A single-member disregarded U.S. limited liability company (“SMLLC”), whose member is a resident of Canada, is factually resident in Canada and, thus subject to Part I tax, whereas U.S. source income (e.g., business income from a U.S. permanent establishment) would also be subject to U.S. income tax in the hands of the member, without the SMLLC being entitled to claim any foreign tax credit for such U.S. tax paid by its member. Is there potential redress under Art. XXVI(1) of the Convention, on the basis that, from the U.S. perspective, the member is double-taxed on the same U.S. source income?
CRA indicated that Art. 26(1) would not assist as there is no taxation that is not in accordance with provisions of the Treaty. The answer was the same for U.S. LLPs or LLLPs.