US LLC is entitled to treaty relief under the Canada-US Tax Treaty

In TD Securities (USA) LLC v. Her Majesty The Queen, the Tax Court of Canada held that a single member US LLC was a US resident for the purposes of the Canada-US Tax Treaty.  The decision was issued by Patrick Boyle, T.C.J., on April 8, 2010. The decision overrides the long-standing position adopted by the Canada-Revenue Agency that a US LLC is not resident in the U.S. for the purposes of the Canada-US tax treaty, because its income is not subject to the most comprehensive form of taxation in the U.S. at the entity level.

The issue before the court was whether a US LLC owned by another US corporation was entitled to branch tax relief in Article X (Dividends) in the Canada-US Tax Treaty.

Given that this result is consistent with Article IV(4) of the Canada-US Tax Treaty (that provides relief to the income derived by a U.S. resident through a US LLC), it is not clear if the CRA would appeal the decision. 

Read the decision here: US LLC is entitled to relief under the Canada-US Tax Treaty, provided that its income is subject to US tax in the hands of its sole member.