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.
913266
R.B. Day
(613) 957-2136
24(1)
January 21, 1992
Dear 19(1):
Re: "Amount Payable" Subparagraph 110(1)(d)(iii) of the Income Tax Act ( the "Act")
We are writing in reply to your letter of November 20, 1991, wherein you requested clarification of the comments set out in our letter of November 20, 1991.
Specifically, you have asked us to clarify whether subparagraph 110(1)(d)(iii) of the Act would apply in the situation where one of several possible exercise prices is less than the fair market value of the underlying shares at the time the option is granted but where the actual exercise price is not less than the fair market value of the underlying share at the time the option was granted. For example, assuming that the exercise price is computed pursuant to a formula, such that the exercise price for the share could be either $12, $10 or $8, and the fair market value of the share at the time the option was granted, is $10, would subparagraph 110(1)(d)(iii) of the Act apply?
Our Comments
In the example set out above, it is our opinion that where the actual exercise price for the share was either $12 or $10, subparagraph 110(1)(d)(iii) of the Act would apply. However, if the exercise price for the share was $8, subparagraph 110(1)(d)(iii) of the Act would not apply. In other words, the deduction under subparagraph 110(1)(d)(iii) of the Act will be available to a taxpayer where the actual exercise price of the share is equal to or greater than the fair market value of the share at the time the option is granted.
We trust that the above comments provide you with the required clarification.
Yours truly,
J. Szeszyckifor DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1992
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1992
Email this Content