Summaries under ss. 110(1)(d) and 69(1)(c).
Principal Issues: Where an employee held unexercised employee stock options at the time of the employee's death, what are the tax consequences to the deceased employee and the estate of the deceased employee? What are an employer's reporting obligations in this situation?
Position: The employee is deemed to have received a benefit in the year of death equal to the value of the stock options immediately after death less any amount paid by the employee to acquire the options. We generally accept to apply the provisions of paragraph 69(1)(c) of the Act such that the stock option is deemed to have been acquired by the estate at a cost equal to its fair market value. In general, where the estate exercises an employee stock option, the adjusted cost base of the option will be added to the cost of the shares acquired. The employer is required to issue a T4 slip in the name of the deceased employee in the year of death.
Reasons: Paragraph 7(1)(e). The provisions of paragraphs 69(1)(c) and 49(3)(b). Subsection 200(1) and (2) of the Income Tax Regulations.