U.S. Supreme Court Rules Canadian Tax Treaty Allows Enforcement of IRS Summons to Implement Canadian Request

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Wednesday, March 1, 1989
Bruce Zagaris
In a unanimous decision the U.S. Supreme Court has held that the Internal Revenue Service (IRS) can issue a summons to obtain tax information in response to a request from Canadian authorities without the need to demonstrate that a Canadian tax investigation had not reached a stage analogous to a referral of the U.S. Department of Justice.  In particular, the Court found that neither the 1942 double tax convention nor the applicable U.S. legislation on the issuance of third-party summons under the Internal Revenue Code required such a determination, provided the IRS can show that the following requirements have been fulfilled: the investigation is relevant to a legitimate purpose; the IRS does not already possess the information; and it has followed the statutorily required administrative steps.