An umbrella corporation has three classes of tracking-interest shares (A, B and C) which each track to a corresponding Sub-Fund (A, B or C). A Canadian shareholder of the umbrella corporation (“Canco”) owns 90% of the Class A shares of the umbrella corporation (Scenario 1), or those shares together with 10% of the Class B shares (Scenario 2).
CRA indicated that in Scenario 1, s. 95(11) would deem there to be a separate notional non-resident corporation that owned the tracked property (in Sub-Fund A) for FAPI (ss. 91(1) and (4)) and foreign property reporting (s. 233.4) purposes and whose shares were held by the Class A shareholders (e.g., 90% by Canco).
In Scenario 2, there would be two separate notional corporations, each holding the properties of the respective sub-funds (Sub-Funds A and B), with the Class A and B shareholders of the umbrella corporation being respective shareholders of those two notional corporations.
Why then does s. 95(11)(e)(ii) refer to “tracking classes” in the plural? CRA indicated this reference takes into account the situation where, for example, the umbrella corporation had both Class C and D shares outstanding that both tracked Sub-Fund C and with both classes of shareholders holding shares of the notional corporation (holding the Sub-Fund C property) on a pro rata basis.