 Using more linguistic terminology, "The can" is a noun phrase composed of a determiner followed by a noun, and "can hold water" is a verb phrase which is itself composed of a verb followed by a verb phrase.But is this the only interpretation of the sentence?Certainly "The can can" is a perfectly valid noun-phrase referring to a type of dance, and "hold water" is also a valid verb-phrase, although the coerced meaning of the combined sentence is non-obvious.