Employees of a CCPC (Corporation A) , including non-residents, disposed of shares of Corporation A, that they had acquired on exercising their s. 7 options, on a s. 7(1.5) rollover basis for shares of the grandparent of Corporation A (Corporation C). The Directorate stated:
[S]ubsection 7(1.1) applies to defer recognition of the benefit determined under subsection 7(1) until the taxation year in which the employee disposes of the Corporation C shares. For greater certainty, subsection 7(4) provides that subsection 7(1) will then apply to the employee who has benefited from the provisions of subsection 7(1.1) even though the employee is no longer employed by Corporation A.
… [T]he benefit determined under subsection 7(1) will be required to be added to the non-resident's employment income earned in Canada in the taxation year of the disposition of the Corporation C shares by virtue of subsections 7(1) and (1.1) and subparagraph 115(1)(a)(i).