It 113r4 Avantages Aux Employés Stock Options

Commentaire Ss. 7 (1) a) à e) stipulent diverses règles qui s'appliquent lorsqu'une société a accepté d'émettre des actions à un employé de celle-ci ou à une autre société avec laquelle il n'a pas de lien de dépendance (une convention d'option). Des règles semblables s'appliquent aux fiducies de fonds commun de placement (voir le paragraphe 7 (7)). En vertu de l'art. 7 (1) a), l'employé est réputé avoir reçu une prestation de son emploi au moment où il acquiert des actions en vertu de la convention d'option (à moins que, dans le cas de l'exercice d'un contrat d'option par un L'acquisition d'actions d'une société privée contrôlée par le Canada, la reconnaissance de cette prestation est différée jusqu'au moment où l'employé dispose des actions). Le montant de la prestation est égal à la valeur des actions au moment de leur acquisition par l'employé moins le prix d'exercice, c'est-à-dire le montant payé par l'employé en vertu de la convention d'option pour acquérir les actions. (Dans le cas inhabituel où l'employé a versé un montant pour acquérir la convention d'option, le montant de la prestation calculée est réduit de façon correspondante.) Le montant de la prestation calculée est ensuite inclus dans le revenu des employés en vertu de l'art. 6 (1) a). Ces règles s'appliquent de la même façon aux options d'un employé d'acquérir des actions d'une société non-résidente, même si elle n'était pas un résident du Canada et qu'elle était employée à l'extérieur du Canada au moment où elle a reçu les options d'achat d'actions Ou son emploi (Tedmon). Le mot valeur à l'art. 7 (1) a) est essentiellement synonyme de juste valeur marchande (Steen, IC 89-3). Bien que nous utilisions le terme d'accord d'option pour faire référence à l'accord de l'employeur d'émettre des actions, il a été déclaré que les termes accord et accord ne sont pas des expressions techniques (mais voir l'interprétation statutaire, le sens ordinaire), de sorte que, par exemple, Option incorporée dans les modalités d'une débenture convertible émise par l'employeur serait également suffisante pour engager l'application de l'art. 7 (Mansfield). De même, il a été dit qu'aucun contrat formel n'est requis pour engager l'application de l'art. 7 (Aylward). Aux fins de l'art. 7 (1) a), le moment auquel l'employé a acquis des actions en vertu d'une convention d'option a été déterminé comme étant le moment auquel les actions qu'il a contractées pour acquérir lui ont été valablement émises. En conséquence, il a été constaté que l'employé n'avait pas acquis des actions où il avait l'option d'acquérir des actions librement négociables et que, à ce moment-là, l'employeur n'était pas encore en mesure d'émettre des actions librement négociables (Clemiss) (Gesser), ou lorsque le contribuable n'avait pas encore payé le prix d'exercice des actions qui auraient été émises (Ball). Bien que, dans la plupart des statuts ou dans l'ensemble des statuts, les actions ne soient valablement émises qu'après leur paiement intégral, dans un cas, il a été constaté qu'un salarié avait acquis des actions d'une société de fiducie lorsqu'il y avait un accord contraignant pour les acquérir, Il n'a pas entièrement payé pour eux à ce moment-là (Grant). L'acquisition d'actions par un prête-nom ne donnera pas lieu à un avantage imposable au candidat (Williams, Bertram et Stafford). La Reine c. Morin. Le contribuable a conclu une entente avec un consultant (Bobsan) en vertu de laquelle Bobsan lui recommanderait des entreprises de la haute technologie à qui le contribuable pourrait demander un poste, et le contribuable a accepté de payer Bobsan Les 100 000 premiers de tous les avantages d'options d'achat d'actions des employés réalisés par lui d'un tel employeur, plus 13 de l'excédent de plus de 100 000. En concluant qu'un montant versé par le contribuable à Bobsan en vertu du présent arrangement n'était pas un montant. Payé par l'employé pour acquérir le droit d'acquérir. Titres aux fins de l'art. 7 (1) a) (iii), de sorte que le montant ainsi payé n'était pas déductible en vertu du par. 7 (1) a) (iii), Malone J. A. A déclaré à la page 6059: [TRADUCTION] Un montant payé pour acquérir un bien est un montant versé en échange d'un titre de propriété ou en échange d'un titre de propriété et il est évident que les paiements faits par le contribuable à Bobsan n'étaient pas Fait pour acquérir les options d'achat d'actions, qui ont plutôt été reçues directement de l'employeur à qui il avait été référé par Bobsan, et il n'était pas tenu de verser de l'argent à cet employeur pour les options. Mots et expressions Clemiss c. La Reine. Le juge Reed a accepté l'argument des procureurs selon lequel les contribuables prétendaient accepter l'offre de l'employeur, énoncée dans un contrat d'option, d'émettre des actions librement négociables, ne pouvait alors constituer un accord contraignant pour acquérir les actions parce que La société n'était alors pas en mesure d'émettre des actions librement négociables. En conséquence, le contribuable n'a acquis les actions qu'à une date ultérieure au cours de laquelle le conseil d'administration lui a attribué et délivré les actions, un certificat d'actions lui a été remis et il a renoncé à l'obligation de libre négociabilité. Emplacement des autres résumés La succession de la Reine c. Gesser. 92 DTC 6273 (FCA) En 1970, un cadre (Gesser) a conclu une lettre d'entente avec son employeur (Cemp) qui a confirmé l'achat par Gesser de 8 400 actions ordinaires d'une société apparentée (Fairview) pour un prix d'achat payable Exception d'un petit paiement initial supposé) dans dix ans. Les intérêts Gessers sur les actions et les paiements antérieurs effectués au titre du prix d'achat seraient annulés en cas de défaut de paiement du prix d'achat sans autre recours. Gesser avait le droit de mettre ses actions à Cemp à compter de cinq ans pour leur valeur déterminée par les vérificateurs. En concluant que le ministre avait correctement estimé que Gesser n'avait pas acquis les actions en 1970, de sorte que l'art. 7 (1) a) s'appliquait à la réception des actions par Gesser en 1972, Marceau J. A. A conclu que l'accord de 1970 donnait probablement à Gesser le droit de contraindre Cemp, après cinq ans, à payer la différence entre la valeur des actions de Fairview en 1970 et au moment du paiement. Scott c. La Reine. DTC 6193 (FCA) Le contribuable, dont les services ont été fournis à une société (Nighthawk) par une société (Delsco) appartenant à sa femme et aux conjoints Des membres d'un cabinet d'avocats, était également administrateur de Nighthawk. Ss. 7 (1) a) et 7 (1.1) régissait la prestation qu'il avait reçue à la disposition d'actions qu'il avait acquises en vertu d'options d'achat d'actions qui lui avaient été consenties et les autres administrateurs de Nighthawk étant donné que le nombre d'options d'achat d'actions attribuées À lui représenté le travail qu'il a fait pour Nighthawk (bien que sa rémunération régulière ait été payée par Delsco). Lieux d'autres résumés Mansfield c. La Reine. En 1972, le contribuable et d'autres employés d'une société privée se sont vu offrir des débentures convertibles de leur employeur qui, dans le cas du contribuable, Avait un montant en principal de 5 000. Lorsque, en 1977, le contribuable a exercé les droits de conversion en vertu de sa débenture pour acquérir des actions de son employeur à une juste valeur marchande de 11 700, il était réputé, aux termes de l'art. 7 (1) a) de recevoir une prestation imposable égale à la différence entre cette juste valeur marchande et le prix de 5 125 pour lequel sa débenture convertible lui avait été émise. Cette prestation n'était pas exonérée de l'impôt par l'al. 51, qui ne portait que sur le prix de base rajusté des actions et sur la question de savoir s'il y avait eu une disposition, et n'a pas estimé que l'échange n'était pas imposable. Mahoney, J. a également déclaré (à la page 5138 DTC) que l'accord et l'accord ne sont pas des termes d'art ou des expressions techniques, de sorte que l'option d'acquisition incorporée dans les termes de la débenture représentait une entente avec l'employeur. La Cour d 'appel a rejeté un argument selon lequel la valeur de 11 700 de la débenture en 1977 constituait le montant payé aux fins de l' art. 7 (1) a), car cette interprétation aurait pour effet de rendre ce paragraphe sans effet. Mots et expressions Emplacement des autres résumés Grant c. La Reine. 74 DTC 6252, 1974 CTC 332 (FCTD) L'effet de deux résolutions et demandes d'actions par les employés de la société a été de créer des accords contraignants. Le contribuable a acquis sa part pour l'application de l'art. 85A (1) a) au moment de l'entente, nonobstant le fait qu'il n'a pas entièrement payé l'action et n'a reçu un certificat d'actions que plus tard, lorsque le cours des actions avait augmenté. Emplacements des autres résumés Ferlaino c. La Reine. Le contribuable était le directeur des impôts d'une filiale canadienne détenue à 100% par une société publique américaine cotée au NYSE (UTC) qui, à la suite de son exercice ( Sur une base sans numéraire) d'options d'achat d'actions d'employés sur des actions de UTC, a calculé son résultat s. 7 (1) (a) de la façon habituelle, sauf que, lors de la conversion du prix d'exercice des actions en dollars américains, il a utilisé le Cdn. U.S. Le taux de change à la date d'attribution des options (de plus de 1,5) plutôt que le taux de change (de l'équivalent du pair) à la date d'exercice. En rejetant cette approche, Smith J. a déclaré (aux paragraphes 46 et 52): Tout doute quant à savoir si un employé a reçu un avantage imposable en vigueur à compter de la date d'attribution des options d'achat d'actions est résolu par une lecture de l'alinéa 7 (3) (une). Il n'y a rien à l'article 7 qui suggère que le prix de base des actions soit établi à la date d'attribution des options d'achat d'actions. Il a également conclu (au paragraphe 87): Le jour où le montant particulier a été soustrait pour l'application de l'alinéa 261 (2) b) était lorsque l'appelant a exercé ses options d'achat d'actions, soit la date à laquelle il a acquis les actions UTC Et simultanément les disposer. Lieux d'autres résumés visant à satisfaire le prix d'exercice des prix des options d'achat d'actions des employés à convertir au taux au comptant de la date d'exercice Van de Velde c. La Reine. 2007 DTC 1314, 2007 TCC 533 Les UAS (que le juge Miller semblait traiter comme des titres) n'avaient pas inclus leur valeur dans son revenu jusqu'à ce que son droit à ces droits lui soit acquis. Williams c. La Reine. 