UK Parent owns US Parent, which owns US Holdco (whose shares are taxable Canadian property) which owns Can Sub. US Parent sells US Holdco. Does Art. XXIX-A, para. 3 of the Canada-U.S. Treaty (i.e., the LOB) apply, assuming US Parent is carrying on a business that is upstream, downstream or parallel to the business carried on by Can Sub, and would the gain be derived from Canada where Canada taxes it under domestic law? CRA responded:
[W]e would consider the gain realized in US Parent from the disposition of its US Holdco shares to be income derived from Canada for purposes of applying paragraph 3 of Article XXIX-A of the Treaty, since the value of the US Holdco shares would be principally derived from property that is "taxable Canadian property" as defined in subsection 248(1).