SEC. 4. GENERAL CONDITIONS

UNDER WHICH THIS PROCEDURE APPLIES

.01 General. The assistance of the competent authority is entirely discretionary.

.02 Types of Assistance. In connection with Article XIII(8) of the Treaty, the U.S.

competent authority handles two types of requests for relief:

(a) requests by Canadian transferees of property for relief from U.S. taxation, and

(b) requests by Revenue Canada for verification of the U.S. tax treatment of transactions of U.S. transferees of property.

.03 Transactions Subject to U.S. Taxa- tion but not Subject to Canadian Taxa- tion. Where a transaction is subject to taxation within the United States but qualifies for nonrecognition treatment in Canada, the transferee may request that the U.S. competent authority defer taxation until the time that Canada would impose taxation. In these cases, the U.S. competent authority will contact the Canadian competent authority for verification of the nonrecognition treatment under Canadian law. If nonrecognition treatment in Canada is verified, the U.S. competent authority will consider the facts and circumstances supporting the request in deciding whether to defer the recognition of profit, gain, or income under Article XIII(8) of the Treaty. The taxpayer(s) may be required to enter into a closing agreement in order to obtain the relief. See section 5 of this revenue procedure for guidance in requesting relief from U.S. taxation.

.04 Transaction Subject to Canadian Taxation but not Subject to U.S. Taxation. Where Canada would impose tax on a transaction receiving nonrecognition treatment in the United States, the U.S. competent authority will provide verification of nonrecognition treatment by the United States when requested to do so by the Canadian competent authority. To facilitate this process, the taxpayer may wish to request a private letter ruling from the Office of Chief Counsel to substantiate the claim of nonrecognition treatment. Even if the taxpayer does not do so, the U.S. competent authority may require that the taxpayer obtain such a private letter ruling. See section 7 of this revenue procedure for guidance in requesting assistance from the Canadian competent authority under Article XIII(8) of the Treaty.