(March 5 – 18:15 ET) – Finance Minister Paul Martin has extended the deadline for electing to defer taxation of employee stock options exercised in 2000.

The new deadline will be extended from February 15, 2001, to 60 days after the day on which the new legislation receives Royal assent.

The Dept. of Finance says that the extension will benefit employees who wish to defer the tax on stock option benefits under the measure announced in the 2000 budget, but who missed the deadline for filing the appropriate paperwork.

Employees are required to file an election to defer taxation of the stock option benefit with either the employer, the corporation granting the option or the corporation whose shares have been acquired under the option.

The February 15 deadline was first announced as part of the package of draft amendments to the Income Tax Act that was released on December 21, 2000. However, Finance now says that, “a significant number of people were unaware of the deadline. Without this flexibility, a lot of people would face a significant and unexpected tax burden for the 2000 taxation year.”

The extended election deadline will mean that, in some instances, employers will have to issue revised T4 slips.

Martin also announced an extra condition that applies if the option being exercised was acquired by an employee as a result of one or more exchanges of options.

Specifically, the draft amendments require that the shares that could have been acquired under each of the previous options must also have been publicly listed. This condition was not part of the budget, but was introduced in the December draft amendments.

This extra condition will not apply to options exercised in 2000 if the shares underlying the options were publicly listed from the time the options were granted to the time they were exercised. This is to avoid penalizing individuals who acquired stock option shares last year with the expectation of being able to defer tax on the benefit before this extra condition was added.
-IE Staff