Article 13 provides rules — U.S. Income Tax Treaty

taxation of gains from the alienation of property.

Paragraph 1 preserves the situs country right to tax gains derived from the alienation of real property situated in the situs State (the "source State"). Thus, paragraph 1 permits gains derived by a resident of one State from the alienation of real property located in the other State to be taxed by such other State.

Paragraph 2 provides that the rule of paragraph 1 applies to shares of the stock of any company that consists principally of real property situated in a Contracting State, and a participation in any partnership, trust or estate to the extent attributable to real property situated in a Contracting State. In all events the term "real property situated in the other State" includes a United States real property interest in the United States, as that term is defined in section 897 of the Internal Revenue Code (or any successor statute). Thus, the United State preserves its right to collect the tax imposed by section 897 on gains derived by foreign persons from the disposition of United States real property interests, including gains arising from indirect dispositions described in section 897(h). For this purpose, the source rules under section 861(a)(5) shall determine whether a real property interest is situated in the United States.

Paragraph 3 provides that gains from the alienation of personal property that are attributable to a permanent establishment that an enterprise of one of the States maintains in the other State may be taxed in the other State. The same rule applies to a fixed base used for the purpose of performing independent personal services, and to gain from the alienation of a permanent establishment or fixed base described in this paragraph. This provision permits gains from the alienation by a resident of a State of an interest in a partnership, trust or estate that has a permanent establishment in the other State to be taxed as gains attributable to such permanent establishment. Thus, for example, the United States may tax gains derived from the disposition of an interest in a partnership that has a permanent establishment in the United States, regardless of whether the assets of such partnership consist of personal property as defined in Article 13.

Paragraph 4 provides that gains from the alienation of property other than that described in this Article shall be taxable only in the State of which the alienator is a resident. The rule in this paragraph is subject to the provisions of Article 8 (Shipping and Air Transport). Gains described in Article 8 are taxable in accordance with the provisions of that Article.