Section 49

Subsection 49(1) - Granting of options

See Also

CIR v. Scottish Provident Institution, [2004] UKHL 52

The Special Commissioners concluded that under an arrangement whereby the respondent ("SPI") granted an option to Citibank International PLC...

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Locations of other summaries Wordcount
Tax Topics - General Concepts - Ownership commercially realistic prospect of put and call not being exercised 161

Mitsui & Co. (Canada) Ltd. v. Royal Bank of Canada, [1995] 2 S.C.R. 187

Before finding that a clause in a lease giving the lessee the unilateral right to compel the lessor to sell helicopters to the lessee at their...

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Words and Phrases
option exercise
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 49 - Subsection 49(3) 143

Kopec v. Pyret, [1987] 3 WWR 449 (Sask. C.A.)

A right of first refusal contained in a lease was not an option. An option gives to the optionee at the time it is granted a right which he may...

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Canadian Long Island Petroleums Ltd. et al. v. Irving Industries Ltd., [1974] 6 WWR 385, [1975] 2 S.C.R. 715

A right of first refusal, unlike an option, is only a personal right rather than an interest in land, and therefore is not subject to the rule...

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Administrative Policy

13 September 2007 External T.I. 2007-0251081E5 F - Transactions d'options d'achat d'actions

In order to effectively convert an otherwise-expiring non-capital loss to a net capital loss, a CCPC (Aco) sells covered options (Options #1) on...

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22 January 2020 External T.I. 2014-0559281E5 F - T5008

Respecting the application of s. 49(1) to the writing and sale on an exchange of a naked call option and the reporting of the “cost” of the...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 40 - Subsection 40(1) - Paragraph 40(1)(a) - Subparagraph 40(1)(a)(i) option writer can deduct its expenses from deemed s. 49(1) proceeds 125
Tax Topics - Income Tax Regulations - Regulation 230 - Subsection 230(2) “cost” of call options closed out by writer is nil, not the cost of offsetting call option purchase/cost re short sale is the FMV of the borrowed shares 351
Tax Topics - Income Tax Act - Section 9 - Computation of Profit cost of short sale is FMV of borrowed shares 59

18 July 2011 External T.I. 2010-0370561E5 F - Location avec option d'achat

Where there is a real estate lease with a purchase option, is the landlord deemed to have disposed of the option when granting it, and is a...

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Locations of other summaries Wordcount
Tax Topics - General Concepts - Substance lease is a lease in the absence of sham 92
Tax Topics - Income Tax Act - Section 68 where lease is coupled with bargain purchase option, a portion of the rents must be allocated to option proceeds 147

Income Tax Technical News No. 44 13 April 2011 [archived]

CRA stated:

[W]hen a holder of an exchangeable debenture exercises the right to exchange the debenture for the target shares, the holder would...

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21 December 2006 External T.I. 2006-0170851E5 F - Option d'achat de biens immeubles

Where the owner of a farm granted an option for consideration to sell his farm in 2005 and received a further sum in 2006 to extend the option,...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 49 - Subsection 49(4) refiling when option exercise in subsequent year 83
Tax Topics - Income Tax Act - Section 13 - Subsection 13(1) recapture of depreciation previously claimed for farm was farming income 21

4 April 2005 External T.I. 2004-0099411E5 F - Transfert de contrat de crédit-bail

CRA noted its position that where a lease had a bargain purchase option, a portion of each lease payment was to be treated as allocable to...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 68 purchase price for lease with bargain purchase option likely to be allocated to the embedded option 178

2004 APFF Roundtable Q. 13, 2004-008699

Discussion of CRA position that where a lease contains a bargain purchase option, a portion of each rent payment may be considered to be a payment...

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92 C.R. - Q.51

Warrants issued in connection with a "poison pill" arrangement are a form of option and, therefore, are subject to the usual option rules.

IT-96R5 "Options Granted by Corporations to Acquire Shares, Bonds or Debentures"

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 49 - Subsection 49(3) 0

Articles

Jack Bernstein, "Canadian Tax Treatment of Index Participation Units and Exchange Traded Index Derivates", 35 Tax Notes International, 20 September 2004, p. 1107.

