Dear Sirs:
Re: Employee Option to Acquire 24(1)
This is in reply to your letter of March 12, 1991 concerning the impact of the recent decision of Robertson, J.S. v the Queen, 90 DTC 6070 on the hypothetical situation you describe in your letter.
24(1)
You have asked us to..... not apply either at the time the employee acquires the option or at the time the employee's wife exercises the option. You also ask if our response would be different if the employee's wife were to acquire the option directly from the employer.
Please note that the Department does not provide opinions pertaining to proposed transactions otherwise than by way of an advance income tax ruling. However, we can provide you with the following general comments.
In a situation such as you describe, it is our view that an employee receives a benefit in the year in which the spouse exercises the option to purchase the 24(1) if the fair market value of the 24(1) is in excess of the amount paid-by the employee for the option. The timing of the benefit is based on the principles outlined in the Robertson case.
In our view it does not matter whether it is the employee or the employee's spouse who holds and exercises the option. If an employee or someone with whom the employee does not deal at arm's length receives or enjoys a benefit in respect of, in course of, or by virtue of that employment, the employee is considered to have received or enjoyed the benefit, albeit possibly indirectly. This position has been supported by the courts in various cases dealing with holiday trips provided by an employer for an employee and the spouse of the employee. Consequently, our response would not be different if the option were offered directly to the employee's spouse.
We caution you that the comments made herein represent our best interpretation of the law as it applies generally, but this is not a ruling and is not binding on the Department.
Yours truly,
for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch