Canada’s top court rules stock options donated to charities are taxable income

OTTAWA— Canada’s top court on Thursday ruled that stock options donated to charities by an employee should be considered employment income under Quebec’s tax laws.

In a unanimous ruling, the Supreme Court agreed with a lower court’s decision that the Quebec Revenue Agency was correct in its assessment that some C$3 million ($2.3 million) in stock options donated by appellant Yves Des Groseillers should be included in his taxable employment income.

The ruling could have implications beyond Quebec as tax laws in other provinces are similarly framed. It could also help governments to stop any tax revenue leaks.

Des Groseillers argued that because he did not exercise those stock options, he did not receive any benefit and therefore the options should not be considered employment income for tax accounting. He did however use receipts from the charities to claim tax credits.

The Supreme Court dismissed his appeal saying the Quebec Revenue Agency “properly assessed Des Groseillers ... for the benefit received.”

Des Groseillers received stock options when he was the chief executive at BMTC Group that he donated to charities in 2010 and 2011.

The Quebec Revenue Agency, in an audit in 2014, determined that the stock options should have been included as part of Des Groseillers’s employment income and asked him to pay additional taxes.

Des Groseillers successfully challenged the agency’s decision at a Quebec court, before an appeals court overruled and restored the agency’s original determination.