97 DTC 887, Dossier: 97-445-IT-I (TCC) Lorsque le contribuable a exercé des droits de souscription d'actions, il l'a fait comme candidat pour d'autres. Par conséquent, il n'avait pas acquis (c'est-à-dire obtenu pour lui-même) les actions et, par conséquent, n'était pas imposable. Mots et expressions Bertram c. La Reine. Même si les contribuables prétendaient exercer des options d'achat d'actions pour les employés et les affecter au prix d'exercice à l'acquéreur d'actions de la société à un moment où le prix de marché était bien supérieur au prix d'exercice, Le faisaient comme agent pour les acheteurs. Par conséquent, ils n'ont réalisé aucun avantage lié aux options sur actions. Stafford c. La Reine. 93 DTC 438 (TCC) Afin d'échapper aux restrictions établies par la Bourse de Vancouver quant au nombre d'actions qu'un promoteur d'actions pouvait avoir le droit d'acquérir en vertu d'une option, un promoteur a conclu une entente avec le contribuable en vertu de laquelle le contribuable A obtenu des options d'achat d'actions pour les employés et a accepté de vendre une partie des actions qu'il a acquises en vertu de l'option au promoteur au coût des contribuables. Étant donné que l'entente avec le promoteur était distincte des options d'achat d'actions accordées au contribuable, le contribuable a réalisé une prestation d'emploi en vertu de l'art. 7 (1) lorsqu'il a exercé ses options à la demande du promoteur. Emplacements des autres résumés Ball v. MNR. 92 DTC 2123 (TCC) seule portion d'actions valablement acquises lors de l'exercice Le contribuable s'est vu accorder une option d'achat de 25 000 actions de son employeur au prix de 2,05 $ par action. Le 10 juillet 1985, le contribuable prétendait exercer son option et a été émis un certificat d'actions pour 25 000 actions. Il a ensuite vendu 9 700 actions et, à ce moment, a payé le prix d'exercice de ces actions. Son employeur est devenu insolvable avant de pouvoir vendre le solde des actions prétendument émises, et il a retourné le certificat d'actions pour le solde des actions à son employeur. Étant donné que seulement 9 700 actions lui avaient été valablement émises, il était assujetti à l'impôt en vertu de l'art. 7 (1) a) uniquement en ce qui concerne l'exercice de son option à l'égard de ces actions. Tedmon c. MNR. 91 DTC 962 (TCC) Le contribuable, alors qu'il était un résident des États-Unis et qu'il était employé par une société américaine (GE), a obtenu des options d'achat d'actions par GE. Il a ensuite démissionné de son poste chez GE (mais sans perdre son droit à ses options dans le cadre du régime d'options d'achat d'actions de GE) et a commencé à travailler pour une société canadienne non apparentée (Noranda Inc.) Beaubier. 7 ne s'appliquait pas aux options d'achat d'actions des employés d'un résident canadien où les options d'achat d'actions ont été accordées alors que le résident avait été un non-résident avec un employeur non résident. Par conséquent, le contribuable était réputé bénéficier d'un emploi lorsque (alors qu'il résidait encore au Canada), il exerçait ses options d'achat d'actions de GE. Ingram c. MNR. 91 DTC 939 (TCC) Certains promoteurs d'actions ont demandé au contribuable de siéger au conseil d'une société subalterne inscrite à la bourse de Vancouver pour leur donner le pouvoir de négocier les actions de la société en son nom, mais pour leur compte Et de recevoir des options d'achat d'actions en son nom mais détenues par lui pour leur bénéfice et à leur direction. Cette convention d'agence en vertu de laquelle le contribuable a acquis et exercé des options d'achat d'actions était nulle (sur la base du principe selon lequel un mandataire ne peut être autorisé à ce qu'il n'est pas juridiquement possible pour le mandant de faire et les opérations optionnelles en cause étaient contraires Aux lois sur les valeurs mobilières). Néanmoins, les avantages résultant de l'option d'achat d'actions ont néanmoins été le revenu des promoteurs, plutôt que du contribuable, parce que le bénéfice économique des options était celui des promoteurs. Emplacements des autres sommaires Demande de vente à un employé d'un placement d'actions secondaires Holdco, qui détient la quasi-totalité des actions d'Opco, accepte de vendre des actions d'Opco à l'un des employés d'Opcos à un prix qui est censé être à la juste valeur marchande , Bien qu'il soit possible que la juste valeur marchande finalement déterminée puisse être supérieure. L'art. 7 L'ARC a répondu: L'article 7 s'applique lorsqu'une société s'engage à vendre ou à émettre des actions de la société ou des actions d'une société avec laquelle elle n'a pas de lien de dépendance avec un employé d'une autre société ou avec une autre société avec laquelle elle Ne traite pas à distance. Comme la situation que vous décrivez satisfait à ces conditions, l'article 7 s'appliquerait. JVM des actions au moment de l'exercice de l'option d'achat d'actions déterminée par l'évaluation de la clause de rentabilité dans le contrat de vente ultérieur Au moment même de l'acquisition par les salariés des actions en vertu d'un contrat d'options d'achat d'actions, Acheteur. Le contrat de vente contient une clause de earnout. Faire les ss. 7 (1) et 110 (1) d) s'appliquent aux montants reçus en vertu de la clause de cumul après avoir noté que le par. 7 (1) a) l'avantage était fondé uniquement sur l'excédent de la juste valeur marchande des actions sur le prix d'exercice au moment de l'acquisition (et de tout montant payé pour les options), CRA a déclaré (TaxInterpretations translation): La JVM est une question de fait. La clause de earnout était connue avant l'exercice des options. Dans ces circonstances, la valeur des droits visés à la présente clause doit être prise en compte pour déterminer la JVM des actions et être utilisée dans le calcul de la prestation déterminée en vertu de l'alinéa 7 (1) a). Si le paragraphe 7 (1.1) s'applique, il ne changera pas la valeur de la prestation que l'employé est réputée recevoir. Les montants reçus ultérieurement en vertu de la clause de remboursement se rapportent à la vente des actions et non à l'exercice de la disposition des options et ne constituent pas un avantage aux termes de l'article 7. Emplacement des autres résumés L'entente de vente à contrepartie d'une contrepartie monétaire est incluse Un parent non-résident acquiert ses propres actions sur le marché libre et les revente à sa filiale canadienne à la juste valeur marchande. En vertu d'un accord entre la filiale et ses salariés, la filiale leur transfère ensuite les actions sans contrepartie monétaire. Si la filiale était considérée comme ayant convenu d'émettre ou de vendre les actions aux fins de l'art. 7, et l'art. 7 (3) v) s'opposent à une déduction par la filiale. L'ARC a répondu (traduction de TaxInterpretations): Dans le contexte de l'article 7, le terme vente devrait être lu par rapport à l'émission à terme. Une émission d'actions a un sens spécifique et se réfère à la livraison d'actions non émises par une société, y compris l'émission d'actions non émises pour aucune contrepartie monétaire. Par conséquent, aux fins de l'article 7, le terme «vente» vise généralement toutes les situations qui n'entraînent pas l'émission d'actions et lorsqu'un employeur transfère à un employé des actions de son capital ou celles d'une société avec laquelle il ne traite pas la longueur du bras. Le fait que l'employé acquiert les actions sans contrepartie financière n'est pas en soi un facteur qui empêche de conclure que l'employeur a accepté d'émettre ou de vendre des actions conformément à l'article 7. Si toutes les autres conditions de l'article 7 L'entente entre les parties sera envisagée par l'article 7 Dans ces circonstances, le coût d'acquisition par l'employeur ne sera pas déductible en vertu de l'alinéa 7 (3) b). Transfert d'une fiducie de protection avant l'exercice Un employé d'une SPCC transfère des options d'achat d'actions à une fiducie de protection en sa faveur, les options étant éventuellement distribuées à l'employé avant son exercice. L'ARC a conclu que, puisque la fiducie n'avait pas exercé les options, l'art. 7 (1) c) n'avait pas d'application et que l'art. 7 (1) a) s'appliquait à l'exercice des options. Par conséquent, l'art. 7 (1.1) pourrait s'appliquer aux actions que l'employé a acquis aux termes des options. Exercice sans numéraire - moment de l'acquisition Une méthode d'exercice sans numéraire de l'exercice d'options d'achat d'actions d'employés est utilisée en vertu de laquelle des actions identiques sont vendues à découvert par un courtier, le produit de cette vente étant alors appliqué pour payer le prix d'exercice des employés. Par conséquent, une partie des actions émises par l'employeur sert à couvrir la vente à découvert. Après avoir consulté le Guide T4130. P. 24 et affirmant que le par. 7 (1) a) est calculée sur la base de la juste valeur marchande des actions au moment de leur acquisition, CRA a déclaré (Traduction TaxInterpretations): dans le contexte d'une vente à découvert, l'ARC est généralement d'avis qu'une Employé a acquis les actions de l'employeur au moment où l'employeur transfère les actions à l'employé et elles sont payées. Lorsque les actions ne sont pas émises directement à l'employé mais plutôt au courtier pour les avantages du personnel, l'ARC est d'avis que l'employé a acquis les actions au moment où l'employeur remet les actions au courtier et elles sont payées. Lorsqu'une société accepte de vendre ou d'émettre ses actions à un employé, ou lorsqu'une fiducie de fonds commun de placement accorde des options à un employé pour acquérir des parts de fiducie, l'employé peut recevoir un avantage imposable. L'avantage imposable est la différence entre la juste valeur marchande des actions ou des parts lorsque l'employé l'a acquis et le montant payé ou à payer pour eux, y compris tout montant payé pour les droits d'acquisition des actions ou des parts. En outre, l'employé peut bénéficier d'une prestation si ses droits découlant de la convention sont acquis à une autre personne ou si elle cède ou cède les droits. Les actions ou les parts de fiducie sont considérées comme acquises lorsque la propriété légale des actions a été transférée et que le vendeur a le droit de recevoir le paiement. En général, cela se produirait lorsque les actions ont été transférées à l'employé-courtier et payées. 2004 Décision 2004-007204 Décision concernant un régime d'unités d'actions différées aux termes duquel le conseil d'administration peut, à sa discrétion, choisir de verser aux administrateurs des actions autodétenues, des actions achetées à l'échange ou en numéraire, déduction faite des retenues à la source applicables. 