27 March 2001 External T.I. 2001-0072425 - SPECIFIC IDENTIFICATION 30 DAY TEST

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: Proposed subsection 7(1.31) allows a taxpayer to specifically identify the shares that were acquired under a stock option as being the shares sold by the taxpayer when they are disposed of within 30 days of their acquisition and the taxpayer has elected to utilize the specific identification method. Will we administratively allow a taxpayer to elect to use the specific identification provision in extenuating circumstances where the 30 day condition can't be satisfied?

Position: No.

Reasons: The proposed 30 day condition is clear.

XXXXXXXXXX 2001-007242
M. P. Sarazin, CA
March 27, 2001

Dear XXXXXXXXXX:

Re: Disposition of Newly-Acquired Shares

This is in reply to your facsimile of February 27, 2001, requesting our views as to whether the Canada Customs and Revenue Agency (the "Agency") will provide administrative relief in the application of proposed subsection 7(1.31) described in the Legislative Proposals and Explanatory Notes Relating to Income Tax published in December 2000 and in the Notice of Ways and Mean Motion to amend the Income Tax Act, the Income Tax Application Rules, certain Acts related to the Income Tax Act, the Canada Pension Act, the Customs Act, the Excise Tax Act, the Modernization of Benefits and Obligations Act and another Act related to the Excise Tax Act tabled on March 13, 2001 by The Honourable Paul Martin, P.C., M.P., Minister of Finance.

Under proposed subsection 7(1.31), where certain conditions are satisfied, a taxpayer can designate specific shares as being the shares that are disposed of at a particular point in time. One of the conditions is that the disposition of shares occurs no later than 30 days after the taxpayer acquired the particular shares under a stock option described in section 7 of the Income Tax Act. You believe that there may be extenuating circumstances where a taxpayer is not able to dispose of the shares within the 30 day period and you would like to know whether the Agency will allow a taxpayer to designate specific shares under proposed subsection 7(1.31) where the 30 day period is exceeded in extenuating circumstances.

Comments

The condition that a share has to be disposed of within 30 days of its acquisition under an employee stock option, as described in proposed subsection 7(1.31), is very clear. Consequently, the Agency will not allow a taxpayer to designate a specific share under the provisions of subsection 7(1.31) where that condition is not satisfied.

We trust these comments will be of assistance.

Yours truly,

Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate