2010 Ruling 2010-0361591R3 - Article IV(7)(b) Restructuring -- summary under Article 4

Canco, a ULC and fiscally transparent under the Code, is wholly-owned by USCo, which is a C-Corp and a qualified person for purposes of the Canada-US Treaty. Canco will pay interest on the "new Note" issued by it to US Loanco, which also is a qualified person. Article IV(7)(b) is not applicable such interest, because the US tax treatment of the interest income to the recipient is the same regardless of whether the Canadian-resident company was fiscally transparent. In particular, US Loanco will include the interest in its income under either alternative, notwithstanding that the dual loss consolidation loss rules may apply at the level of determining the consolidated taxable income of the US group.