7 (1) a) s'appliquera à la juste valeur marchande des actions autodétenues émises à un participant et l'art. 6 (1) c) s'appliquera à inclure dans le revenu du participant le montant de la retenue à la source applicable retenu et remis par l'employeur. 18 août 2004 Externe. T. I. 2004-0070361F5 acquisition en vertu d'un exercice sans numéraire sur règlement de vente à découvert Un employé acquiert généralement des actions en vertu d'un régime d'options sur actions au moment de l'exercice. Dans le cas de l'utilisation de la méthode de l'exercice sans numéraire, la date de règlement de la vente à découvert associée par le courtier sera généralement la date où le salarié est considéré comme acquérir des valeurs mobilières de l'employeur. 2002 Décision 2001-011593 Lorsque deux fiducies et une société sont les commanditaires et qu'une deuxième société est l'associé commandité d'une société de personnes, les prestations en vertu d'un régime d'options d'achat d'actions établi à l'égard de la société de personnes seront couvertes par les art. 7 et 110 1) d). Il n'existe pas d'entente qui limite la relation de travail de l'un des employés de la société de personnes à l'une des sociétés ou des fiduciaires. Par conséquent, chacun des employés de la société de personnes est considéré comme un employé de chacun des associés de la société de personnes aux fins de l'article 7. 2001 Règl. 2001-008401 aucun nouveau plan où la modification de l'acquisition n'a aucun commentaire sur la moyenne de négociation de 30 jours Changement À l'acquisition des options octroyées en vertu d'un régime d'options d'achat d'actions n'entraînerait pas la création d'un nouveau régime aux fins de l'impôt sur le revenu. Dans le cas où le prix d'exercice des options émises le dernier jour d'un mois était égal au cours de clôture moyen du NASDAQ pour les jours de bourse du 15e jour du mois précédent au 15e jour du mois en cours, l'ADRC pourrait Ne donne pas de définition quant à savoir si le prix d'exercice serait admissible à la juste valeur marchande 2001 2001-007775 options reçues au nom de la société de personnes Confirmation que lorsque les employés du directeur général de deux sociétés de personnes siègent au conseil d'administration des sociétés au nom de leur Employeur, ils ne sont pas tenus de déclarer les jetons de présence et les options sur actions qui leur sont versés à titre d'administrateurs de la société. Lorsque les options d'achat d'actions sont exercées, les sociétés en commandite seront considérées avoir reçu un revenu d'entreprise égal à l'excédent de la juste valeur marchande des titres sous-jacents au moment de l'exercice par rapport au prix d'exercice. 1999 Table ronde APFF, Q. 1 (No 9M19190) Lorsqu'un citoyen américain, qui a reçu des options d'achat d'actions auprès d'une société publique américaine tout en travaillant pour elle et vivant aux États-Unis, devient résident du Canada, art. 7 s'applique dans l'exercice au cours duquel il exerce son droit d'acquérir les actions. Les actions américaines dépositaires seraient considérées comme des actions aux fins de l'art. 7, étant donné que l'ARC avait conclu auparavant qu'il s'agissait d'actions aux fins de l'art. 146 (1). 21 octobre 1996 T. I. 960437 employés de la société de personnes employés par chaque partenaire partenaires employés de chaque partenaire Lorsque les salariés d'une société de personnes reçoivent des options d'achat d'actions par un associé, ils sont généralement considérés comme des employés de chaque partenaire sauf indication contraire (par exemple, Entre les partenaires précisant quels partenaires emploient quels employés). Lorsque les faits aboutissent à la conclusion qu'un employé est employé par un contribuable donné, l'art. 7 s'applique lorsque l'employé bénéficie d'options pour acquérir des actions de ce partenaire. 2 juin 1995 T. I. 950472 Lorsqu'une personne conclut un contrat de vente de certaines actions mais conserve l'option de payer en espèces au lieu de remettre les actions, nous ne considérons pas qu'il s'agit d'un accord de vente d'actions. Cependant, nous serions d'avis qu'un accord de vente d'actions existe lorsque le vendeur paie simplement de l'argent à l'acheteur qui doit l'utiliser pour acheter les actions. 20 janvier 1994 T. I. 940074 HAA4735-1 (CTO Section 7 - Plans de partage des bénéfices des employés) Un régime de participation aux bénéfices des employés peut être structuré de façon à être un accord entre l'employeur de vendre ou d'émettre des actions de l'employeur ou d'une société sans lien de dépendance. . 7 serait plus précis que le par. 144, de sorte que l'art. 7 s'appliquera. 11 juin 1993 T. I. Lorsqu'une employée cède ses droits en vertu d'un régime de stock fantôme et reçoit une option pour acquérir des actions de la société d'employeur avec un prix d'exercice égal à la différence entre la juste valeur marchande de Les actions au moment de l'octroi de l'option et la valeur des parts sous le régime de stock fantôme qu'elle a cédée, la valeur des parts rachetées sera incluse dans son revenu, mais ce montant sera considéré comme payé par elle pour Droit d'acquérir les actions en vertu du régime d'options d'achat d'actions aux fins du paragraphe 7 (1) et de l'alinéa 110 (1) d) (ii). À la différence de son approche des régimes de réinvestissement des dividendes, RC évaluera une prestation aux employés lorsque les actions sont acquises par un employé à un taux de 5% Le prix du marché. 27 mars 1990 T. I. (Août 1990, lettre d'accès, 1362) L'employé serait considéré comme ayant acquis des actions où il reçoit une part restreinte qui ne peut être transférée ou vendue au cours des quatre années initiales et qui est échangée contre une action ordinaire sans restriction à la fin des quatre , Ou lorsque les actions restreintes sont émises à l'employé mais détenues par la société. 86 C. R. - Q.64 un administrateur est un employé aux fins de l'art. 7. IT-113R4 Avantages pour les employés - Options d'achat d'actions 7 août 1996 6. Le mot «émission» signifie la livraison d'actions non émises d'une société, Pour aucune contrepartie monétaire. Par conséquent, l'article 7 s'applique lorsque la société d'employeur accepte de vendre ou d'émettre à un employé de la société ou d'une société avec laquelle elle n'a pas de lien de dépendance ses propres actions ou de vendre ou d'avoir émis ceux d'une société avec Qu'elle ne traite pas à distance, à une valeur inférieure à la juste valeur marchande ou à aucune contrepartie monétaire. IC 89-3 Énoncé de politique sur les évaluations de l'équité des entreprises, par. 38 La référence à la valeur est généralement interprétée comme signifiant la juste valeur marchande. Christina Medland, Andrew Stancel, Régime d'incitation fiscalement adapté au risque pour les sociétés ouvertes, Fiscalité de la rémunération de la haute direction et de la retraite. Vol. 22, n o 9, mai 2011 Comprend un aperçu des régimes de RSU et d'UAR de trésorerie. Christina Medland, Jennifer Sandford, Traitement fiscal de la rémunération à base d'actions, Imposition de la rémunération de la haute direction et de la retraite. Septembre 2005, p. 583. Commentaire En vertu de l'art. 7 (1) b) un employé est réputé recevoir une prestation imposable égale à la valeur de toute contrepartie reçue à la disposition d'une option d'achat d'actions à une personne avec laquelle il ou elle traitait sans lien de dépendance (moins tout montant Payé par l'employé pour acquérir ces options). Il est clair que l'art. L 'alinéa 7 (1) b) s'applique lorsque l' employé renonce volontairement ses options à l 'émetteur des options (avec lesquelles il traite sans lien de dépendance) en contrepartie d' un paiement en espèces (Greiner, Harvey). Contrairement à un paiement volontaire de rachat, un paiement de dommages-intérêts pour violation d'un contrat d'achat d'actions n'était pas (avant l'adoption de l'article 7 (1.7)) imposable en vertu de l'art. 7 (1) (b) (Buccini, Bernier, Huestis). Toutefois, les montants prétendus payés à titre de dommages et intérêts qui ont été convenus essentiellement avant la résiliation des contrats d'options d'achat d'actions peuvent être trouvés en substance pour représenter des paiements de rachat (voir Dundas). Le paragraphe 7 (1.7) du présent article considère maintenant que des dommages-intérêts ont été reçus à la suite de la cessation d'exercer des options d'achat d'actions par des salariés, de sorte que le par. 7 (1) b) (et, le cas échéant, l'alinéa 110 (1) d)) sont alors engagés. Avant la promulgation de l'art. 7 (1) b.1), aucune disposition de l'al. 7 s'appliquait à une disposition d'options d'achat d'actions par un contribuable à une personne avec laquelle il n'avait pas affaire à distance (Bowens). Buccini c. La Reine. À la suite de la fusion de l'employeur des contribuables avec d'autres filiales canadiennes de la société mère américaine, le contribuable a conclu une entente de règlement avec l'employeur canadien dans laquelle il a reconnu qu'un paiement de 83 900 En règlement intégral de toutes les réclamations découlant de la résiliation unilatérale unilatérale de son employeur de la convention d'options sur actions entre le contribuable et l'employeur. Pour conclure que cette somme était un reçu exempt d'impôt et en renversant une conclusion du juge de la Cour de l'impôt selon laquelle elle représentait la valeur de la contrepartie d'une disposition en vertu de l'art. 7 (1) (b), Malone J. A. A déclaré qu'une disposition en vertu de l'alinéa 7 (1) b) renvoie à une opération dans laquelle le contribuable accepte volontairement d'échanger les droits de propriété qui ont été accumulés en vertu d'une convention d'option d'achat d'actions pour une autre contrepartie, La répudiation unilatérale des droits des contribuables en vertu de l'accord d'option par l'employeur et que ce comportement unilatéral constitue une violation fondamentale du contrat qui l'a mis fin à cette date. Mots et expressions Beaumont c. La Reine. CTC 365 (FCA) Étant donné que le contribuable était considéré comme ayant un lien de dépendance avec une société (Clarebeau) dont 12 étaient détenues par les contribuables (Claridge), une vente par le contribuable d'options d'achat d'actions à Clarebeau pour une contrepartie nominale était régie par l'art. 7 (1) b) plutôt que l'art. 7 (1) c). Le demandeur et Claridge croyaient que (avec leurs épouses respectives) jouissaient exactement du même contrôle de Clarebeau (bien que, comme ils l'ont découvert beaucoup plus tard, Claridge comme président avait le droit de voter lors de réunions), ils avaient les mêmes droits sur les biens et Les gains de Clarebeau et les options sur actions représentaient une occasion d'affaires que le demandeur se sentait obligé de mettre en commun avec Claridge par l'entremise de Clarebeau. Lieux d'autres résumés JV compagnie à distance de bras avec 50 actionnaire Greiner c. La Reine. Avant la date d'entrée en vigueur de la compression de la fusion, le contribuable a accepté de céder ses droits d'achat d'actions non acquis en contrepartie d'un paiement en espèces de son employeur égal au gain accumulé. Son droit à ce paiement a été constaté dans le cadre du contrat d'option d'achat d'actions plutôt que dans le cadre d'une demande de dommages-intérêts (distincte) au titre de l'annulation de ces droits. The words otherwise disposed of include the surrender for value by employees of share options at a time when their rights under the stock option agreement are still alive. For the purpose of determining whether the rights were still alive at the time of surrender, it was found that the surrender took place when the taxpayer agreed to surrender his rights upon the occurrence of certain events (including shareholder approval of an amalgamation), rather than the date on which the option rights were actually released. In addition, s. 7(1)(b) was not found to be restricted to amounts received from a person other than the optioneremployer, and the words otherwise disposed of are sufficiently broad as to include an amount received as consideration for the surrender of rights that are thereby extinguished. Locations of other summaries The Queen v. Harvey . 