If a security option (a share of a corporation's capital stock or a mutual fund trust unit) is granted to one of your employees or to an employee of a qualifying person (a corporation or a mutual fund trust) with which you are not dealing at arm's length, and the option is granted under an agreement that allows the employee to acquire such a security from their employer or the qualifying person, there is no taxable benefit for the employee at the time the option is granted.
The employee is generally deemed to receive a taxable benefit in the year in which they acquire the security or transfer a right under the agreement, unless the security is a share of a Canadian-controlled private corporation (CCPC).
The employer who grants the benefit has to file an RL-1 slip (see courtesy translation RL-1-T) for the employee.
This section does not cover the tax treatment of:
- exchanges, sales and transfers of security options;
- the sale or exchange of CCPC shares that an employee acquired before May 23, 1985, under an agreement reached after April 23, 1985;
- the sale or exchange of shares (acquired further to the exercise of a stock option) in the course of a reorganization or recapitalization of the corporation; or
- the replacement of a stock option plan.
For information regarding these special cases, contact us.