An individual who donated some of his employee stock options on the shares of a public company to arm's length registered charities, claimed the $3M fair market value of the donated options for charitable tax credit purposes, but did not include any portion of the donated options in his income under TA s. 50 (the equivalent of ITA s. 7(1)(b)).
In disagreeing with this result and with the view of the Court of Quebec that TA s. 54 (the equivalent of ITA s. 7(3)(a) established that the stock option rules (contained in TA s. 49 et seq.) constituted a “complete code” so that TA s. 422 (equivalent to ITA s. 69(1)(b)) did not apply to deem the “value of the consideration for the disposition” received by the taxpayer to be equal to the options’ fair market value of $3M, rather than the nil proceeds in fact received, Cournoyer JCA had stated (as quoted in translation at para. 2):
[T]he very broad formulation of the rule set out in section 422 suggests that the legislature’s purpose was to attribute to any disposition of property by a person a value equal to the fair market value of the property for the purposes of computation of income. Moreover, the legislature did not explicitly exclude the Division of the statute relating to employee stock options from the application of section 422 … . Its silence in this regard is telling, because there are several express references in the T.A. to the non‑applicability of section 422.
The only effect of section 54 T.A. is to give precedence to the application of sections 49 et seq. over any other section that lays down a taxing rule. Section 54 does not prevent the ARQ from relying on the presumptions set out in the T.A. in computing a taxpayer’s taxable income. …
[W]hile section 54 ensures that sections 49 et seq. of the T.A. apply to benefits arising from the granting of stock options and excludes those benefits from the ambit of sections 36 and 37 [similar to ITA ss. 5 and 6(1)(a)], it does not, in the absence of clear legislative indicia to this effect, constitute a code so complete and so hermetic that the application of section 422 is excluded.
After quoting extensively from his reasons, the Supreme Court briefly stated (at para. 3) that “[w]e agree with Cournoyer J.A.’s view.”