The taxpayer, which was a U.S. limited liability company ("LLC") that carried on business in Canada through a Canadian branch with the income from such branch being included in the consolidated return of the "C-Corp" parent of the taxpayer's immediate parent (also a U.S.-incorporated C-Corp.) was assessed on the basis that the profits of the Canadian branch were subject to Canadian branch tax at the non-treaty reduced rate of 25% (rather than 5%). Before finding that the taxpayer was entitled to the treaty-reduced rate of 5%, Boyle, J. indicated (at para. 86) that "the treatment of partnerships and of LLCs should be analogous for purposes of the interpretation application of the U.S. Treaty" and noted (at para. 76) that a partnership which is not liable to tax in its home country by virtue of being fiscally transparent should nonetheless get the benefit of the tax convention based on the residence of its members. The taxpayer should be considered to be a resident of the U.S. for purposes of the U.S. Treaty, and its income should be considered to be subject to full and comprehensive taxation under the U.S. Internal Revenue Code by reason of a criterion similar in nature to the enumerated grounds in Article 4, namely the place of incorporation of its members (para. 101).
He also noted (at para. 103) that the U.S. Treaty as amended by the Fifth Protocol would not necessarily be interpreted and applied in a similar manner.