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.
XXXXXXXXXX
Attention: XXXXXXXXXX
Dear Sirs:
RE: Foreign Property and Options
This is in reply to your letter of May 28, 1993, in which you ask whether a liability under an option could enter into the calculation of the "cost amount" of a foreign property under section 206 of the Income Tax Act (the "Act").
The writing of a call or put option is not subject to the rules governing foreign property as it does not involve the acquisition of a property or right by a taxpayer.
Where the taxpayer is writing a "covered call option", it would be necessary to determine if the underlying security which it holds is a foreign property within the meaning of section 206 of the Act. However, this determination has no bearing on the option itself which, as you point out, is a liability and does not constitute a property within the meaning of section 206 of the Act.
Although the foregoing comments are an expression of opinion only and, therefore, not binding on the Department, we trust they are helpful.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate
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