83 DTC 5098, 1983 CTC 63 (FCTD) Prior to the effective date of a merger between a Michigan corporation (Tranter) and a second American corporation, Tranter approached Harvey who was the chief executive of its Canadian subsidiary, and obtained his agreement to surrender his option to purchase Tranters shares, which had been granted by Tranter to Harvey in 1976, for 25,500. Because Tranter was not in breach of the option agreement when Harvey agreed to surrender his option, the payment made to him was consideration for the disposition of his option (rather than damages for its breach) and accordingly was taxable. Locations of other summaries disposition of property to corporation even though property extinguished Bowens v. The Queen . 94 DTC 1853 (TCC), affd 96 DTC 6128 (FCA) When a corporation (Trilogy) made an offer to acquire all the shares of a corporation (DEB), including any outstanding stock options, the taxpayer, who was the chief financial officer of DEB, incorporated a numbered company, transferred his options to it, sold the shares of the numbered company to Trilogy for shares of Trilogy, and filed a joint election with Trilogy under s. 85. In finding that the taxpayer did not deal at arms length with Trilogy, so that s. 7(1)(b) could not apply to a transfer of his option rights to Trilogy, Bowman TCJ. noted that the taxpayer was a partner in a partnership which, with other corporations, raised capital and promoted the acquisition by Trilogy of the shares of DEB and that the taxpayer for some time had been an executive vice-president of Trilogy and was instrumental in formulating the exchange offer made by Trilogy for the shares and options. In addition, since it was not suggested that the transaction with the numbered company was a sham or legally ineffective, the taxpayer did not transfer or otherwise dispose of the options to Trilogy. Locations of other summaries The Queen v. Huestis . 75 DTC 5393, 1975 CTC 560 (FCA), briefly affd 77 DTC 5044 (SCC) After the employer corporation (Bethel) granted options to purchase its shares to the taxpayer and other employees, it commenced winding-up proceedings and gave the taxpayer shares in the purchaser of the assets of Bethel in settlement of Bethels liability under the option agreement. It was held that the shares in the purchaser were not received under the option agreements, nor could the taxpayer be said to have transferred or otherwise disposed of rights under the option agreements. (Ss.85A(1)(a), (b) of pre-1972 Act). Administrative Policy s. 7(1)(a) inapplicable where shares issued equal to in-the-money value A Canadian-controlled private corporation issues treasury shares to the employee holder of a stock option (with a fair market value exercise price) equal in value to the in-the-money value of the option. CRA stated: The scenario you have described results in an employee disposing of the employees rights under a stock option for consideration equal to the stock options intrinsic or in-the-money value where the consideration is paid in employer treasury shares. In this scenario, paragraph 7(1)(b). will apply and not paragraph 7(1)(a). Locations of other summaries contingent amount included under s. 7(1)(b), cannot subsequently be excluded In the course of the acquisition of shares in the capital of a Corporation, it cancels stock options of certain employees for an amount corresponding to the shares value. However, as the final determination of the per share purchase price depends on the outcome of litigation to which the Corporation is party, part of the agreed amount is retained. Must the retained amount be included in the value of the consideration for the disposition of the stock options pursuant to s. 7(1)(b) Can an employee request an amendment of the employees tax return for the year of disposition of the stock options if, in a subsequent year, the retained amount is not paid to the employee CRA responded (TI translation): The term value of the consideration for the disposition under paragraph 7(1)(b) includes a receivable from the employer. Thereforeif the agreed price for the options includes the amount retained at the moment of the disposition of the stock options subject to a possible future reduction, the retained amount would be a part of the value of the consideration for the disposition under paragraph 7(1)(b). Furthermore, if the employees have received a benefit described in paragraph 7(1)(b) which has been correctly treated as taxable in the year of disposition of the stock options, the employees would not be able to amend their declared income for that year. Locations of other summaries contingent amount included under s. 7(1)(b) cannot later be reversed deduction for amount. paid to acquirerights does not include value of old exchanged options In an exchange of employee stock options in a takeover situation which does not satisfy the conditions in s. 7(1.4), will the value of the old options exchanged to acquire the new options be considered the amount, if any, paid by the employee to acquire those rights for purposes of s. 7(1)(b) CRA responded that in this situation: Where the provisions of subsection 7(1.4) do not apply, the exchange of stock options will result in a disposition of the exchanged options for the new options and the application of paragraph 7(1)(b) . The reference in subparagraph 7(1)(b)(ii) to the amount, if any, paid by the employee to acquire those rights (under the employee stock option) refers to an amount paid by the employee to acquire the rights under the employee stock option that is being disposed of, i. e. the exchanged option. The value of the exchanged options at the time of the exchangedisposition would not be considered part of the amount, if any, paid by the employee to acquire the rights disposed of under the exchanged options. However, the new options acquired as a result of the exchange will have a cost equal to the value of the exchanged options at the time of the exchange. Locations of other summaries executives potentially avoid double taxation on a bad (offside s. 7(1.4)) stock option exchange Income Tax Technical News No. 19, 16 June 2000 Where under a securities option plan an employee has the right to choose to receive the fair market value of the securities option rights in shares, paragraph 7(1)(b) will apply in respect to the disposition of those rights. 1999 Ruling 990259 cash surrender of subscription rights for unlisted shares cash surrender of subscription rights for unlisted shares Canadian employees of a Canadian subsidiary of a foreign parent had subscription rights to acquire unlisted ordinary shares of the foreign parent. The subscription rights plan provided that, for reasons relating to the tax rules in the foreign jurisdiction, at the time of the grant of such right, the employee also would acquire a non-interest bearing bond of the parent at an appropriate discount. In addition, under put and call agreements with a non-resident corporation (Putcallco) the employee could cause Putcallco to acquire the employees foreign parent shares (after exercise of the subscription right) at their fair market value at the time of such exercise (as determined under a formula), and Putcallco could acquire the subscription rights for their fair market value (as also determined under the formula) in the event the individual ceased to be an employee. The foreign parent and the Canadian subsidiary had agreed that when a subscription right was exercised by an employee, the Canadian subsidiary would be obliged to pay to the foreign parent the amount by which the fair market value of the shares acquired by the employee exceeded the exercise price. The granting by the Canadian subsidiary to the employees of the right to surrender their subscription rights to it for a cash amount equal to the difference between the fair market value of a foreign parent share (determined on the same formula basis) and the exercise price would not result in a disposition under s. 7(1)(b) or result in a conferral of a benefit by the Canadian subsidiary on the foreign parent under s. 15(1). 22 July 1999 T. I. 983381 change to employer cash-out right change to employer cash-out right If an existing stock option arrangement under which only the employee has the right to elect to receive cash instead of shares has changed so that the employer has the right to pay the employee cash instead of shares, this will not cause an immediate disposition pursuant to s. 7(1)(b). 