2013-0484181E5 7(1)(e) benefit and 110(1.1) election

Principal Issues: Whether an election under subsection 110(1.1) may be made by an employer in a situation where paragraph 7(1)(e) applies after March 4, 2010.

Position: Yes.

Reasons: The CRA accepts such elections on an administrative basis.

Author: Beaulieu, Mélanie
Section: 7(1)(e), 18(1)(m), 110(1)(d), 110(1.1), 164(6.1)

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                                                                                                                                                                 2013-048418
                                                                                                                                                                 Mélanie Beaulieu

May 4, 2015

Dear XXXXXXXXXX,

Re : Subsection 110(1.1) election in circumstances where paragraph 7(1)(e) applies

We are writing in response to your letter of April 4, 2013 wherein you requested our comments on whether an employer could make the election under subsection 110(1.1) of the Income Tax Act (“Act”) in a situation where paragraph 7(1)(e) of the Act deems a deceased employee to have received an employment benefit in the year of death.

We understand that your enquiry is further to our documents 2011-0423441E5 and 2009-0327221I7. More specifically, we indicated that, as a result of the amendment to subparagraph 110(1)(d)(i) of the Act that requires a taxpayer to acquire shares under the stock option agreement, a deduction pursuant to paragraph 110(1)(d) of the Act may not be available in circumstances where paragraph 7(1)(e) of the Act applies after March 4, 2010.

Our Comments

The Canada Revenue Agency accepts, on an administrative basis, that an election be made pursuant to subsection 110(1.1) of the Act in order to allow a deduction pursuant to paragraph 110(1)(d) of the Act in circumstances where paragraph 7(1)(e) of the Act applies and the other conditions of paragraph 110(1)(d) of the Act are met (such that a deduction could have been claimed under paragraph 110(1)(d) of the Act as it read prior to the 2010 amendment referred to above). 

We trust these comments will be of assistance.

Yours truly,

Louise J. Roy, CPA, CGA
for Director
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory
  Affairs Branch

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