of the                   
            treaty dealing with the elimination of double taxation.                   
                 Second, they argue that section 59(a)(2) cannot be                   
            harmonized with paragraphs 4, 5, and 6 of article XXIV, and               
            that the entire paragraph 1 is "subject to the provisions                 
            of paragraphs 4, 5, and 6".  According to petitioners,                    
            paragraphs 4, 5, and 6 of article XXIV provide, in                        
            substance, that the United States and Canada have agreed to               
            a method for allocating a U.S. citizen's tax liabilities                  
            between the two countries in the case of a U.S. citizen who               
            resides in Canada.  In making that allocation, petitioners                
            argue, the United States has agreed that a U.S. citizen                   






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