Petrominerales is distributing an exploration sub as a PUC distribution rather than under s. 86

Prior to an acquisition of all its shares for $935M in cash by Pacific Rubiales, Petrominerales is proposing to distribute an Alberta company (ResourceCo), holding a Brazilian exploration subsidiary, to its shareholders as a paid-up capital distribution rather than under a s. 86 reorganization.  There is no indication that a ruling was sought.

The U.S. tax disclosure indicates that ResourceCo (which will start out with exploration assets with a book value of $32M and with $100M of cash) is anticipated to be a PFIC for 2013 and 2014 but not thereafter.  Although there is no forecast in the Circular, many of our readers might take this as a forecast that ResourceCo will have turned much of its cash into producing assets by 2015!

Neal Armstrong and Abe Leitner.  Summary of Petrominerales Circular under Spin-offs – S. 84(2) distributions.