Principal Issues: Can employee stock options and warrants be contributed to a TFSA? If so, what is the amount of the contribution? What are the tax consequences of an employee stock option being contributed to a TFSA?
Position: Provided the conditions of 4900(1)(e) are satisfied, options and warrants will be qualified investments for a TFSA. Contributions of property such as options, warrants, or similar rights, must be contributed to a TFSA at the property's FMV and are subject to the TFSA holder's unused TFSA contribution room. When an employee stock option is exercised by a TFSA, the employee is deemed to have received a benefit in accordance with paragraph 7(1)(c) of the Act. If the option expires in the TFSA, no benefit will be deemed received by the employee, in accordance with section 7.
Reasons: Paragraph 4900(1)(e) of the Act. Property must be contributed at the property's FMV, which is a question of fact and an appropriate valuation method must be used in the particular circumstances. In the CRA's view, the intrinsic value of an option, warrant or similar right is not reflective of the option's, warrant's or similar right's FMV.