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: Where a stock option which was received by a taxpayer in kind as business income is it the Agency's view that the exercise of such an option will always result in business income to the taxpayer?
Position: Only if the exercise of the option is on income account.
Reasons: It will be a question of fact as to whether the exercise leads to income or capital treatment.
XXXXXXXXXX 2000-003267
G. Kauppinen
Attention: XXXXXXXXXX
September 22, 2000
Dear Sirs:
Re: Stock Options Granted to Independent Contractors
This is in reply to your facsimile transmission dated June 16, 2000 regarding the above-noted subject.
You have asked for clarification of our opinion expressed in our document 1999-0013915 in which we state there will be a business income inclusion to the holder where options are exercised by virtue of the supplier\customer relationship between holder and issuer.
Specifically, you ask whether it is the Canada Customs and Revenue Agency's view that an exercise of an option received as business income (in kind) will always result in business income to the holder upon exercise of the option.
In our opinion the exercise of such a option would normally be subject to the rules in section 49 of the Income Tax Act. However, there may be circumstances under which the exercise of the option would result in business income. Such a determination is one of fact.
We trust our comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings Directorate
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