Des Groseillers – Supreme Court of Canada finds that s. 7(3)(a) does not override s. 69(1)(b)

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 accepted by 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 the taxpayer to be equal to the options’ fair market value of $3M, rather than the nil proceeds in fact received.

In allowing the ARQ’s appeal, Cournoyer JCA indicated inter alia that:

  • It was “telling” that the s. 69 rule did not explicitly exclude the employee stock option rules from its application, given the presence of other carve-outs from s. 69.
  • The only effect of the s. 7(3)(a) rule was to give precedence to the stock option rules over any other charging provisions, and did not prevent the ARQ from applying the s. 69 deeming rule, and “in the absence of clear legislative indicia to this effect” those rules did not “constitute a code so complete and so hermetic that the application of [the s. 69 rule] is excluded."

After quoting extensively from his reasons, the Supreme Court briefly stated that “[w]e agree with Cournoyer J.A.’s view.”

Neal Armstrong. Summary of Des Groseillers v. Quebec (Agence du revenu), 2022 SCC 42 under s. 69(1)(b).