rp-98-21.pdf

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Part III
26 CFR 601.201: Rulings and determination letters.
Rev. Proc. 98-21
SECTION 1. PURPOSE
This revenue procedure sets forth the procedures concerning
requests to the U.S. competent authority for assistance in
resolving cases under Article XIII(8) of the Convention Between
the United States of America and Canada with respect to Taxes on
Income and Capital, dated September 26, 1980, as amended by the
Protocols dated June 14, 1983, March 28, 1984, March 17, 1995,
and July 29, 1997 ("the Treaty"), 1986-2 C.B. 258. Article
XIII(8) of the Treaty permits taxpayers to request the competent
authority to defer the recognition of profit, gain, or income
with respect to property alienated in the course of a corporate
or other organization, reorganization, or similar transaction.
See also Rev. Proc. 96-13, 1996-1 C.B. 616, for an updated
discussion of the general procedures concerning requests by
taxpayers for assistance of the U.S. competent authority under
the provisions of an income, estate, or gift tax treaty to which
the United States is a party.
SEC. 2. SCOPE
.01 General. The U.S. competent authority assists
taxpayers concerning matters covered in the mutual agreement
provisions of tax treaties in the manner specified in those
provisions. A tax treaty generally permits taxpayers to request

competent authority assistance when they consider that the
actions of the United States, a treaty partner, or both, result,
or will result, in taxation that is contrary to the provisions of
the treaty. Competent authority matters are a government-to-
government activity that does not include the taxpayer’s
participation.
.02 Requests for Assistance. In general, all requests for
competent authority assistance must be in accordance with Rev.
Proc. 96-13. However, to the extent that this revenue procedure
provides additional or inconsistent procedures from those set
forth in Rev. Proc. 96-13, the procedures set forth in this
revenue procedure must be followed when requesting competent
authority assistance under Article XIII(8) of the Treaty.
.03 U.S. Competent Authority. The Assistant Commissioner
(International) acts as the U.S. competent authority in
administering the operative provisions of tax treaties (including
Article XIII(8) of the Treaty) and in interpreting and applying
these treaties. In interpreting or applying these tax treaties,
the Assistant Commissioner (International) acts only with the
concurrence of the Associate Chief Counsel (International). See
Delegation Order No. 114 (Rev. 10), Effective date: June 2, 1994.
SEC. 3. BACKGROUND
.01 General. Article XIII(8) of the Treaty, as revised by
the Protocol of March 17, 1995, provides that:
"Where a resident of a Contracting State alienates property
in the course of a corporate or other organization,
reorganization, amalgamation, division or similar transaction and

profit, gain, or income with respect to such alienation is not
recognized for the purpose of taxation in that State, if
requested to do so by the person who acquires the property, the
competent authority of the other Contracting State may agree, in
order to avoid double taxation and subject to terms and
conditions satisfactory to such competent authority, to defer the
recognition of the profit, gain, or income with respect to such
property for the purpose of taxation in that other State until
such time and in such manner as may be stipulated in the
agreement."
.02 Purpose of this Provision. The purpose of Article
XIII(8) of the Treaty is to coordinate the U.S. and Canadian
nonrecognition rules concerning corporate and other
organizations, reorganizations, amalgamations, divisions, and
similar transactions in order to avoid double taxation of gain
from the alienation of property in the United States and Canada.
SEC. 4. GENERAL CONDITIONS UNDER WHICH THIS PROCEDURE APPLIES
.01 General. The assistance of the competent authority is
entirely discretionary.
.02 Types of Assistance. In connection with Article
XIII(8) of the Treaty, the U.S. competent authority handles two
types of requests for relief:
(a) requests by Canadian transferees of property for relief
from U.S. taxation, and
(b) requests by Revenue Canada for verification of the U.S.
tax treatment of transactions of U.S. transferees of property.
.03 Transactions Subject to U.S. Taxation but not Subject

