SEC. 3. BACKGROUND

.01 General. Article XIII(8) of the Treaty, as revised by the Protocol of March 17, 1995, provides that:

“Where a resident of a Contracting State alienates property in the course of a corporate or other organization, reorganization, amalgamation, division or similar transaction and profit, gain, or income with respect to such alienation is not recognized for the purpose of taxation in that State, if requested to do so by the person who acquires the property, the competent authority of the other Contracting State may agree, in order to avoid double taxation and subject to terms and conditions satisfactory to such competent authority, to defer the recognition of the profit, gain, or income with respect to such property for the purpose of taxation in that other State until such time and in such manner as may be stipulated in the agreement.”

.02 Purpose of this Provision. The purpose of Article XIII(8) of the Treaty is to coordinate the U.S. and Canadian nonrecognition rules concerning corporate and other organizations, reorganizations, amalgamations, divisions, and similar transactions in order to avoid double taxation of gain from the alienation of property in the United States and Canada.