Watkins, "Equity Exchangeable Debentures and Appreciation Rights", 1993 Conference Report, C. 20; and Kingissepp, "Summaries of Corporate Finance Panel Discussion", 1993 Conference Report, C. 21

Discussion of whether s. 49 applied to an offering of "appreciation rights" by Canadian Pacific.

Paragraph 49(1)(a)

Administrative Policy

17 April 2007 External T.I. 2007-0230381E5 F - Option d'achat de biens immeubles

CRA indicated that where an option was granted on a farm consisting of a principal residence and the farmland:

[T]he portion of the consideration...

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Subsection 49(2) - Expired option — shares

See Also

Garner v. Pounds Shipowners and Shipbreakers Ltd., [1997] BTC 223 (Ch. D.)

The taxpayer received £399,750 for granting an option to buy land at a sale price of over £4M, but subject to a condition that the taxpayer was...

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Subsection 49(3) - Where option to acquire exercised

Cases

Salt v. The Queen, 84 DTC 6395, [1984] CTC 414 (FCTD)

It was argued by a taxpayer who had granted an option to purchase his land that the Act included no provision permitting the taxation of payments...

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See Also

Mitsui & Co. (Canada) Ltd. v. Royal Bank of Canada, [1995] 2 S.C.R. 187

Major J. noted, with respect to a clause in a lease that gave the lessee the unilateral right to compel the lessor to sell helicopters to the...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 49 - Subsection 49(1) 106

Administrative Policy

17 February 2021 External T.I. 2018-0768051E5 F - Contrat de crédit-bail

Regarding a lease to “Aco” of a truck tractor (the “Vehicle”) with a term of 48 months and a bargain purchase option at maturity, CRA...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) - Subparagraph 20(1)(c)(ii) leasing contract cannot be recharacterized as a secured loan funding an acquisition of depreciable property 246
Tax Topics - Income Tax Act - Section 68 lease payments for vehicle lease with bargain purchase option are allocated between ACB of option and deductible lease payments 301
Tax Topics - Income Tax Act - Section 13 - Subsection 13(5.2) acquisition of leased vehicle pursuant to bargain purchase option followed by sale of vehicle could engage s. 13(5.2) 131
Tax Topics - Income Tax Act - Section 16.1 - Subsection 16.1(1) truck tractor is prescribed property 26
Tax Topics - General Concepts - Substance lease payments, but not the lease itself, could be recharacterized 93

25 April 2005 Internal T.I. 2004-0108301I7 F - Coût d'une automobile

The cost (for purposes of C of the standby charge formula under s. 6(2)) of an automobile acquired by the employer at the end of its lease...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(2) - Element C cost of automobile acquired pursuant to exercise of bargain purchase option increased under s. 49(3) by portion of each preceding lease payment treated as an option premium 154

2003 Ruling 2003-0028033 - LEASE-BARGAIN PURCHASE OPTION

A lease is amended to add an option to purchase and to increase the annual lease payment by an amount that would be in excess of the fair market...

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28 November 2001 Internal T.I. 2001-0091247 - Employer Stock Opt. & Section 116116(5)

S.49(3) did not apply to deem the exercise of employee stock options held by a non-resident former employee to not be a disposition of the...

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6 September 1994 External T.I. 9419865 - ARE SPECIAL WARRANTS FLOW-THROUGH SHARES?

Special warrants to acquire shares that if not exercised prior to the specified expiry time are deemed to be exercised at that time without any...

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IT-96R5 "Options Granted by Corporations to Acquire Shares, Bonds or Debentures"

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 49 - Subsection 49(1) 0

Articles

Will House, Janes Painter, "Granting an Option to Acquire an Interest in a Partnership", Canadian Tax Focus, Vol. 12, No. 3, August 2022, p. 8

Consequences of grant of option to acquire partnership interest (p. 8)

  • A and B formed Partnership, each contributing $100. Partnership then...

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Subsection 49(4)

Administrative Policy

21 December 2006 External T.I. 2006-0170851E5 F - Option d'achat de biens immeubles

Regarding where the owner of a farm (the correspondent’s father) granted an option for consideration to sell his farm in 2005 (resulting in the...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 49 - Subsection 49(1) capital gain when amount received for extending an option 52
Tax Topics - Income Tax Act - Section 13 - Subsection 13(1) recapture of depreciation previously claimed for farm was farming income 21

Subsection 49(5) - Idem [Reassessment where option exercised in subsequent year]