to Canadian Taxation. Where a transaction is subject to taxation
within the United States but qualifies for nonrecognition
treatment in Canada, the transferee may request that the U.S.
competent authority defer taxation until the time that Canada
would impose taxation. In these cases, the U.S. competent
authority will contact the Canadian competent authority for
verification of the nonrecognition treatment under Canadian law.
If nonrecognition treatment in Canada is verified, the U.S.
competent authority will consider the facts and circumstances
supporting the request in deciding whether to defer the
recognition of profit, gain, or income under Article XIII(8) of
the Treaty. The taxpayer(s) may be required to enter into a
closing agreement in order to obtain the relief. See section 5
of this revenue procedure for guidance in requesting relief from
U.S. taxation.
.04 Transaction Subject to Canadian Taxation but not
Subject to U.S. Taxation. Where Canada would impose tax on a
transaction receiving nonrecognition treatment in the United
States, the U.S. competent authority will provide verification of
nonrecognition treatment by the United States when requested to
do so by the Canadian competent authority. To facilitate this
process, the taxpayer may wish to request a private letter ruling
from the Office of Chief Counsel to substantiate the claim of
nonrecognition treatment. Even if the taxpayer does not do so,
the U.S. competent authority may require that the taxpayer obtain
such a private letter ruling. See section 7 of this revenue
procedure for guidance in requesting assistance from the Canadian

competent authority under Article XIII(8) of the Treaty.
SEC. 5. PROCEDURES TO BE FOLLOWED FOR RELIEF REQUESTS TO THE
UNITED STATES COMPETENT AUTHORITY
.01 General. A transferee requesting U.S. competent
authority assistance under Article XIII(8) of the Treaty should
follow the procedures in Rev. Proc. 96-13.
.02 Information Required. The request for assistance must
contain a statement that U.S. competent authority assistance is
being requested. In addition, it must provide the following
information:
a) a statement that the request is made pursuant to Article
XIII(8) of the Treaty and a demonstration that relief is
necessary to avoid double taxation;
(b) a statement that the taxpayer seeking benefits from the
United States under the Treaty is a "qualified person" within the
meaning of Article XXIX A of the Treaty;
(c) the names, addresses, U.S. taxpayer identification
number and foreign taxpayer identification number, if any, of the
taxpayer and, if applicable, all related persons involved in the
matter;
(d) the taxable year(s) at issue;
(e) the Internal Revenue Service Center where the taxpayer
(and, if applicable, the related person or persons) filed federal
income tax returns (including amended returns) for the taxable
years in issue, or if no return was filed, a statement to that
effect;
(f) a statement whether the federal income tax returns of

the taxpayer (and, if applicable, of any related person or
persons) for the taxable years in issue were examined or are
under examination;
(g) a full description of the type and amount of income (in
both U.S. and Canadian dollars) or property involved; a full
description of the relevant transaction and any related
transactions, whether the transactions have already been
consummated or, if proposed, when they are likely to be effected;
a full description of the respective positions taken or proposed
by Canada, the taxpayers, and any relevant related person on the
issues raised; and, if applicable, a description of the control
and business relationships between the taxpayer and any relevant
related person for the years in issue, including any changes in
such relationship to the date of the request or any changes
thereafter;
(h) an explanation of the treatment for U.S. tax purposes
in the absence of relief under the Treaty together with a
statement of legal authorities;
(i) an explanation of the treatment of the transaction for
Canadian tax purposes. If the taxpayer is relying on a prior
ruling given by the Canadian taxing authorities, the taxpayer
should attach a copy of that ruling and either provide a
statement to the effect that the facts upon which the ruling was
based have not changed, or explain exactly how the facts
underlying the ruling have changed. The taxpayer should also
identify any subsequent change in the law, statute, or