21 January 1998 T. I. 973116 cost of new options acquired on exchange When section 7(1)(b) applies to the exchange of an old option for a new option, it is our opinion that, for the purposes of any subsequent application of sections 7 and 110(1)(d) of the Act, the new options will have a cost equal to the value of the old option at the time of the exchange. Accordingly, if the new options are subsequently exercised, the provisions of paragraph 7(1)(a) will result in a reduction of the benefit otherwise determined at that time, by that value. If the value of the two options is not equal at the time of the exchange, the series of transactions may result in the inclusion of benefits that exceeds the value ultimately received. IT113R4 Benefits to Employees - Stock Options 7 August 1996 7. Section 7 applies where a corporate employer issues shares to an employee as a salary bonus or under a stock bonus plan. 11. Where, under a stock option agreement, an employer elects to pay cash in lieu of issuing shares, subsection 7(1) does not apply and the amount of cash received by the employee is taxable under either subsection 5(1) or paragraph 6(1)(a). Where it is the employee who has the right to choose cash instead of shares, paragraph 7(1)(b) will apply, in respect of the cash received by the employee in satisfaction of the employees rights under the plan. Nouvelles techniques de l'impôt sur le revenu. No. 7, 21 February 1996 s. 7(1)(b) if employee cash-out right Where under an employee stock option plan, it is the employee rather than the employer who has the option to choose cash instead of shares, s. 7(1)(b) will apply in respect of the cash that the employee elects to receive in satisfaction of his rights under the plan. 17 February 1994 External. T. I. 5-940137 Where an employee may elect to receive cash instead of shares under an employee stock option plan, any benefit will be included in her income under s. 7(1). However, if the decision to pay cash rather than issue shares remains with the employer, any cash actually paid will be included in her income under s. 5(1) or s. 6(1)(a). 1 May 1991 T. I. (Tax Window, No. 3, p. 28, 1224) Where a stock option plan provides that, at the time the option otherwise would be exercisable, the employee may elect to receive cash in lieu of shares and the employee so elects, the amount received by the employee will be included in his income pursuant to s. 7(1)(b), and a deduction will be available under paragraph 110(1)(d) if the provisions of that paragraph are otherwise met. Anna Malazhavaya, Stock Options and Foreign, Taxation of Executive Compensation and Retirement . Vol. 23, No. 1, JulyAugust 2011, p. 143 Where a foreign corporation repurchases its own shares and then transfers those same shares to an employee under a stock option plan, it would appear that such shares cannot be considered to be issued to the employee but that they may be considered to be sold. Jeremy Forgie, Elizabeth H. Boyd, Tax Issues Relating to Stock Options in the Context of Corporate Mergers, Acquisitions and Reorganizations, Taxation of Executive Compensation and Retirement . Vol. 11, No. 5, DecemberJanuary 2000, p. 224. Elizabeth H. Boyd, Stock Options and Other Executive Compensation Arrangements in a Reorganization, Merger or Acquisition - Tax Issues, Taxation of Executive Compensation and Retirement . Vol. 10, No. 1, JulyAugust 1998, p.3. Paragraph 7(1)(c) Administrative Policy contribution to TFSA recognition deferred until exercise by TFSA What are the tax consequences of an employee stock option being contributed to a TFSA CRA responded: The property must be contributed to the TFSA at its fair market value (FMV) and the contribution is subject to the holders unused TFSA contribution room. The CRA is of the view that the intrinsic value of a warrant, option, or similar right is not reflective of the propertys FMV. Where a TFSA exercises an employee stock option, pursuant to paragraph 7(1)(c) the employee is deemed to have received a benefit in the taxation year that the TFSA exercises the option equal to the amount by which the value of the shares acquired under the option exceeds the total of the amount paid by the TFSA to acquire the shares and the amount, if any, paid by the employee to acquire the option. Proposed amendments were announced to prohibit asset transfer transactions (swaps) between TFSAs and other registered and non-registered accounts. Locations of other summaries nil valuation of unvested options How does s. 7(1)(e) apply if a deceased employee held unvested stock options which therefore are not exercisable after death CRA stated: Where the terms of the owned unexercised stock option provide that the stock options are automatically cancelled in the event of the employees death, the value of the options immediately after death, and the paragraph 7(1)(e) benefit, will be nil. If the employee stock options are not vested prior to the employees death, the employee would not own unexercised stock options prior to their death and paragraph 7(1)(e) would not apply. Locations of other summaries Wiebe v. The Queen . 87 DTC 5068, 1987 1 CTC 145 (FCA) significant changes giving rise to new stock option agreement A stock option agreement which the trial judge found to have been in place in 1972 or 1973 was held to have been so radically altered in its terms in 1977, that in that year it should be regarded as a new agreement, with the result that the agreement should be regarded as coming into being after 31 March 1977. The changes consisted of requiring the employee, as a condition to acquiring the shares: (1) to guarantee indebtedness of the employer and (2) to execute a buy-back agreeement. Administrative Policy 7(1.1) applicable to non-discretionary bonus payable in shares CRA considers that where a Canadian-controlled private corporation has agreed in writing to award a bonus based on the employee reaching certain measurable performance objectives and the employer agrees to pay this bonus in shares equal in value to the bonus amount, then the value of the shares generally will not be included in the employees income when issued by virtue of ss. 7(3)(a) and 7(1.1). In addition, although an arrangement in which the employer has full discretion as to whether to award the bonus or as to the mode of payment will not come within the s. 7 rules, such a discretionary arrangement could become a qualifying one if, for example, after the first year, the employer exercises its discretion and sets the amount of the bonus at say 75 shares, which is payable in shares at the end of the year if the employee is still employed by the employer. The right of the employee to elect to be paid in cash does not detract from this analysis if that right is not exercised. Locations of other summaries 21 October 1996 External. T. I. 5-963321 Where an employee stock option is transferred by the employee to a non-arms length person such as an RRSP under which the employee is the annuitant, recognition of any benefit under section 7 of the Act is not made in accordance with paragraph 7(1)(a) of the Act but under 7(1)(c) if the option is exercised by the RRSP. Accordingly, subsection 7(1.1) of the Act can not apply to defer taxation of the amount. 28 July 1992 T. I. (Taxation of Executive Compensation and Retirement, November 1992, pp. 682-683) The preferential rules for a Canadian-controlled private corporation will be applicable after the corporation becomes a public corporation only in relation to rights under the employee stock option plan that had vested in the employee at the time the corporation became a public corporation. 28 May 1990 T. I. (October 1990 Access Letter, 1450) S.7(1.1) will be available to an employee under a plan who can elect to receive either cash or shares as a year-end bonus, and he elects to receive shares. Subsection 7(1.3) - Order of disposition of securities Administrative Policy 15 October 1997 T. I. 972531 Where an employeeshareholder owns shares of a CCPC which have a nominal adjusted cost base and subsequently acquires shares under a stock option arrangement, subsequent dispositions by the employee of shares will be deemed to come first out of the original shareholding, with the result that the realization of an employment benefit under s. 7(1.1) (and of a corresponding addition to ACB) will be deferred. Locations of other summaries 25 October 1999 T. I. 990956 Discussion of the order of disposition of identical shares, some acquired under option and some not, for the purposes of s. 7. Subsection 7(1.31) Administrative Policy shares acquired on option exercise must be disposed of in one transaction to avoid basis averaging A, who is the sole shareholder of Holdco and also holds low-cost shares of PublicCo, will exercise his option to acquire 100,000 shares of PublicCo (giving rise to a s. 7(1)(a) benefit). Of the 100,000 shares acquired, 35,000 will be donated to a qualified done (the Donation), and then 65,000 will be disposed of to Holdco (the Transfer). Assuming that its other conditions are satisfied, would the conditions of s. 7(1.31.)(a) be satisfied for both the Donation and Transfer CRA indicated that the s. 7(1.31) rules does not apply to avoid basis averaging if the executive (A), immediately after exercise, disposes of the acquired shares in two tranches, i. e. here, the Donation and the Transfer. The second disposition (the Transfer) is tainted (i. e. the safe harbour in s. 7(1.31) is not available) because there was an intervening disposition of identical shares (i. e. the first disposition under the Donation) following the exercise - and conversely, if the Transfer occurred before the Donation. Subsection 7(1.4) - Exchange of options Administrative Policy replacement stock options issued by Spinco treated as boot A butterfly spin-off by a specified corporation (DC) of two business divisions (which it prepackages in a Newco subsidiary) to Spinco entails an exchange of old DC employee options for new options with a no-greater in-the-money value. In particular, there will be an exchange of a pro rata portion (based on the relative FMV of the Newco shares) of each DC stock option to Spinco and DC in consideration for the grant of replacement options. Such issuance by Spinco will be treated as non-share consideration for the butterfly transfer of Newco shares to Spinco (otherwise occurring in consideration only, or mostly, for the issuance of Spinco special shares). Locations of other summaries 2009 Ruling 2009-0338731R3 public company butterfly spin-off with Spinco options including tandem SARs underlinegt : Overview. Public company spin-off butterfly by DC of Spinco including splitting of stock options.. Option exchange DC had an option plan under which it had granted stock options some of which included tandem share appreciation rights (which permitted the option holder to surrender a vested stock option in exchange for a cash payment equal to the in the money value of the option thereby extinguishing the holders option). Under the butterfly reorganization those options were exchanged for options to acquire shares of Spinco and new options to acquire shares of reorganized DC (a. k.a. New DC), corresponding to the division of assets between the two corporations. In the case of Spinco, its option plan enabled it to issue stock options with attached tandem share appreciation rights. In the case of New DC, the ruling does not expressly refer to tandem share appreciation rights but the replacement options are issued under DCs existing plan, which includes such rights. The exchange of the existing options for new options of Spinco and New DC would be governed by s. 7(1.4). The ruling was conditioned on the new options of Spinco and New DC being the sole consideration for the disposition of the old options and the old options being cancelled. Although the tandem share appreciation rights are not expressly addressed, the ruling in effect treats the tandem share appreciation right as part of the option itself. 