CRA indicates that the s. 86.1(2)(c)(i) U.S.-residence test references central management and control
A U.S. public corporation ('Parentco"), which had two actively-traded classes of common shares, whose respective performance tracked two businesses, wished to spin-off one of the two businesses to the holders of the related tracking shares (the “Original Shares”) as a tax-free distribution for Code purposes. It did so by transferring that business to a newly-incorporated U.S. subsidiary (Splitco) in consideration for Splitco common shares, and then distributing those shares on the Original Shares (with the Original Shares ultimately being cancelled).
In finding that the requirements of ss. 86.1(2)(a) to 86.1(2)(c) for an eligible distribution were met, the Directorate stated, respecting the test in s. 86.1(2)(c)(i) that Parentco and Splitco reside in the U.S. rather than Canada:
The common law principles of central management and control of a corporation must be used in determining the residence of Parentco and Splitco.
It is implicit in this interpretation that the Directorate accepted that the tracking shares were common shares.
Neal Armstrong. Summary of 14 January 2020 Internal T.I. 2018-0785991I7 F under s. 86.1(2).