The questions below are based on the following information:
Scott Bicycle Manufacturing Ltd. (SBM)is a Canadian controlled private corporation. Brian Mills, one of SBM's employees, was granted stock options on January 15, 2017 for 10,000 shares at $3 per share. The fair market value on January 15, 2017 was $4 per share.
Brian exercised the stock options on September 30, 2017, when the fair market value was $6 per share. In June, 2020, Brian purchased a new home and sold the shares for $7 each.
-What is the adjusted cost base to Brian of the SBM shares at the time of sale in June, 2020?

Question

Quizplus · Accepted Answer

The adjusted cost base (ACB) of the shares is calculated as follows: 
- Cost of acquiring the shares: 10,000 shares x $3 per share = $30,000 
- Income inclusion from the stock option exercise: (fair market value at exercise - option price) x number of shares = ($6 - $3) x 10,000 = $30,000 
Total ACB = $60,000
Since Brian sold the shares for $7 each, his total proceeds are $70,000. The capital gain is therefore $70,000 - $60,000 = $10,000.

The Questions Below Are Based on the Following Information