17 April 2003 External T.I. 2003-0008215 - SAR OR OPTION RIGHT

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 CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues:

1. Are stock option rights or stock appreciation rights considered property within the meaning assigned by subsection 248(1) of the Act?

2. Would they be property for a qualifying disposition in section 107.4?

Position:

1. Yes.

2. Question of fact.

Reasons:

1. Paragraph (a) of the definition includes a right of any kind.

2. No information so we don't know the context that they are asking from.

XXXXXXXXXX 			2003-000821

April 17, 2003

Dear XXXXXXXXXX:

Re: Rights under Stock Appreciation Rights Plans and Stock Option Plans

We are writing in reply to your letter of March 12, 2003 wherein you requested our views as to whether rights under stock appreciation rights plans ("SAR right") and stock option plans ("Option right") would be property within the meaning assigned by subsection 248(1) of the Income Tax Act (the "Act"). You also ask whether such rights would constitute property eligible to qualify for a qualifying disposition for purposes of section 107.4 of the Act.

Comments

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advanced Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. The following comments are, therefore, of a general nature only and are not binding on the Canada Customs and Revenue Agency ("CCRA"). All publications referred to herein can be accessed on the CCRA website at the following address: http://www.ccra-adrc.gc.ca/tax/technical/incometax/menu-e.html.

Under paragraph (a) of the definition of property in subsection 248(1) of the Act, property includes a right of any kind whatever. Consequently, a SAR right and Option right would be considered property for purposes of the Act.

It is a question of fact whether such rights would be considered property eligible to qualify for a qualifying disposition for purposes of section 107.4 of the Act. We would make this determination where all of the facts and proposed transactions are disclosed in the context of an application for an advance income tax ruling. We would also be able to consider how the provisions of section 107.4 would interact with the provisions of section 6 and section 7 of the Act in respect of the SAR rights and Option rights.

We trust that these comments will be of assistance.

Yours truly,

Mickey Sarazin, C.A.

for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch