Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Will the disposition of shares that are subjected to paragraph 7(1)(a) by virtue of subsection 7(1.1) which were acquired under an exchanged option that satisfied subsection 7(1.4) qualify for the deduction under paragraph 110(1)(d.1)?
Position: If the conditions in subparagraph 110(1)(d.1)(ii) and (iii) are satisfied, yes.
Reasons: The provisions of paragraph 110(1)(d.1) are satisfied.
XXXXXXXXXX 2000-003252
M. P. Sarazin
Attention: XXXXXXXXXX
August 30, 2000
Dear Sirs:
Re: Exchange of Securities Options
This is in response to your letter of June 16, 2000, requesting a review of the position taken in our letter dated October 18, 1999 (file # 991926) (the "Letter") regarding an exchange of security options originally granted by a Canadian-controlled private corporation under subsection 7(1.4) of the Income Tax Act (the " Act") and the application of paragraph 110(1)(d.1) of the Act.
Where an individual disposes of shares acquired under a securities option that was exchanged for a securities option issued by a Canadian-controlled private corporation and the exchange was subjected to the provisions of subsection 7(1.4) of the Act, you are of the view that paragraph 110(1)(d.1) of the Act could apply to the disposition of shares. Even though subsection 7(1.4) of the Act does not include a specific reference to paragraph 110(1)(d.1) of the Act, the disposition of a security acquired under an exchanged security option which results in an income inclusion under paragraph 7(1)(a) by virtue of subsection 7(1.1) would satisfy the condition in subparagraph 110(1)(d.1)(i) of the Act. Where the conditions in subparagraphs 110(1)(d.1)(ii) and (iii) are also satisfied in respect of the particular security disposition, the individual should be entitled to the deduction under paragraph 110(1)(d.1) of the Act.
We have reconsidered the position expressed in our Letter and we agree that paragraph 110(1)(d.1) of the Act could apply to securities acquired in the situation described above.
We trust that the above comments will be of assistance.
Yours truly,
Patricia Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate
XXXXXXXXXX 2000-003252
M. P. Sarazin
Attention: XXXXXXXXXX
August 30, 2000
Dear Sirs:
Re: Securities Options and Canadian-Controlled Private Corporations
This is to advise you that we have reconsidered the comments regarding the application of paragraph 110(1)(d.1) which were provided to you in our letter of October 18, 1999 (file # 991926) (the "Letter").
In our Letter we stated that paragraph 110(1)(d) rather than paragraph 110(1)(d.1) of the Act would apply to a disposition of securities where the securities were acquired under a securities option which was exchanged for a securities option granted by a Canadian-controlled private corporation under subsection 7(1.4) of the Act. We concluded that subsection 7(1.4) did not apply for the purposes of paragraph 110(1)(d.1).
We have reconsidered the position expressed in our Letter. We are of the view that paragraph 110(1)(d.1) of the Act could apply to the disposition of shares acquired under a securities option that was exchanged for a securities option issued by a Canadian-controlled private corporation and the exchange was subjected to the provisions of subsection 7(1.4) of the Act. Even though subsection 7(1.4) of the Act does not include a specific reference to paragraph 110(1)(d.1) of the Act, the disposition of a security acquired under an exchanged security option which results in an income inclusion under paragraph 7(1)(a) by virtue of subsection 7(1.1) would satisfy the condition in subparagraph 110(1)(d.1)(i) of the Act. Where the conditions in subparagraphs 110(1)(d.1)(ii) and (iii) are also satisfied in respect of the particular security disposition, the individual should be entitled to the deduction under paragraph 110(1)(d.1) of the Act.
We trust that our revised comments will be of assistance.
Yours truly,
Patricia Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate
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