CRA indicates that the s. 110(1)(d) deduction can now apply to stock option benefits realized on death

On death, an individual holding stock option rights is deemed pursuant to s. 7(1)(e) to have disposed of them immediately before death for their value. Although 2009-0327221I7 and 2011-0423441E5 indicated that the 50% deduction under s. 110(1)(d) is not permitted to a deceased taxpayer, s. 110(1)(d) was since amended to make specific reference to s. 7(1)(e).

CRA indicated that, as a result of this amendment, the deduction is now available to a deceased taxpayer in circumstances where s. 7(1)(e) applies, provided that all of the conditions of s. 110(1)(d) are met.

Neal Armstrong. Summary of 15 June 2022 STEP Roundtable, Q.17 under s. 110(1)(d).