12 January 1999 External T.I. E9822435 - EXISTING STOCK OPTION, 7(1)

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.

Principal Issues: Will this specific stock bonus plan be covered under section 7 of the Act?

Position: Question of fact.

Reasons: Completed transaction so no comments can be provided other than through the relevant TSO.

XXXXXXXXXX 982243
M. P. Sarazin
Attention: XXXXXXXXXX

January 12, 1999

Dear Sirs:

Re: Share Based Employee Bonus Plan

This is in reply to your letter dated August 28, 1998, wherein you requested confirmation that a specific share based employee bonus plan is covered by section 7 of the Income Tax Act (the “Act”).

Comments

In your letter you have outlined what appears to be an actual fact situation related to a past transaction. In addition, you have provided us with only a brief description of several features of the plan. We must advise you that the review of such transactions falls within the responsibility of Tax Services Offices and it is the practice of this Directorate not to comment on such transactions when the identities of the taxpayers are not known. This Directorate can provide an advance tax ruling on a specific proposed transaction where all of the facts and proposed transactions are fully described to us and the requirements outlined in Information Circular 70-6R3, Advance Income Tax Rulings are met. Otherwise, we can only provide you with general comments which are not binding on the Department and which may or may not be relevant to your specific fact situation.

Whether or not a plan is a stock option plan governed by section 7 of the Act is a question of fact. A plan that may otherwise be an employee profit sharing plan governed by section 144 of the Act will be treated as a stock option plan governed by section 7 of the Act where the provisions of section 7 are met.

On a second matter, the comments in paragraph 9 of IT-113R4, Benefits to Employees - Stock Options continue to represent the Department’s interpretation on the value of shares received under a stock option agreement that has imposed trading restrictions on the shares.

We trust our comments will be of assistance to you and also clarify the Directorate’s policies in dealing with specific factual situations.

Yours truly,

Paul Lynch
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch