Question

Which of the following statements with respect to stock options is correct?

		If the option price for shares is less than the grant date market value of the shares, granting the options will create a taxable benefit for the grantee.
		If shares in a Canadian controlled private corporation are acquired through the exercise of stock options, there will be a deduction equal to one-half of the employment income inclusion, provided the shares were held for at least two years.
		When options to acquire the shares of a Canadian public corporation are exercised, there are no immediate tax consequences for the acquirer.
		When shares in a Canadian controlled private corporation that have been acquired through the exercise of options are sold, any loss on the sale can be used to offset any income inclusion that results from the exercise of the options.

Answer 1

1) False - Stock option grated to an employee below current market price are taxable benefit to him only at the time of exercise of the option not at the time of grant of options.

2) True - However subject tocertains conditions i.e. shares acquired thorugh options are retained for two years. b) The exercise price is atleast equal to faire market value of the shares at the time of grant

3) False - Income from excercise of share options  held in Canandian public corporation are taxed as soon option is exercised, however there is no tax consequense at the time of grant.

4) False - Loss on sale of shares acquired thorugh stock options is treated as capital loss and can't be used to offset income.