Des Groseillers – Quebec Court of Appeal decision indicates that s. 69(1)(b) deems FMV proceeds for an employee stock option gift for s. 7 purposes

An individual who donated some of his employee stock options on the shares of a public company to arm's length registered charities, claimed the$3M fair market value of the donated options for charitable tax credit purposes, but did not include any portion of the donated options in his income under the equivalent of ITA s. 7(1)(b). This reporting was confirmed in the Court of Quebec on the basis inter alia that the equivalent of ITA s. 7(3)(a) established that the stock option rules constituted a “complete code” so that the equivalent to ITA s. 69(1)(b) did not apply to deem the “value of the consideration for the disposition” received by him to be equal to the options’ fair market value of $3M, rather than the nil proceeds in fact received.

In disagreeing with this interpretation and before allowing the ARQ’s appeal, Cournoyer JCA stated:

[The s. 7(3)(a) equivalent] only has the effect of giving precedence to the application of [the s. 7 equivalent rules] over any other section providing for a taxability rule. It does not prevent the ARQ from using the presumptions provided for in the T.A. to calculate the taxable income of the taxpayer.

Neal Armstrong. Summary of Agence du revenu du Québec v. Des Groseillers, 2021 QCCA 906 under s. 7(3)(a).