Bobbi Marlene Bellamy v. Her Majesty the Queen, [1996] 3 CTC 2719 (Informal Procedure)

Beaubier J.T.C.C.: - This matter was heard at Calgary, Alberta, on August 9, 1996 pursuant to the Informal Procedure. The Appellant was the only witness.

Paragraphs 5, 6, 7 and 8 of the Reply to the Notice of Appeal read as follows:

5. In computing income for the 1993 Taxation Year, the Appellant reported a benefit of $8,000 in respect of a stock option benefit as recorded in box 38 of her 1993 T4 slip as prepared by her employer Tappit Resources Ltd. (“Tappit”). The benefit was calculated as follows:

Value of shares on June 30, 1993
being the acquisition date 20,000 X $.55	$11,000
Cost to Appellant 20,000 X $.15	_3,000
Benefit	$ 8,000

6. In assessing the Appellant for the 1993 Taxation Year, the Minister of National Revenue (the “Minister”) included the benefit as reported by the Appellant.

7. Upon receiving the notice of assessment in respect of the 1993 Taxation Year the Appellant filed a Notice of Objection stating that the stock option

benefit was calculated in error by Tappit and should be calculated as follows:

Value of shares on October 15, 1993
being the acquisition date 20,000 X $.31	$6,200
Cost to Appellant 20,000 X $.15	3.000
Benefit	$3,200

8. In so assessing the Appellant, the Minister made the following assumptions of fact:

(a) the facts admitted supra;

(b) at all relevant times the Appellant was an employee of Tappit;

(c) the Appellant participated in a stock option purchase plan offered by Tappit;

(d) at all material times the Appellant and Tappit dealt with each other at arm’s length;

(e) on or about June 30, 1993 the Appellant exercised an option to purchase

20,000 shares of the capital stock of Tappit at a cost of $.15 per share;

(f) on or about June 30, 1993 shares of the capital stock of Tappit were trading publicly at $.55;

(g) the Appellant acquired the 20,000 shares of Tappit by virtue of her employment;

(h) the Appellant acquired title to the 20,000 shares on June 30, 1993;

(i) the benefit of $8,000 as calculated by Tappit is correct;

(j) the Appellant claimed a deduction pursuant to paragraph 110(l)(d) of the

Income Tax Act (the “Act”) based on the $8,000 benefit reported.

The Appellant testified, and the Court believes, that Tappit offered her the shares on June 30, 1993 and that she received the shares within about one week thereafter. However she did not have the money to pay for the shares. She signed the cheque dated June 30, 1993 and told the officer of Tappit with whom she was dealing that she could not afford to honour the cheque at that time. On this basis she retained the cheque in her desk in Tappit’s offices until October 15, 1993 when she honoured the cheque. Nonetheless, she had Tappit’s certificate for the shares in the interim.

She further testified, and the Court believes, that there was an agreement between the parties that she would not sell the shares until she had paid for them. On the evidence before the Court, the shares were valued in excess of the amount she paid for them at all material times. Therefore she could have simultaneously sold the shares and honoured the cheque since the shares were listed on the Alberta Stock Exchange.

The Court does not know which corporations act Tappit was incorporated under. Nor does the Court know if Tappit could issue shares without receiving payment in full. Even if it could not, there is no evidence that the Appellant’s agreement not to sell the shares until she paid for them was given for any consideration. Therefore the Appellant became the beneficial and legal owner of the shares of Tappit; she acquired them on or about June 30, 1993.

The Court finds that the assumptions contained in paragraph 8 of the Reply are correct in their entirety. The Appellant by accepting the offer to issue the shares exercised her option to purchase 20,000 shares of the capital stock of Tappit at a cost of $.15 per share on or about June 30, 1993. The shares were then trading publicly at $.55 and the Appellant acquired the 20,000 shares of Tappit on June 30, 1993 by virtue of her employment.

The appeal is dismissed.

Appeal dismissed.