Cases
Placrefid Ltd. v. The Queen, 92 DTC 6480 (FCTD)
A Canadian mortgagee of a Montreal property whose owner was in default granted the taxpayer, a non-resident corporation, an option to purchase whatever interest the mortgagee acquired in the property with the mortgagee retaining the right to rescind that option agreement by paying the taxpayer a lump sum of $250,000. That sum, when received by the taxpayer following rescission of the agreement by the mortgagee, did not constitute income of the taxpayer from immovable property for purposes of the Canada-Swiss Convention given that the mortgagee did not own the property at the time of the negotiations but merely held a hypothec on the property, i.e., "it was not a jus in rem which would have entitled the defendant to specific performance in the event of default" (p. 6486).
The Queen v. Arnos, 82 DTC 6165, [1982] CTC 186 (FCA)
Since "recaptures of capital cost allowances are of the same nature as the revenue from the property in respect of which the capital cost allowances has been deducted", recaptured capital cost allowance was characterized as "rentals from real property" so as to benefit from the favourable treatment accorded to such income by Article XIIIA of the 1942 Canada-U.S. Convention.
Administrative Policy
23 January 2015 T.I. 2013-0509771E5 - Oil & gas payments made to U.S. resident
Mr. A, a U.S. resident, grants the right to drill for or take the oil & gas from his Canadian freehold property to a Canadian company, in consideration for an upfront bonus of $100,000, and annual royalties payable out of any oil & gas production.
After noting that these transactions result in a negative cumulative Canadian oil and gas property expense ("CCOGPE") pool, that any resulting credit balance would be deducted from his cumulative Canadian development expense ("CCDE") pool under variable L, and any negative balance CCDE balance for the year is added to his income pursuant to ss. 66.2(1), 59(3.2)(c) and 115(1)(a)(ii) or (iii.1), CRA quoted from the definition of "real property" in the Canada-U.S. Treaty and in the Income Tax Conventions Interpretation Act, and stated:
Therefore, if Mr. A has an amount included in income under paragraph 115(1)(a) with respect to the disposition of CRP as described above, the ITCIA and Article VI of the Treaty preserve Canada's right to tax the income without limit.
1 February 2012 T.I. 2012-043157 -
oil royalty payments are covered by Art. VI, para. 2 of the Canada-US Convention ("amounts computed by reference to the amount or value of production from...resources") rather than by Art.XII, para. 4 ("payments...for...the use of...tangible personal property") and, accordingly, are not subject to the Treaty-reduced withholding tax rate.