CRA states that no s. 110(1)(d) or (d.1) deduction is available when an employee stock option is settled through the issuance of shares for its 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 found that as s. 7(1)(b) rather than s. 7(1)(a) applied to this disposition of the employee’s rights, the s. 110(1)(d.1) deduction was not available – and then went on to find that the s. 110(1)(d) deduction was not available for the same reason, stating:

[S]ubparagraph 110(1)(d)(i) will not be satisfied as an employee does not “acquire the share under the agreement”, as required under subparagraph 110(1)(d)(i).

S. 110(1.1) was not discussed.

Neal Armstrong. Summaries of 3 August 2016 External T.I. 2015-0572381E5 under s. 7(1)(b), s. 110(1)(d) and s. 110(1)(d.1).