CRA finds that the broker sale rule in s. 110(2.1) requires an immediate payment of the sales proceeds of the stock option shares directly to the charity

S. 110(1)(d.01) provides a deduction (over and above that under s. 110(1)(d)) where the taxpayer makes an immediate donation of a listed share that was acquired under a stock option exercise to a qualified done. This rule is expanded by s. 110(2.1), which also permits the taxpayer to direct a broker approved by the employer to immediately dispose of the shares and pay the proceeds to a qualified donee.

CRA indicated that this expanded rule does not apply if the broker pays the proceeds of disposition directly to the taxpayer (rather than the charity), who then donates the proceeds to the charity. CRA also indicated that the “immediately” requirement in s. 110(2.1) requires not only an immediate sale by the broker, but also an immediate donation of the sales proceeds to the charity in question.

Neal Armstrong. Summaries of 6 December 2016 External T.I. 2015-0605971E5 under s. 110(2.1) and s. 7(1.31).