Roy Berg, in “Tax Dispute Resolution: Watch for US Issues” Canadian Tax Highlights 24:2 (February 2016), outlines some issues to consider when representing a US taxpayer who has a dispute with the CRA. He writes:
The practitioner [handling the dispute] may be tempted to settle (or even concede) a dispute with the CRA in Canadian dollars and hope to recoup some of the loss by claiming a refund of previously paid (and substantially appreciated) US dollars, but the US refund may be denied if appropriate procedures are not followed.
What are the “appropriate procedures”?
A claim for a [US tax] credit for Canadian taxes paid requires that the taxpayer show (1) that the tax has been determined in a manner consistent with a reasonable interpretation and application of the substantive and procedural provisions of Canadian law (including the treaty); and (2) that the taxpayer has exhausted all effective and practical remedies, including the “invocation of the competent authority procedures” (Treas. reg. section 1.901-2(e)(5)(i)).
