In 2013-0480321C6, the CRA confirmed its view that US tax levied directly on a Canadian corporate parent (Canco) of a transparent US limited liability company (LLC) would not be deductible or creditable to Canco until such time as the LLC pays a dividend to Canco. In the case considered, Canco owned all the shares of the LLC and the LLC earned foreign accrual property income (FAPI) in the US (say, US real estate income). For US tax purposes, the LLC was transparent such that US tax on the LLC’s FAPI was levied not on the LLC, but rather directly on Canco as owner of the LLC. For Canadian tax purposes, the LLC’s FAPI was also included in Canco income (under s. 91). On these facts, the CRA confirmed that Canco would not be entitled to either a foreign tax credit (under s. 126(1)) or a foreign tax deduction (under s. 20(12)) for the US tax it paid on the LLC’s FAPI. At this point, the result is double taxation: i.e., both Canadian tax and US tax on the same (FAPI) income. However, the CRA went on to confirm its view that Canco would be entitled to relief for such US tax when dividends are actually paid by the LLC to Canco. That is, Canco would be entitled to relief from double taxation – in the form of a grossed-up deduction under s. 113(1)(c) for the prior US taxes paid – when the LLC actually distributes its after-tax income as a dividend to Canco.