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Citation: 2005TCC118
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Date: 20050228
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Docket: 2003-4409(IT)I
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BETWEEN:
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JANE CALINISAN,
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Appellant,
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And
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR JUDGMENT
Little J.
A. STATEMENT OF
FACTS:
[1] The Appellant was employed by
Ballard Batteries Ltd. in 1990. In 1992 the Appellant was
employed by the parent company, Ballard Power Systems Inc.
("Ballard").
[2] Commencing in 1993 the Appellant
was granted options to purchase shares of Ballard at various
prices per share.
[3] Exhibit A-2 is a letter dated July
18, 1994 from Firoz Rasul, the President of Ballard. The letter
states that the Appellant had been granted an option to purchase
900 common shares of Ballard at a price of $7.09 per share.
[4] In February 2001 the Appellant
exercised part of the option and purchased 400 shares of Ballard
at a price of $7.417 per share. At the time that the Appellant
exercised the option the shares of Ballard were trading at $97.75
per share.
[5] Exhibit A-5 indicates that the
Appellant received a taxable benefit in the amount of $36,133.20
when she exercised the option to acquire 400 shares of
Ballard.
[6] When the Appellant filed her
income tax return for the 2001 taxation year she reported the
salary income that she had received from Ballard. However the
Appellant did not report any taxable benefit arising from the
exercise of employee stock options in that year.
[7] The Minister of National Revenue
(the "Minister") issued a Notice of Reassessment (the
"Reassessment") on December 2, 2002. In the
Reassessment the Minister included an employee stock option
benefit in the amount of $36,133.20 and permitted the Appellant
to deduct one-half of the amount of the taxable benefit in
determining taxable income.
B. ISSUE:
[8] Is the Appellant required to
include an employee stock option benefit in the amount of
$36,133.20 in calculating her income as a result of exercising
the option to acquire 400 shares of Ballard?
C. ANALYSIS:
[9] Subsections 7(8), 7(9) and 7(10)
of the Income Tax Act (the "Act") read as
follows:
7(8) Where a particular
qualifying person (other than a Canadian-controlled private
corporation) has agreed to sell or issue securities of the
particular qualifying person (or of a qualifying person with
which it does not deal at arm's length) to a taxpayer who is
an employee of the particular qualifying person (or of a
qualifying person with which the particular qualifying person
does not deal at arm's length), in applying
paragraph (1)(a) in respect of the taxpayer's
acquisition of a security under the agreement, the reference in
that paragraph to "the taxation year in which the employee
acquired the securities" shall be read as a reference to "the
taxation year in which the employee disposed of or exchanged the
securities" if
(a) the acquisition is a qualifying acquisition;
and
(b) the taxpayer elects, in accordance with
subsection (10), to have this subsection apply in respect of the
acquisition.
7(9) For the purpose of
subsection (8), a taxpayer's acquisition of a security under
an agreement made by a particular qualifying person is a
qualifying acquisition if
(a) the acquisition occurs after February 27,
2000;
(b) the taxpayer would, if this Act were read
without reference to subsection (8), be entitled to deduct an
amount under paragraph 110(1)(d) in respect of the
acquisition in computing income for the taxation year in which
the security is acquired;
(c) if the particular qualifying person is a
corporation, the taxpayer was not, at the time immediately after
the agreement was made, a special shareholder of any of the
following
(i) the particular qualifying person,
(ii) any qualifying person that, at that time, was
an employer of the taxpayer and was not dealing at arm's
length with the particular qualifying person, and
(iii) the qualifying person of which the taxpayer had,
under the agreement, a right to acquire a security; and
(d) if the security is a share,
(i) it is of a class of shares that, at the
time the acquisition occurs, is listed on a prescribed stock
exchange, and
(ii) where rights under the agreement were
acquired by the taxpayer as a result of one or more dispositions
to which subsection (1.4) applied, none of the rights that were
the subject of any of the dispositions included a right to
acquire a share of a class of shares that, at the time the rights
were disposed of, was not listed on any prescribed stock
exchange.
7(10) For the purpose of subsection (8), a
taxpayer's election to have that subsection apply in respect
of the taxpayer's acquisition of a particular security under
an agreement referred to in subsection (1) is in accordance with
this subsection if
(a) the election is filed, in the prescribed form
and manner at a particular time that is before January 16 of the
year following the year in which the acquisition occurs, with a
person who would be required to file an information return in
respect of the acquisition if subsection (8) were read without
reference to paragraph (8)(b);
(b) the taxpayer is resident in Canada at the
time the acquisition occurs; and
(c) the specified value of the particular
security does not exceed the amount by which
(i)
$100,000
exceeds
(ii) the total of all amounts each of which is the
specified value of another security acquired by the taxpayer at
or before the particular time under an agreement referred to in
subsection (1), where
(A) the taxpayer's right to acquire that other security
first became exercisable in the year that the taxpayer's
right to acquire the particular security first became
exercisable, and
(B) at or before the particular time, the taxpayer has elected
in accordance with this subsection to have subsection (8) apply
in respect of the acquisition of that other security.
[10] In this situation the Appellant is not
entitled to defer inclusion of the employee stock options in
respect of the 400 shares of Ballard to a future year because she
did not file an election with Ballard by January 16, 2002 as
required by subsections 7(8), 7(9) and 7(10) of the
Act.
[11] I have therefore concluded that the
Appellant is deemed by subsection 7(1) of the Act to have
received an employee stock option benefit in the amount of
$36,133.20 in the 2001 taxation year when she exercised the
option granted by Ballard to acquire 400 shares of Ballard.
[12] The appeal is dismissed without
costs.
Signed at Vancouver, British Columbia, this 28th day of
February 2005.
Little J.
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