$(16$ Minutes$)$

Terry Fox is the general manager of a professional football team, the Calgary Stampeders Team Ltd$.($a

Canadian public corporation$).$ Assume that today's date is November $15,2022.$ Terry has obtained

approval from the owner of the football club to offer a contract to a $27-$year$-$old free agent player

who is available to the highest bidder. In addition to an offer of a $$200,000$ signing bonus and a

$$850,000$ annual salary, Terry is authorized to offer the following two items as additional

compensation:

A$.$ an interest$-$free employee loan of $$200,000$ that will eventually be forgiven by the football club;

and

B$.$ a stock option to buy $50,000$ common shares of Calgary Stampeders Team Ltd$.$ Assume that on

the grant date, the fair market value of the common shares is $$20$ per share, and that the exercise

price will be $$20$ per

Terry has asked for your advice on the following:

A$.$ Assuming the player will exercise all shares when the FMV is $$35\mathrm{.}00$ per share and then sell the

shares immediately on the open market, outline the income tax consequences with respect to

the stock option and explain how this will affect the player's net income for tax $3$ marks

B$.$ From the player's perspective, what, if any, are the consequences of the signing bonus and the

proposed employee loan that will be forgiven in the final contract year? $3$ marks

C$.$ Assuming instead that the loan will not be forgiven, calculate the deemed interest benefit of the

loan for the $2022$ and $2023$ taxation Assume the prescribed rate of interest on the loan is $6\%.$

Ignore the effects of any leap year. $2$ marks