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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
941562
XXXXXXXXXX G. Middleton
Attention: XXXXXXXXXX
March 13, 1995
Dear Sirs:
Re: Stock Options exercised by Non-Residents
This is in reply to your letter of June 9, 1994 and further to your letter of October 7, 1994 wherein you requested our views on the treatment of stock options in the following hypothetical situation.
An individual commenced employment and established residency in Canada during the 1993 calendar year. His employment necessitates frequent overseas travel on business. His remuneration package includes stock options granted upon commencement of employment in Canada.
The individual may cease to be resident in Canada and leave on or before December 31, 1994. Alternatively, he may cease to reside in Canada before 1995 but continue his employment as a non-resident.
The facts in your situation appear to involve a particular taxpayer, an existing situation and proposed transactions. Assurance concerning the tax consequences of contemplated transactions can only be given in the context of an advance income tax ruling as indicated in Information Circular 70-6R2. Although we cannot provide you with specific answers to your questions, we are prepared to offer you the following general comments.
Where an individual such as described above exercises his stock option at a time when he is a non-resident of Canada, it is our view that a stock option benefit, or portion thereof, which is determined under section 7 of the Income Tax Act (the "Act") and which is in respect of income from the duties of offices and employment performed by him in Canada, would be included in the individual's income in accordance with subsection 2(3) and subparagraph 115(1)(a)(i) of the Act. In our opinion, the provisions of paragraph 115(2)(c) and subparagraph 115(1)(a)(v) are not applicable since such a stock option benefit clearly falls under the words of subparagraph 115(1)(a)(i) of the Act. These views are also in line with the decisions in the Hurd case (81 DTC 5140) and the Hale case (90 DTC 6481).
With respect to the determination of the amount of the stock option benefit that is in respect of income from the duties of offices and employment performed by him in Canada and thus, subject to tax in Canada in accordance with subsection 2(3) and subparagraph 115(1)(a)(i) of the Act, such a determination can only be made after reviewing all of the facts and circumstances in a particular situation, including the terms and conditions of a stock option agreement and employment contract.
One further point that we would like to remind you of is that it is always a question of fact whether or not an individual ceases to be a resident of Canada.
We trust our comments will be of assistance to you.
Yours truly,
for Director
Reorganizations and Non-resident Division
Rulings Directorate
Policy and Legislation Branch
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