2004 Ruling 2004-005817 Ruling that the rules in ss. 7(1.4)(d) to (f) will apply where an Optionee exchanges his or her existing options for a Substituted Right (with further provision that if an Optionee elects to exercise his or her options, the company may, in its discretion, require the Optionee to exchange his or her options for Substituted Rights). 7 October 1997 T. I. 972427 RC followed Amirault v. MNR . 90 DTC 1330 (TCC) in indicating that a reduction in the exercise price for an employee stock option would not represent a disposition. Re MNR and Chrysler Canada Ltd. . 91 DTC 5526 (FCTD) Chrysler (U. S.) contributed treasury shares to a trust for the benefit of its employees and those of Chrysler Canada. Chrysler Canada reimbursed Chrysler (U. S.) for the shares contributed for the benefit of Chrysler Canadas employees. The trustee allocated the shares notionally to employees, reinvested dividends and further shares which are similarly allocated and at the termination of the plan (which occurred some seven years later) distributed the shares or cash proceeds thereof. Subject to any further argument on how to resolve any conflict between the two sets of provisions, this arrangement was held to entail both the issue of shares as described in ss.7(1) and (2), and an employee benefit plan as described in s. 248(1). After noting that Canadian employees agreed to make wage concessions partly in return for right of participation in the plan, Strayer J. stated (p. 5531): I can see no reason why the agreement referred to cannot be an oral agreement or an implied agreement - even an implied agreement based on a collective bargaining arrangement. Locations of other summaries no agreement if allocation of shares in trustees discretion CRA first stated that Placer Dome . Chrysler and McAnulty stand for the proposition that an arrangement to issue or sell shares need not be a detailed written contract to fall within the scope of section 7 or paragraph 110(1)(d), but nonetheless must create legally binding rights and enforceable obligations. CRA considered a trust established by a CCPC to acquire and hold shares of the corporation for employees, with allocations among the employees and distributions entirely at the discretion of the trustees. Several years later and after appreciation in the value of the shares, the trustees decide to distribute the shares to employee beneficiaries (including subsequent hires) in accordance with an allocation determined by the trustees at that time. In finding that the s. 110(1)(d) deduction was not available, CRA stated: A trust arrangement that provides for allocations and distributions of employer shares on a fully discretionary basis would not be governed by section 7. Such a discretionary arrangement lacks the requisite legally binding agreement as neither the corporation nor the trustees have any obligation to transfer shares to any specific beneficiary and no particular beneficiary has any enforceable right to shares until the discretion is exercised. Subsection 7(2) cannot apply any earlier than when a specific number of shares have been allocated to an identifiable employee pursuant to a legally binding agreement to issue or sell shares. Since section 7 would not be applicable, the income tax treatment would be determined under the EBP rules. Locations of other summaries discretionary share bonus plans have no s. 7 agreement unless there is delayed vesting no agreement to issue shares if vesting in employers discretion 3 May 1994 T. I. 940975 (C. T.O. Tax Adjustment for Forfeiture Under Stock Option) S.7(2) deems an employee to have acquired a share at the time a trustee commences to hold it for the employee, even if the employees entitlement is not vested. On the occurrence of forfeiture, the employee will realize a capital loss based on a disposition of the shares for nil proceeds. Ian MacDonald, Trusts Holding Employee Shares - After the Initial Transfer, Taxation of Executive Compensation and Retirement . Vol 22, No.10, June 2011, p. 1415: There are a number of indicators which suggest that an s. 7(2) trust is not governed by various employee benefit plan rules. Subsection 7(3) - Special provision Paragraph 7(3)(a) Rogers v. The Queen . 2015 DTC 1029 at 124, 2014 TCC 348 s. 7 a complete code for taxation of stock option benefits The taxpayer, who was the CEO of a Canadian corporation (RCI) whose voting and non-voting shares both traded on the TSX, did not deal at arms length with RCI as he held over 90 of its voting shares. RCI issued stock options to the taxpayer in 1997 pursuant to the RCI employee stock option plan, and in 2007 attached a share appreciation right (SAR) to all previously granted options, permitting the holder to cash surrender options for their in-the-money value. The taxpayer exercised the SAR in 2007, and reported a capital gain. Hogan J found that s. 7(3)(a) applied to preclude a benefit under s. 6 (as assessed by the Minister), stating (at paras. 38-39): This provision s. 7 is meant to provide a complete code for the taxing of benefits arising under or because of a stock option agreement. If the carveout in section 7(3)( a ) is interpreted in a narrow fashion, as the Respondent argued it should be that is it only applies if the benefit is subject to tax under subsection 7(1) of the Act it would mean that a non-arms length transfer could become immediately taxable notwithstanding the fact that section 7 specifically provided that this should not be the case. In the result, the taxpayer received the benefit as a capital gain (see summary under s. 39(1) ). Locations of other summaries cash surrender of employee stock options for their value was not shareholder benefit capital gain can arise from property which is not capital property exercise of stock option surrender plan for FMV was not remuneration holding ones employee stock options until just before they expire is not typical of an adventure in the nature of trade Mathieu v. The Queen . 2014 TCC 207 non-arms length option surrender proceeds were exempted by s. 7(3)(a) In successive years, the taxpayer cash-surrendered employee stock options to the corporation (Forages Garant) which had granted the options. Paris J found that the taxpayer was related to his wife from whom he was legally separated but not divorced. Accordingly, he was a member of a related group which controlled Forages Garant, which meant that his stock option surrender benefits were not taxable under s. 7(1)(b). In rejecting a Crown submission that the option surrender benefits were taxable under s. 6(1)(a), Paris J stated (at para 77, TaxInterpretations translation) that the principle of generalibus specialia derogant applies and subsection 7(3) deflects the application of the general provision, that the provisions of s. 7(3)(a) are clear and unequivocal (para. 79) and that it is evident that the subsequent addition of paragraph 7(1)(b.1) effected a change to section 7 and not a clarification (para. 85). Accordingly, the benefits were not taxable. Locations of other summaries Ward v. The Queen . 98 DTC 2097 (TCC) Shares issued to the taxpayer were found to be in satisfaction of consulting fees owed to him that had been written off by the corporation in question on its books, rather than being received by him by virtue of his employment with the corporation, based on a finding that the consulting fees would not have been written off had the shares not been issued to him, and given that the records of the corporation did not show him to have become an employee of the corporation until subsequently (although he was a director). Accordingly, the value of the shares received by him was includible in his income under s. 9, or under s. 5(1) by virtue of the application of s. 6(3)(b), and the benefits of the application of s. 7(1.1) were not available to him. Aylward v. The Queen . 87 DTC 1097 (TCC) Before concluding that s. 7(1.1) governed the issuance of shares to the taxpayer, Margeson TCJ. found that they were issued to the taxpayer in respect of his former employment with the issuer and that there was no requirement under s. 7 that the taxpayer be an employee of the company at the time of the granting of a stock option or at the time of its exercise. Although there was no formal agreement for the issuance of the shares, there is nothing in the word agreed that suggested that a formal contract in the sense of an offer and acceptance is required (p. 1108). Words and Phrases Administrative Policy s. 7 can govern bonuses paid in shares where discretion ceases prior to the issuance In accordance with the terms of the employment contract, a Canadian-controlled private corporation pays a bonus to an employee which is payable in shares. Will the share issuance be governed by s. 7, particularly s. 7(1.1) What if the employee has the choice to be paid the sum in cash or shares CRA responded: In the situation where an employer establishes an arrangement under which it undertakes to award a bonus based on the employee reaching certain measurable performance objectives and the employer agrees to pay this bonus in shares, then this arrangement could be an agreement contemplated by section 7. If an employer establishes an arrangement under which it has full discretion to award a bonus or has full discretion as to the mode of payment of this bonus (in shares or in cash), this discretion would ensure that it could not be an agreement for purposes of section 7 . It is possible that an arrangement which is not initially within section 7 due to the employers discretion as to whether or not to grant shares could become an agreement in which section 7 applies at the time the employer undertakes to issue shares. This could be the case whereafter the first year, the employer exercises its discretion and sets the amount of the bonus at 75 shares, which is payable in shares at the end of the year if the employee is still employed by the employer. The choice of the employeedoes not preclude an undertaking from being an agreement to issue shares. Locations of other summaries 2004 Ruling 2004-005692 The replacement of a SAR plan of a private-company (CCPC) employer with