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.
Principal Issues: Can the estate of a deceased holder of a stock option make a designation under section 7(1.31) of the Act if it receives and exercises the option?
Position: Yes
Reasons: The result is comparable to the intended result if the employee had been able to exercise the option and dispose of the shares at the time of death.
XXXXXXXXXX 2005-011509
W. C. Harding
July 26, 2005
Dear XXXXXXXXXX:
Re: Subsections 7(1.31) and 47(3) of the Income Tax Act (the "Act")
This is in reply to your letter of February 8, 2005 concerning the application of subsections 7(1.31) and 47(3) of the Act in the context of a situation where paragraph 7(1)(e) of the Act has applied.
We concur with your position, that provided the provisions of subsection 7(1.31) are complied with, the estate of a deceased taxpayer may make a designation under the provisions of subsection 7(1.31) in circumstances where a benefit was included in the income of the deceased in the year of death in accordance with paragraph 7(1)(e) of the Act and the option has been transferred to, and exercised by, the estate of the deceased.
We trust our comments will be of assistance to you.
Yours truly,
Roberta Albert, CA
for Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Policy and Planning Branch
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