100 Canadian-resident individuals form Canco and each subscribe $1M for a separate class of Canco preferred shares, which invests in preferred shares of 100 separate classes of preferred shares of Barbadosco, which uses the $100M in its investment business. The Canadian investors preferred shares are non-voting, non-participating and retractable based on the value of the same class of shares of Barbadosco.
Each class of Barbadosco Preferred Shares constitutes an hermetic cell that corresponds to an investment management account of a Canco preferred shareholder. The Barbadosco preferred shares are non-voting and non-participating and are redeemable at the option of the holder. The redemption value of each class of Barbadosco preference shares is 98% of the value of the shareholder's after-tax investment management account.
Canco owns all of the common and preferred shares of Barbadosco.
CRA indicated that there was insufficient information to determine whether Canco held tracking interests under former draft s. 94.2(9).