26 November 2020 STEP Roundtable Q. 4, 2020-0838001C6 - Foreign Tax Credit -- summary under Subsection 126(1)

A Canadian-resident individual is subject to Australian gains tax on the gain from selling the shares of a U.K. holding company holding an Australian real estate corporation. Under the Canadian domestic situs rules, the gain would have a U.K. source so that there would be no Canadian foreign tax credit for the Australian tax – but this is remedied by Art. 22(2) of the Canada-Australia Treaty (broadly similar, for example, to Art. 24(3) and 21(3) of the U.S. and U.K Treaties, respectively), which provides that income or gains of a Canadian resident which are taxed in Australia in accordance with Art. 13 of the Treaty are relevantly deemed to be sourced in Australia.