In The Estate of the Edward S. Rogers v. The Queen, 2014 TCC 348, the Tax Court of Canada (TCC) held that the surrender of stock options in 2007 to anon-arm’s length corporate employer, in exchange for a cash payment, gave rise to capital gain under s. 39 and not employment income under s. 7.  The payment was not taxable under s. 7 because s. 7(1)(b.1) had not yet been enacted, which provision would have clearly treated the surrender payment as employment income under s. 7.  The Crown’s alternative arguments that the surrender payment should be taxed as (i) employment income under s. 5 or s. 6, (ii) a shareholder benefit under s. 15, or (iii) an adventure in the nature of trade under s. 9, were soundly rejected.  The TCC instead held that the rights under the stock option agreement – including the right to surrender the stock option for cash and referred to as a “stock appreciation right” or “SAR” – constituted property, which property was disposed of on the surrender generating a capital gain under s. 39.