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During January, 2017, Lastech Inc. issued options to their employee, Ms. Marianne Black. The options allowed...

During January, 2017, Lastech Inc. issued options to their employee, Ms. Marianne Black. The options allowed Ms. Black to acquire 1,500 of the Company’s common shares at an option price of $23 per share.

At the point in time when the options were exercised, the fair market value of the shares was $25 per share.

All of the shares that are acquired through the options are sold on December 31, 2019 at a price of $28 per share.

Required: Indicate the tax effect on Ms. Black of the transactions that took place during 2017, 2018, and 2019 under each of the following independent Cases. Your answer should include the effect on both Net Income For Tax Purposes and Taxable Income. Where relevant, identify these effects separately.

Case A Lastech Inc. is a Canadian public company. At the time the options were granted, the shares were trading at $22 per share. The options were exercised on July 1, 2018.

Case B Lastech Inc. is a Canadian controlled private corporation. At the time the options were granted, the Company’s shares had a fair market value of $24 per share. The options were exercised on July 1, 2017.

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