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Background
The trial of this case was held over 2 days during which Mr.
Rusten and his administrative assistant testified, and the
parties stipulated certain exhibits into the record.
Mr. Rusten was a citizen and a resident of the United States
during 1998, but he worked in Canada as a consultant in the
railroad industry. Mr. Rusten was an independent contractor
associated with a company called CLN Industries International
(CLN). Mr. Rusten assisted railroad companies by purchasing
machinery such as locomotives, generators, and traction motors
for them and by training their employees to make repairs and
maintain the locomotives and cars.
Despite the fact that Mr. Rusten considered himself an
independent contractor and was taxed as such in the United
States, in Canada Mr. Rusten was taxed as an employee of CLN.
CLN withheld the American equivalent of $21,011.53 of income
taxes from Mr. Rusten’s compensation and paid them to the Canada
Revenue Agency. The income taxes withheld were reported on a
T4A-NR, Statement of Fees, Commissions, or Other Amounts Paid to
Non-Residents for Services Rendered in Canada. The Canadian
Government retained these withheld income taxes.
Petitioners timely filed their 1998 Federal income tax
return. Petitioners’ return was audited for the taxable year
1998. After the first audit, the parties reached an agreement
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Last modified: March 27, 2008