Mahoney, J:—The defendant was a Canadian resident, employed by a Canadian corporation Tranter Canada Ltd, a wholly owned subsidiary of Tranter, inc [sic], hereafter “Tranter”, a Michigan corporation. On January 28, 1976, Tranter granted the defendant an option to purchase 1,000 of its shares at a price of $12.50. All amounts of money mentioned herein are United States dollars. The option was to be exercised within five years of, and not more than 25% of the shares optioned could be taken up for each year of continuous employment after, January 28, 1976. The defendant had no rights as a stockholder in respect of optioned shares until exercise of the option thereon. The agreement imposed no obligation on him to continue in his employment but did terminate, subject to specific conditions, immaterial to this action, immediately his employment ceased. The option provided for adjustments in the event of capital reorganization or stock dividends and went on:
6. ... Subject to any required action by the stockholders, if the Company shall be the surviving corporation in any merger or consolidation, any option granted hereunder shall pertain to and apply to the securities to which a holder of the number of shares of common stock subject to the option would have been entitled; but a dissolution or liquidation of the Company or a merger or consolidation in which the Company is not the surviving corporation, shall cause every unexercised option outstanding hereunder to terminate.
The agreed statement of facts stipulates that, by the law of Michigan, an amalgamation may involve one corporation absorbing another with the result that the absorbing corporation survives and the absorbed does not, a concept different from that embodied in Canadian company law. The amalgamation hereafter referred to was carried out under the law of Michigan.
On December 14, 1977, Tranter entered into an agreement whereby, effective January 5, 1978, a subsidiary of another company merged into it, with Tranter the surviving corporation. The effect of the amalgamation was to make Tranter a wholly owned subsidiary of the other company while Tranter’s previous shareholders received $38 per share and retained no equity in Tranter. The defendant was, at the time, entitled to exercise his option in respect of 250 shares but had not done so. It was a term of the merger agreement that:
10. The Corporation agrees that any option to purchase Corporation shares under the Corporation’s Qualified Stock Option Plan outstanding at the Effective Date of Merger shall be cancelled and that the Corporation will be released of all further obligations to any holder of any option under the Plan.
22. The Corporation will take such action as may be necessary to terminate and cancel as of the closing all stock options that may then be outstanding under its Qualified Stock Option Plan, whether or not such options are then exercisable and to terminate such Plan effective as of the closing. At any time prior to such cancellation, any holder of a Corporation Stock Option, whether or not it is exercisable may enter into an agreement to sell his option to the Corporation for such shares covered by the option at a price equal to the differences between $38 times the number of shares covered and the aggregate option price for the shares. The agreement may be subject to a condition that if the Merger is not consummated the sale will not be carried out.
The “Corporation” was Tranter. By clause 15, Tranter covenanted, inter alia, that 503,288 shares of its capital stock were outstanding and would be outstanding at the date of merger.
The defendant was approached and agreed to surrender his option for $38 per share less the $12.50 option price. The operative document, signed by him, read:
In consideration of the sum of twenty-five thousand five hundred and 00/100 dollars ($25,500.00) receipt of which is hereby acknowledged, I surrender to Tranter, inc all of my options to purchase stock of Tranter, inc.
Prior to December 31, 1977, he was paid $25,500.
The Income Tax Act provides:
7. (1) Where a corporation has agreed to sell or issue shares of the capital stock of the corporation or of a corporation with which it does not deal at arm’s length to an employee of the corporation or of a corporation with which it does not deal at arm’s length,
(b) if the employee has transferred or otherwise disposed of rights under the agreement in respect of some or all of the shares to a person with whom he was dealing at arm’s length, a benefit equal to the value of the consideration for the disposition shall be deemed to have been received by the employee by virtue of his employment in the taxation year in which he made the disposition.
The receipt clearly lies to be taxed under that provision.
The learned assistant chairman of the Tax Review Board,  CTC 2826; 80 DIC 1701, held that this case was not to be distinguished from Reynolds et al v The Queen,  CTC 792; 77 DTC 5044, in which it was found that a company, by resolving to wind itself up under the British Columbia Companies Act had breached options to purchase its shares given the taxpayers there and it was held that the consideration accepted by them was received in satisfaction of their rights of action flowing from that breach.
With respect, I disagree. Here, there was no breach. When the defendant agreed to surrender his option, Tranter was, as it remained after the merger, in a legal position to fulfil its obligations to him under it. Tranter never breached the option by putting itself in a position where it could not fulfil its Obligations under it; Tranter simply agreed to procure his surrender. It in fact procured the surrender. It is idle to speculate on the consequences to him or the merger had he refused it.
The defendant’s argument that the surrender did not fall within paragraph 7(1 )(b) because no right survived the surrender is specious. He disposed of his rights under the agreement; the effect of that disposition on those rights is immaterial.
This case is on all fours with Greiner et al v The Queen,  CTC 477; 81 DTC 5271, as that case dealt with the taxpayers’ stock options. I understand an appeal is pending there. The defendant’s efforts to distinguish the case on the basis of Greiner’s senior managerial position is entirely without merit. Mr Justice Addy had already concluded the stock option issue against Greiner when he referred to Greiner’s position in connection with another issue which need not be considered here. It was no part of the ratio for his disposition of the stock option issue.
The assessment of the defendant’s 1977 income tax return is restored. The plantiff will recover her taxed costs.