New Liberal Government Platform Proposes Adverse Changes To Stock Option Deduction

The newly elected Liberal government has indicated in its electoral platform that it intends to make certain tax-related changes, including changes to the tax treatment of stock options.

What You Need To Know

• Current tax treatment of stock options. Paragraph 110(1)(d) of the Income Tax Act (Canada) provides employees with the ability to claim a deduction equal to one half of the employment benefit that would otherwise be required to be included in computing income on the exercise of certain qualifying stock options. These are options the exercise price of which is not less than the fair market value of the underlying shares at the date of grant of the options and that meet certain other conditions. The result of this particular rule is that qualifying stock options are effectively taxed at capital gains rates on exercise. In addition to the rule in paragraph 110(1)(d), which is the rule relied on in the case of stock options granted by public companies, other