What is the adjusted cost base when I exercise employee stock options in Canada?

The CRA says that when you get an option to buy securities through your employer, it does not immediately affect your tax. If you exercise and buy the securities for less than their fair market value, the employment benefit is that value on the exercise day minus what you paid. You can reduce the benefit by any amount you paid for the option rights. Your adjusted cost base is not the price you paid. Add the actual purchase price and any amount included in your income as that benefit, even if you claimed a security option deduction. If a Canadian-controlled private corporation that you deal with at arm's length granted the option, you may be able to wait until the year you sell. A date when the option only becomes yours to exercise is not the day the benefit arises. This page does not work out your tax.

Continue on CRA · Guide T4037