28 November 2001 Internal T.I. 2001-0091247 - Employer Stock Opt. & Section 116116(5) -- summary under Subsection 116(5)

S.49(3) did not apply to deem the exercise of employee stock options held by a non-resident former employee to not be a disposition of the options, given that s. 49(3) applied only to capital property, whereas employee stock options are governed by s. 7. However, there was no liability under s. 116(5) to the Canadian corporation that had issued the options as it should not be considered to have acquired the options from the employee and, therefore, had no cost therefor. CRA stated "this is analogous to a situation where a debtor repaid his debt and the debt ceased to exist. That is, the CRA would generally recognize the settlement or extinguishment of the debt as a disposition of property by the creditor but not an acquisition of property by the debtor".