| October 30, 1990 | |
| Provincial and International | Rulings Directorate |
| Relations Division | G. Arsenault |
| 957-2126 | |
| Attention: C. Savage | |
| Acting Director | 902834 |
SUBJECT: 24(1) the "Trust"
This is further to our Memorandum to you dated October 1, 1990 and the telephone discussion on October 12, 1990 between Mr. Jim Wilson and Mr. G. Arsenault in connection therewith whereby Mr. Wilson advised that your original inquiry as to whether a trust whose income is exempt in its hands and in the hands of the beneficiaries can be a "resident of a Contracting State" for treaty purposes was meant to relate to a trust that did not meet the definition of a religious, scientific, literary, educational or charitable organization under Article XXI of the Canada-United States Income Tax Convention 1980 (the "Convention") but is exempt from taxation in the United States.
This will confirm that for the purposes of the Convention and other treaties comparable thereto we have adopted the position that an organization that is resident in a Contracting State will generally be considered to be a "resident of" that State notwithstanding that it is granted exemption from tax in such State by the tax laws thereof. Accordingly, an organization that is resident in the United States will be entitled to the benefit of Articles X and XI of the Convention as though it were a resident of the United States notwithstanding that it is exempted from United States tax by laws of the United States granting an exemption from tax to residents of the United States of the class or kind or having the attributes of the organization in question.
While the foregoing is generally our position, so far as we can determine this issue has not been previously considered in respect of a trust (other than a trust that was exempt under Article XXI). However, provided the exemption from tax does not arise simply from the flow through of the trust's income to its beneficiaries and provided paragraph 6(a) of Article XXIX of the Convention does not apply, we see no reason not to generally apply our position to trusts.
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