QUESTION: If a Canadian citizen who is not a resident of the US owns a
US LLC that puts on seminars in the US, and thus has US source income,
is the Canadian citizen required to pay US taxes? It seems to me that
he would need to pay US taxes on the US sourced income.

REPLY: Either the LLC or the members would be subject to U.S. tax on
the income from seminars in the U.S. The default treatment of a U.S.
LLC is to treat it as a partnership for tax purposes unless the
members make an election to have the LLC treated as a corporation.
Assuming that no election was made, the Canadian members of the U.S.
LLC would be subject to both U.S. and Canadian tax on their respective
shares of the LLC income. They should then be able to treat the U.S.
tax as a credit against the Canadian tax on that same income --
assuming no difference in tax rates on that income.

My knowledge of Canadian tax law is extremely limited, but the Dec.
14, 2007 issue of Tax Practice by Tax Analysts includes an extensive
article about the recent fifth protocal (revision) of the U.S/Canada
Tax Treaty. It appears from the article that "LLCs should receive the
same general look-through treatment that the CRA affords to
partnerships."

Vern

The comments in this memorandum are not intended to constitute an
opinion regarding any specific tax issues because additional tax
issues may exist that could affect the tax treatment of the tax issues
addressed in this memo. This memorandum does not consider or reach a
conclusion with respect to those additional issues and was not written
and cannot be used for the purpose of avoiding penalties under code
section 6662(d). For further details see
http://www.offshorepress.com/vkjcpa/disclosurerules.htm