an agreement to acquire its preferred and common shares that is subject to s. 7 will not be an immediate taxable event. S.7(3)(a) will limit the recognition of any benefits that might arise as a result of this conversion, and the employees will not receive any amount as a result of the agreement to waive any rights under the SAR. Notwithstanding that the corporation will add to its stated capital account maintain in respect of the common shares and preferred shares an aggregate amount not exceeding its estimate of the current accrued liability owing to the executives under the SAR plan. Locations of other summaries 2002 Ruling 2001-010761 Where an arms length employee transfers options to a personal holding company for no consideration, he will not, except as provided by s. 7, be deemed to have received or enjoyed any benefit under or because of the options or their transfer to the corporation. Under s. 7(1)(c), he will realize a benefit when the holding company exercises the options during his lifetime or, if the options are exercised after his death, the company will be deemed to receive employment income under s. 7(1)(c) on exercise. Locations of other summaries 16 February 2001 Internal T. I. 2000-005365 A s. 7 employee stock option plan can be implemented in substitution for an existing SAR Plan without any immediate tax consequences. However, we caution that this position is only valid where there is an exchange of the SAR unit for the option and the employee does not otherwise receive any amount or right to receive an amount. For example, a receipt of a taxable benefit might occur at the time of an exchange if the arrangement provided for the acceleration of the vesting of the SAR and, because of the vesting, the employee obtained a right to receive cash for the unit. 10 May 2001 External. T. I. 2001-007568 Where an employee has contributed employee stock options to his RRSP, by virtue of s. 7(3)(a) there would be no income inclusion at the time of the transfer to the RRSP, and the employee would be entitled to a deduction under s. 146(5) or (5.1) equal to the fair market value of the option at the time of the transfer. When the RRSP exercised the option, there would be an income inclusion to the employee under s. 7(1)(c) at that time. Locations of other summaries 18 February 1999 Memorandum 990081 Where Canadian employees of a Canadian corporation are eligible to participate in an employee stock option plan of an indirect U. S. public-corporation parent, amounts paid by the Canadian employer to the U. S. parent to reimburse it for the difference between the option price and the amount actually paid by the U. S. parent in order to purchase the shares for distribution to the Canadian employees, will not be deductible by virtue of s. 7(3)(b). 6 December 1995 T. I. 952703 (C. T.O. Taxation of Benefit of Employee Share Offering) If a benefit is received by an individual qua employee, paragraph 7(3)(a) requires that it be taxed under section 7 and not under any other provision in Part I of the Act. Paragraph 7(3)(b) The Queen v. Placer Dome Inc. . 92 DTC 6402 (FCA) discounted stock purchase plan In finding that an employee stock purchase plan (under which employees contributed up to 6 of their salary and the taxpayer and its affiliated companies then were obligated to contribute an amount equal to 12 of each employees contribution) was governed by s. 7(1)(a), with the result that s. 7(3) applied to deny a deduction to the taxpayer (except to the extent that the taxpayers contribution to the plan was not returned to it in the form of a share subscription), Marceau J. A. stated (p. 6410): Based on the following facts: that the trustee is merely a conduit through which the employer administers the Plan that the employees never receive money or moneys worth until termination or withdrawal and, even then, never from the employer directly and, that the funds payable by the employer to the trustee each month have a predetermined destination and never fall under any real control or genuine power of the employees or the trustee, it must be concluded that the true benefit the employees acquire by their participation in the Plan is not the entitlement to an additional remuneration but the entitlement to a credit for shares of Placer at two-thirds of their market value. Kaiser Petroleum Ltd. v. The Queen . 90 DTC 6034 (FCTD), revd 90 DTC 6603 (FCA) In an agreement between the U. S. parent of the taxpayer and Kaiser Resources Ltd. for the sale of shares of the taxpayer to Kaiser Resources Ltd. for 33.50 per share, it was agreed that the U. S. parent would cause the taxpayer to obtain the cancellation of outstanding employee stock options on the shares of the taxpayer on the payment by the taxpayer of the difference between the exercise price per share and 32.50 per share. Before finding that the payment of such amounts by the taxpayer in consideration for the cancellation of the options was deductible notwithstanding s. 18(1)(b) on ordinary principles, Joyal J. implicitly accepted the submission of the taxpayers counsel that s. 7(3) has no application as no issue of shares took place (p. 6036). Transalta Corporation v. The Queen . 2012 DTC 1106 at 3044, 2012 TCC 86 no bilateral agreement to pay bonuses only in shares Near the beginning of each year, the taxpayer would notify each of its executives that an award of units (within a specifed range) would be made to the executive in respect of the three-year compensation period commencing with that year, which would then be used to determine, within 120 days after the end of that compensation period, the bonus that would be paid to the executive in respect of the compensation period. Bonuses were paid at the option of the taxpayer in cash or shares with full stated capital. Margeson J. found that the taxpayers deduction of the amount of the bonuses which were paid in treasury shares was not barred under s. 7(3)(b) because such shares were not paid or issued pursuant to an agreement. The word agreement in s. 7 refers only to legally binding agreements, meaning contracts. There was no meeting of the minds that could have led to the formation of a bilateral contract (para. 71), nor did the employees do or refrain from doing anything specified in an offer for a unilateral contract (para. 86). The implicit notion that the bonuses would be earned through superior work performance was not enough to constitute an offer (para. 85). Even if there had been an agreement to pay bonuses, they could have been paid entirely in cash, so there was no agreement to issue securities. Words and Phrases discretionary share bonus plans have no s. 7 agreement unless there is delayed vesting In response to several enquiries from auditors on the meaning of agreement for the purposes of ss. 7 and 110(1)(d), the Directorate first referenced the Placer Dome . Chrysler and McAnulty decisions, and stated: These cases stand for the proposition that an arrangement to issue or sell shares need not be a detailed written contract to fall within the scope of section 7 or paragraph 110(1)(d), but nonetheless must create legally binding rights and enforceable obligations. This principle was confirmed in Transalta . The Directorate then discussed this issue in the context of various types of plans. Respecting a discretionary share bonus plan (where the corporation determines at the end of the 3-year period the number of shares earned and whether the bonus would be paid in the form of shares issued from treasury or cash equivalent., it stated: Because the corporations commitment remains fully discretionary at all times, the arrangement does not give rise to a legally binding agreement for the purposes of section 7. Therefore, where the corporation opts to settle the bonus by issuing shares, paragraph 7(3)(b) does not apply to prohibit the corporation from deducting the bonus expense. Similarly, a fully discretionary stock bonus plan without a cash option will also fall outside section 7 where the granting of the awards and the issuance of the shares is made concurrently. However, if the eventual issuance of the shares is subject to time or other objective vesting conditions, it is our view that section 7 would apply. A share bonus plan that has been designed to avoid the application of paragraph 7(3)(b) (by the inclusion of a discretionary cash settlement option) will also need to qualify as a three-year bonus plans deferred share unit plan . Respecting a SAR or DSU plan, because there is no agreement to issue sharesi. e., the corporation is free to choose the form in which the payment will be made (which includes cash)accordingly, paragraph 7(3)(b) will not apply . Words and Phrases shares purchased through broker Ruling that s. 7(3)(b) would not apply to an arrangement under which bonuses are paid no later than the end of the third calendar year after the particular year of service through the transfer to the employee of shares of the employer (whose number, before taking into account a notional dividend reinvestment feature, is specified at the time of the grant of the bonus), given that the shares are purchased at the time of payment through broker rather than being issued by the employer. Locations of other summaries 18 March 2004 Internal T. I. 2004-005531 cash applied to share purchase S.7(3)(b) will not deny the employer a deduction where under a stock option plan, an employee elects to be paid in cash and uses the cash proceeds to acquire shares namely, flow-through shares) of the employer that are different from the shares that could have been acquired under the stock option. 