regulations upon which the ruling is based;
(j) a statement whether there has been a prior request made
to the U.S. competent authority by the taxpayer or a predecessor
in interest on the same or related issue, including copies of
pertinent correspondence, and a statement of actions requested
of, proposed by, or taken by the Assistant Commissioner
(International); and
(k) U.S. powers of attorney with respect to the taxpayers.
.03 Penalties of Perjury Statement. In addition, the
taxpayer must provide a penalties of perjury statement in the
following form: "Under penalties of perjury, I declare that I
have examined this request, including accompanying documents,
and, to the best of my knowledge and belief, the facts presented
in support of the request for competent authority assistance are
true, correct, and complete." This declaration must be signed by
the person or persons making the request and not by such person’s
or persons’ representative. The person signing for a corporate
taxpayer must be an authorized officer of the taxpayer who has
personal knowledge of the facts. The person signing for a trust,
an estate, or a partnership must be, respectively, a trustee, an
executor, or a partner who has personal knowledge of the facts.
.04 No deletion statement required. No deletions statement
under section 6110 of the Code is necessary.
.05 Updates. It shall be the responsibility of the
taxpayer to keep the U.S. competent authority informed of all
material changes in the information or documentation previously
submitted as part of, or in connection with, the request for

competent authority assistance, as well as any new information
(including English translations where necessary) or documentation
relevant to the resolution of the issues under consideration as
it becomes known or available.
SEC. 6. ACTION BY THE U.S. COMPETENT AUTHORITY
.01 Notification of Taxpayer. Upon receiving a request for
relief pursuant to this revenue procedure, the U.S. competent
authority will consider whether the facts provide a basis for
assistance.
.02 Extending Period of Limitations for Assessment. If the
U.S. competent authority accepts a request for assistance, the
taxpayer may be requested to execute a consent extending the
period of limitations for assessment of tax for the taxable
periods in issue. Failure to comply with the provisions of this
subsection can result in denial of assistance by the U.S.
competent authority with respect to the request.
.03 Determination regarding relief. The decision whether
to grant relief will be made based upon all of the facts and
circumstances.
.04 No Review of Denial of Request for Assistance. The
U.S. competent authority’s denial of a taxpayer’s request for
assistance or dismissal of a matter previously accepted for
consideration pursuant to this revenue procedure is final and not
subject to administrative review.
SEC. 7. PROCEDURES TO BE FOLLOWED FOR REQUESTS FOR RELIEF TO THE
CANADIAN COMPETENT AUTHORITY

This revenue procedure is intended to coordinate requests
for competent authority assistance made to the United States and
Canada under Article XIII(8) of the Treaty. Taxpayers who wish
to request relief under Article XIII(8) of the Treaty from the
Canadian competent authority should follow the procedures
outlined in Revenue Canada Information Circular 71-17R4.
Information regarding such requests may be obtained from:
Revenue Canada, Director General, International Tax Programs
Directorate, Ottawa ON K1A 0L8.
SEC. 8. FEES
No user fees are required for a request for competent
authority assistance pursuant to this revenue procedure. Section
15 of Rev. Proc. 97-1, 1997-1 I.R.B. 11, at page 46, requires the
payment of user fees for requests to the Service for rulings,
opinion letters, determination letters, and similar requests.
SEC. 9. EFFECT ON OTHER DOCUMENTS
Rev. Proc. 96-13 is amplified.
SEC. 10. EFFECTIVE DATE
This revenue procedure is effective for requests for U.S.
competent authority assistance pursuant to Article XIII(8) of the
Treaty that are filed after [the date of publication of this
revenue procedure in the Internal Revenue Bulletin]*.
DRAFTING INFORMATION
The principal author of this revenue procedure is David
Bergkuist of the Office of Associate Chief Counsel
(International). For further information regarding this revenue
procedure, contact the Office of the Assistant Commissioner

(International), Tax Treaty Division, on (202) 874-1550 (not a
toll-free call).
* add the date of publication of this revenue procedure in
the Internal Revenue Bulletin.