CRA responded to various questions respecting the completion of Box 20 of Form T5008 in the context of:
- the sale (or closing out by the acquisition of an offsetting option) by the writer (on an exchange and through a securities dealer) of securities’ call options that it had written, or
- the borrowing of shares for a short sale and the subsequent delivery of identical shares to close out the short.
CRA indicated:
“Publicly traded” (as defined in s. 230(1)) option sales transactions conducted as agent for non-exempt clients are included in what must be declared on the T5008 slip by the trader or dealer.
[W]here … the writer and seller of a particular call option purchases another call option traded in the market that has the same characteristics as the particular option, in order to terminate its obligations [thereunder] … the purchase of the call option constitutes a separate transaction … . The cost of purchasing the option should not be treated as the cost of the option at the time the option is granted or sold. The purchase constitutes a transaction subsequent to the sale of the call option by the writer. ...
In the case of the sale of the option by the writer … the cost of the call option sold by the writer is usually nil. Where the cost of the seller's written call option is nil, "0" should be entered in Box 20 of the T5008 slip or the Box should be left blank.
After noting that the short seller acquires the securities borrowed by it at a cost based on their fair market value at the time of the borrowing, which is the cost amount reported in Box 20 when those securities are sold short, CRA noted:
The amount to be entered in Box 20 of the T5008 slip for a short sale of shares is not the cost of the identical shares that are acquired by the short seller and transferred to the lender to cover the short position.