Reversing its published position, CRA now permits a s. 110(1)(d) deduction for a stock option benefit arising on death

Where a s. 7 benefit arises otherwise than from acquisition of the underlying shares, ss. 110(1.1) and 110(1)(d)(i) require that the employer make and file an election to agree to not take any deduction for the benefit amount in order for the employee to be permitted to claim the (1/2) s. 110(1)(d) deduction.

This raises an issue where the benefit arose on death under s. 7(1)(e).  Although s. 110(1.1) does not go so far as to require the dead employee to sign the election, it does require the employee to receive a copy of the election and file it with his or her return.

Reversing 2011-0423441E5 F, CRA now states that "on an administrative basis, …an election [may] be made pursuant to subsection 110(1.1)…in circumstances where paragraph 7(1)(e)…applies."  CRA dos not explicitly state that a copy of the election should be included in the terminal return, but this would be prudent.

Neal Armstrong.  Summary of 4 May 2015 T.I. 2013-0484181E5 under s. 110(1.1).