CRA rules that a U.S. public corporation can issue flow-through shares for work under a farm-in agreement with a Canadian sub
A U.S. corporation (Bco) whose shares were listed on a redacted exchange was a principal business corporation by virtue of most of its assets being shares and debt of Canadian mining or exploration subsidiaries. In order that it can finance exploration work on properties of one such sub (Aco) through issuing flow-through shares to be issued to Canadian investors and listed on that exchange, Bco will enter into simple farm-in agreements with Aco respecting two of those properties (consisting of mining claims) and earn a working interest in those properties by expending the flow-through proceeds on related exploration work.
CRA ruled that Bco’s status as a U.S. public corporation would not preclude it from renouncing CEE provided that it was carrying on business in Canada. The Additional Information indicated that once it had earned the working interests, Bco might transfer those interests to Aco under s. 85(1).
Neal Armstrong. Summaries of 2016 Ruling 2015-0614081R3 under s. 66(12.71) and s. 66.1(6) – CEE – (f).