Taxpayer received payment for surrender of options pursuant to share appreciation right (“SAR”). Taxpayer reported payment as capital gain. Minister re-assessed on basis payment either income from employment or employee benefit, shareholder benefit, or income from venture in nature of trade. Taxpayer appealed. Appeal allowed. Section 7 of Income Tax Act (Can.), meant to provide complete code for taxing of benefits arising under or because of stock option agreement. Section 7(3) meant to exclude benefits arising from non-arm’s length exercise and disposition of options. Surrender payment not properly characterized as “salary, wages and other remuneration”. SAR not separate property from options. Taxpayer did not treat options in same way as trader would. Nothing in record to suggest that taxpayer acquired options with intent of disposing of them or underlying shares for cash. Taxpayer held options until shortly before they expired. Payment not shareholder benefit. Taxpayer gave up something of equal value. Surrender payment reflected monetary value of options. Taxpayer correct in considering that he realized capital gain corresponding to amount of Surrender payment received as proceeds of disposition for his options.
Rogers Estate v. R. (Nov. 25, 2014, T.C.C. [General Procedure], Robert J. Hogan J., File No. 2012-1845(IT)G) 246 A.C.W.S. (3d) 724.