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paragraphs 1 and 4 of article XXIV of the U.S.-Canada
treaty.
Recently, in Kappus v. Commissioner, T.C. Memo. 2002-
36, we decided the very issue presented in the instant
case. The taxpayers in that case made virtually the same
argument as petitioners. We pointed out that in order for
the taxpayers to prevail, we would have to find both that
section 59(a)(2) and article XXIV of the treaty are in
conflict and that the U.S.-Canada treaty is later in time.
We pointed out:
If the treaty and section 59(a)(2) are not in
conflict, then effect must be given to the
provisions of both without regard to which of the
two is later in time. Pekar v. Commissioner,
* * * [113 T.C. 158, 161 (1999)]. In that event,
we must find that petitioners are subject to
section 59(a)(2). On the other hand, if there is
a conflict between the two, and if section
59(a)(2), as opposed to the treaty, is found to
be later in time, then section 59(a)(2) controls
as the last expression of the sovereign will.
Jamieson v. Commissioner, T.C. Memo. 1995-550,
affd. without published opinion 132 F.3d 1481
(D.C. Cir. 1997).
In Kappus, we disagreed with the taxpayers' position
that there is a conflict between section 59(a)(2) and
article XXIV of the U.S.-Canada treaty, and we agreed with
the Commissioner that section 59(a)(2) and the provisions
of article XXIV of the U.S.-Canada treaty can be applied
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