The plaintiff (“SSCF”) was a Canadian registered charity that sought a pro rata refund under Art. XXI(1) of the Canada-U.S. Convention of U.S. taxes that had been imposed on U.S.-source portfolio dividends received by a Canadian unit trust (“Greystone Fund”) of which SSCF was a unitholder and whose terms required all its income to be distributed annually. SSCF argued that, as Greystone Fund was fiscally transparent for Canadian tax purpose, SSCF could by virtue of Art. IV(6) (which allowed it to look through fiscally-transparent Canadian entities) access its exemption on US-source dividend income pursuant to Art. XXI(1).

In rejecting SSCF’s position, Hertling J first noted that “Canadian unit trusts were not recognized by the signatories at the time the Fifth Protocol was negotiated and adopted as a fiscally transparent entity,” and then concluded:

Together, the Tax Treaty text and the relevant extrinsic evidence reflect a deliberate allocation of treaty benefits: the signatories expanded Article XXI(3) to allow charitable organizations to benefit from investing in pooled-investment vehicles, but only when the vehicle is restricted to tax-exempt organizations. Allowing charities to benefit from Article IV(6) and evade that restriction is inconsistent with Article XXI(3). At the same time, the signatories adopted Article IV(6) but expressly limited its application in Canada to Partnerships and bare trusts. SSCF cannot rely on Article IV(6) to avoid U.S. taxation of its U.S.-source dividend income. Rather, Article XXI(3) governs the treatment of SSCF’s U.S.-source income through the Greystone Fund. Because the Greystone Fund is not limited to tax-exempt organizations, its income does not qualify for the favorable tax treatment in Article XXI(1).

Neal Armstrong. Summary of The South Saskatchewan Community Foundation Inc. v. US (US Ct of Federal Claims, August 25, 2026) under Treaties – Income Tax Conventions – Art. 21.

CRA stated that, since whether a debt has become uncollectible is a factual determination respecting each debt, the “election provided for in subsection 50(1) must therefore be made separately for each debt.” S. 33(2) of the Interpretation Act (“the singular include[s] the plural”), was not discussed.

However, CRA indicated that the election must be made by attaching a signed letter to the return, and that “there appears to be nothing in the legislation to prevent several separate elections, for each of the debts in question, from being set out in a single letter.” Effectively, CRA seems to be saying that a single s. 50(1) election letter can be attached for a multitude of debts, provided that they are listed.

Neal Armstrong. Summary of 1 April 2026 Internal T.I. 2025-1050651I7 F under s. 50(1).

The taxpayer (KDL) was a resident of the Isle of Man that used the development and marketing services of a related Isle of Man company to carry on a land development and trading business in the UK. Art. 6 of the UK–Isle of Man arrangement for the avoidance of double taxation (the “2018 DTA”) provided (along the OECD Model lines):

1. Income derived by a resident of a Territory from immovable property (including income from agriculture or forestry) situated in the other Territory may be taxed in that other Territory. …

3. The provisions of paragraph 1 shall apply to income derived from the direct use, letting, or use in any other form of immovable property.

Unlike the Canada–UK Treaty, Art. 6(3) did not expressly include profits from the alienation of immovable property.

KDL’s position was that Art. 6 was concerned only with income derived from the use or exploitation of land, and that this category of income was dealt with exhaustively by Art. 6(3), which referred to income derived for the purposes of Art. 6(1) and did not include profits from the sale of land that involved no continuing use or exploitation. Accordingly, its profits from its UK land sales fell outside Art. 6 and (as it did not have a UK permanent establishment) also were not captured by Art. 7.

The Tribunal rejected this submission, stating:

Our conclusion follows principally from the language and structure of Article 6 itself. The natural meaning of "income derived from immovable property" is sufficiently broad to encompass income which arises directly from the ownership, development and sale of the immovable property in question, and nothing in Article 6(3) requires Article 6(1) to be confined to income generated during a period of continuing ownership. We do not agree that the OECD Commentary, the reservation practice [in, e.g., the Canada treaty], or the reasoning in RBC establishes the narrower "use versus alienation" distinction for which the Appellant contends. … That interpretation is also consistent with the broader context and purpose of the arrangements and avoids what would otherwise be a striking exclusion from source-state taxation of a particular category of income derived from United Kingdom immovable property.

In obiter it indicated that if, contrary to this conclusion, Art. 6(1) did not itself extend to the profits in issue and therefore Art. 6(3) assumed determinative importance, KDL’s activities nonetheless would fall within Art. 6. It stated:

The Appellant's analysis places undue emphasis upon the final act of sale. …

A property development trade involves substantially more than the passive holding of land pending disposal. The land is employed, altered, improved and commercially deployed in order to generate profit. In ordinary language, that constitutes a form of use.

The Tribunal also went on to state, obiter, that, contrary to the HMRC submission, Art. 13 of the 2018 DTA dealt only with capital gains (notwithstanding that it referred instead to “gains”) having regard to the overall structure of the 2018 DTA.

Neal Armstrong. Summary of Knights Developments Ltd v Revenue and Customs [2026] UKUT 329 under Treaties – Income Tax Conventions – Art. 6.

This morning's release of five severed letters from the Excise and GST/HST Rulings Directorate (identified by them as their May 2025 release) is now available for your viewing.