If a U.K. resident disposes of shares of its Canadian subsidiary that derive the greater part of their value from rights related to an active oil and gas business, is the gain on the disposition exempted under para. 7? After referring to the status of such shares as “taxable Canadian property”, and noting that under Art.13, para. 5(a), shares may be taxed in Canada if they derive the greater part of their value from immovable property situated in Canada, OR “any right referred to in paragraph 4 of Article 13 of the Convention, which describes certain rights related to petroleum, natural gas, or other related hydrocarbons situated in Canada,” CRA stated:
Assuming that the shares of the Canadian subsidiary (which carries on an active oil and gas business) derive the greater part of their value from rights described in paragraph 4 of Article 13 of the Convention, then Canada retains its right to tax the gain on the alienation of those shares. It is not necessary to determine whether the shares derive their value from immovable property as defined in the Convention or the Income Tax Conventions Interpretation Act.