14 November 2000 External. T. I. 2000-004835 employer option to pay cash In response to a request for further clarification of the CRA position respecting a stock option plan where the employer can elect to pay the employee cash instead of issuing shares at the exercise price, the Agency stated that it was its view that no agreement is entered into until the corporation decides that it will issue shares to an employee upon that employees exercise of an option. It is at that time that the option in respect of the employee will be subject to the provisions of section 7. Furthermore, the result in Kaiser. is not inconsistent with our position that the payment by an employee of cash rather than shares pusuant to the terms of a stock option plan will, in the absence of evidence to the contrary (e. g. the fact situation in Kaiser). be a deductible expense to the employer. Locations of other summaries 1999 Ruling 990259 use of employee bond to acquire foreign parent share at initial value use of employee bond to acquire foreign parent share at initial value Canadian employees of a Canadian subsidiary of a foreign parent had subscription rights to acquire unlisted ordinary shares of the foreign parent. The subscription rights plan provided that, for reasons relting to the tax rules in teh foreign jurisdiction, at the time of the grant of such right, the employee also would acquire a non-interest bearing bond of the parent at an appropriate discount. In addition, put and call agreements with a non-resident corporation (Putcallco) under which the employee could cause Putcallco to acquire the employees foreign parent shares (after exercise of the subscription right) at their fair market value at the time of such exercise (as determined under a formula), and Putcallco could acquire the subscription rights for their their fair market value (as also determined under the formaula) in the event the individual ceased to be an employee. The foreign parent and the Canadian subsidiary had agreed that when a subscription right was exercised by an employee, the Canadian subsidiary would be obliged to pay to the foreign parent the amount by which the fair market value of the shares acquired by the employee exceeded the exercise price. An employee right to cash-surrender the subscription right to the Canadian subsidary is subsequently granted. Ruling that the Canadian subsidiary will be entitled to claim a deduction in computing its income under s. 9(1) equal to the amount paid in cash to an employee who exercises the cash-out right. 18 February 1999 Memorandum 990081 non-deductibility of reimbursements by Cdn employer to US parent non-deductibility of reimbursements by Cdn employer to US parent Where Canadian employees of a Canadian corporation are eligible to participate in an employee stock option plan of an indirect U. S. public-corporation parent, amounts paid by the Canadian employer to the U. S. parent to reimburse it for the difference between the option price and the amount actually paid by the U. S. parent in order to purchase the shares for distribution to the Canadian employees, will not be deductible by virtue of s. 7(3)(b). Nouvelles techniques de l'impôt sur le revenu. No. 7, 21 February 1996 employee option to receive cash Where under an employee stock option plan, the employee has the option to receive cash instead of shares, s. 7(3)(b) will not deny a deduction by the employer of a resulting cash payment because no shares will have been sold or issued under the plan. 1995 Institute of Chartered Accountants of Alberta Round Table, Q. 9 (9511740) In RCs view, it is not appropriate for cash that an employee elects to receive in lieu of exercising a stock option to be eligible for the deduction under s. 110(1)(d), with the employer at the same time being entitled to a corresponding deduction. Accordingly, this matter is under study by RC and Finance. 20 January 1994 T. I. 940075 HAA4735-1 purchase of employer shares under EPSP purchase of employer shares under EPSP If employer contributions under an employees profit sharing plan can be used to purchase treasury shares, s. 7 will apply and the employer will be denied a deduction pursuant to s. 7(3)(b). 92 C. R. - Q.47 In response to the decision in the Placer Dome case, RC is undertaking a complete review of its practices whereby treasury shares of the employer are acquired by employees or employee stock purchase plans. 92 C. R. - Q.45 stock option reimbjurseent to parent A payment by a Canadian subsidiary to its U. S. parent to compensate the U. S. parent for the participation of employees of the Canadian subsidiary in a U. S. stock option plan, would not be deductible on computing the Canadian subsidiarys income. 4 May 1992 Tax Executives Round Table, Question 10 (December 1992 Access Letter . p. 48) S.7(3)(b) will not deny a deduction in computing the income of a corporation in respect of a cash payment which an employee elects to receive in lieu of exercising his stock option. Hurd v. The Queen . 81 DTC 5140, 1981 CTC 209 (FCA) Where an individual was granted a stock option by reason only of his employment by the grantor company, he will realize taxable employment income in the year that the option is exercised notwithstanding that in that year he (1) is no longer an employee of the company (s.7(4)) and (2) is no longer a resident of Canada. Respecting the second point, the reference in S.2(3) to a previous year makes it clear that the duties of employment need not be performed in Canada in the year in which the benefit is sought to be taxed. Locations of other summaries Commentary The provisions of s. 7 do not apply to a benefit conferred by an agreement if it was not received in respect of, in the course of, or by virtue of the employment. The quoted phrase has also been interpreted in the context of s. 6(1)(a) . Even if an individual is a director or employee of a corporation at the time that it grants stock options to him or her, the resulting benefit may be found not to have been received by virtue of his or her employment. For example, the grant of options to the taxpayer and other individuals may not be correlated in any way with the extent of the individuals duties (if any) as employees or directors (Grohne. Bernstein cf. Scott. Del Grande ). Scott v. The Queen . 94 DTC 6193 (FCA) The taxpayer, who was the Director and Secretary-Treasurer of a public corporation (Night Hawk) and whose work as corporate secretary (for which he received no remuneration) of advising directors of meetings, taking minutes and preparing directors resolutions etc. was usual work of a corporate secretary, was issued stock options by Night Hawk and exercised them at a gain. The Court affirmed the finding of the Trial Judge that the options were granted to the taxpayer in respect of, in the course of, or by virtue of his employment with Night Hawk notwithstanding that the taxpayer was an employee of a corporation (Delsco) which provided significant managerial services of the taxpayer to the Night Hawk group (who provided such services to the group on close to a full-time basis). The award of stock options to the directors were proportined to the degree of time and effort they devoted to the affairs of Night Hawk, and they received no other direct compensation. Furthermore, and notwithstanding the form of the agreements with Delsco, there was evidence to support the finding of the trial judge that in substance the taxpayer was a Night Hawk employee independently of his position of (an ostensibly unpaid) director and officer of Night Hawk. Accordingly, the taxpayer was taxable under s. 7(1)(a) when he exercised his options. Locations of other summaries Bernstein v. MNR . 77 DTC 5187, 1977 CTC 328 (FCA) The two beneficial shareholders of a company (Highland) each received an option, and exercised that option, to purchase redeemable preference shares of a subsidiary of Highland for 200, and then received the sum of 100,000 when those shares were redeemed. It was held that they did not receive their options by virtue of their employment with Highland, but rather in their capacities as shareholders, in light of their substantial salaries as officers, the fact that other valuable employees did not receive the stock options and their desire to devise a scheme to extract the earnings of Highland in a fashion that minimized tax. (S.83A(7) of pre-1972 Act.) Del Grande v. The Queen . 93 DTC 133 (TCC) In finding that any benefit received by the taxpayer as a result of the granting or exercise of options would have been received more by virtue of being an officer and director rather than by virtue of being a shareholder, Bowman J. stated (p. 138): . the option agreements refer to his contribution to the business and affairs of the companies. The options are exercisable only while he is an officer or director of the companies. In other words the granting and exercise of the options may have been connected with his position as an officer and director but they are in no way connected with his being a shareholder. Locations of other summaries employer rather than s. 7(6) trust withholds Under an arrangement described in s. 7(6), does obligation to withhold tax rests with the corporationemployer or the s. 7(6) trust CRA stated: The arrangement is deemed to be a section 7 agreement to issue shares. Accordinglythe corporation is paying the section 7 employment benefit as remuneration for purposes of paragraph 153(1)(a) and therefore, the corporation has the obligation to withhold and remit the appropriate amount of tax. Before so concluding, CRA summarized s. 7(6) as follows: Subsection 7(6) provides that where a corporation has entered into an arrangement where the corporations shares are issued or sold to a trustee to be held for sale to the corporations employees, for purposes of section 7 and paragraphs 110(1)(d) and (d.1), the following apply: (i) the arrangement is deemed to be a section 7 agreement to issue shares between the corporation and the corporations employee (ii) shares acquired under the arrangement are deemed to be acquired under the section 7 agreement, and (iii) amounts paid to the trustee under the arrangement by the employee are deemed to be paid to the corporation under the section 7 agreement. Home What the Archived Content notice means for interpretation bulletins What the Archived Content notice means for interpretation bulletins On August 1, 2013 a standardized160Treasury Board of Canada Secretariat160Archived Content notice was added to all interpretation bulletins (ITs) on the CRA website. The notice has no effect on the status or reliability of the ITs. They are current up to the effective date stated in each publication. The notice merely confirms that the160page is not subject to Government of Canada Web standards and that the content160will not be altered or updated. Each IT will be cancelled when it is replaced by an income tax folio. For more information, go to Introducing income tax folios . Taxpayers and their representatives may continue to refer to the ITs for explanations of the CRAs interpretation of federal income tax law, keeping in mind the caution that has always applied: While the comments in a particular paragraph in an IT may relate to provisions of the law in force at the time they were made, such comments are not a substitute for the law. The reader should, therefore, consider such comments in light of the relevant provisions of the law in force for the particular taxation year being considered, taking into account the effect of any relevant amendments to those provisions or relevant court decisions occurring after the date on which the comments were made. Date modified: 2013-07-26 Secondary menu Site Information