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Unformatted text preview: t authority that treaty benefits should be allowed, or 2. establish that the taxable gain on the disposition is in connection with or incidental to an active trade or business under article xxix a(3). active Tr ade or Business Test:
applic ation to C apital gains
The technical explanation provides no additional insight about whether the scope of the active trade or business test in article xxix a(3) is limited to income or whether treaty benefits should extend to gains under article xiii. at the 2008 iFa seminar,62 a question was raised about whether Canada will allow capital gains to be treated as income that is in connection with or incidental to an active trade or business in applying article xxix a(3). This question raises two fundamental issues: (1) whether the concept of income in article xxix a(3) includes capital gains, and (2) whether these 60 For taxes in respect of capital gains, the LOb is effective for taxable years beginning after 2008. 61 The us company does not receive a foreign tax credit for Canadian taxes paid because the capital gain is not generally considered foreign-source income for us tax purpose...
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