20 August 1990 Ministerial Correspondence 900754 F - Employee Stock Purchase Plans

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.

Dear Sirs:

Re:  Employee Stock Purchase Plans

We are replying to your letter of March 29, 1990 addressed to source Deductions Division which has been referred to us for reply. We regret the delay in providing a response.

You enclosed a copy of a booklet describing the 24(1) 

Our response is based on the following assumptions concerning the employee share purchase plan:

24(1)

24(1)

We would first like to point out that share purchase arrangements for employees are generally subject to the provisions of section 7 of the Act to the extent that the shares are issued by or acquired from the employer corporation or a corporation with whom the employer does not deal at arm's length and that any benefit calculated thereunder is considered to be remuneration from employment.

24(1)

With respect to the third criteria, it is our view that the time at which the agreement is made is the effective date at which the corporation is committed to issuing the shares specified in the agreement.  If it is established that the options are granted to the employee at the beginning of the Purchase Period, a deduction under paragraph 110(1)(d) is only available to the employee if the actual purchase price paid is not less than the fair market value of the shares at the time the agreement was made and the transaction otherwise qualifies under paragraph 110(1)(d) of the Act.  This will only be the case where the stock has increased in value over the Purchase Period by at least the amount of the discount.

We caution that the foregoing represents our considered opinion only and is not binding on the Department.

We trust our comments will be of assistance to you.

Yours truly,

for DirectorBusiness and General DivisionRulings DirectorateLegislative and IntergovernmentalAffairs Branch

enclosure

c.c.     John Wilson,H.O. Source Deductions