Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Request concerning the Department's interpretation of paragraphs 7(1)(b), 7(3)(b) and 110(1)(d) concerning stock option plans where the taxpayer can elect to receive cash in lieu of shares.
Position TAKEN:
The Department's position is presently under review in consultation with the Department of Finance.
Reasons FOR POSITION TAKEN:
In the Department's view, it is not appropriate that an amount received in cash by an employee on the disposition of stock options is eligible for the paragraph 110(1)(d) deduction whereas the employer is entitled to a deduction for the full amount paid.
Revenue Canada Round Table
Institute of Chartered Accountants
of Alberta
Question No. 9
Receipt of Cash in Lieu of Stock option
Revenue Canada has, in the past, issued a technical interpretation that where an employee elects to receive cash in lieu of exercising a stock option, the employee would still be eligible for the deduction pursuant to paragraph 110(1)(d) of the Act and the corporation would not be precluded under subsection 7(3) from deducting the cash payment to the employee. Recently Revenue Canada has stated that this interpretation is being reconsidered. What is Revenue Canada's current position with respect to this situation?
Department's Position
Revenue Canada's interpretation of paragraph 7(1)(b), 7(3)(b) and 110(1)(d) of the Act is still presently under review. Revenue Canada is studying this matter in consultation with the Department of Finance. In the meantime, no opinions will be expressed and no rulings will be given on this issue.
In Revenue Canada's view, it is not appropriate that an amount received in cash by the employee on the disposition of stock options is eligible for the paragraph 110(1)(d) deduction whereas the employer is entitled to a deduction for the full amount paid.
Author: R. Gagnon
File: 7-951174
Date: April 27, 1995