I don't agree. If the shares dropped to nil, you would be able to claim an ABIL (allowable business investment loss) for 100% of the drop in share price.
For example:
1) Your share is worth 0.0001.
2) The company goes bankrupt/insolvent/no longer carries on business
3) You include $10-0.0001 * 50% in your income as employment income for the benefit you recieved from options. The tax base of the shares is now $10.
4) You claim a business investment loss of $10 per share. This can be deducted against all income. This in effect negatives 2x the tax you would have had to pay.
Please keep in mind this does not apply to public companies or large non-small business companies. Only to this example he has proposed. Again i suggest approaching a tax accountant.
For example: 1) Your share is worth 0.0001. 2) The company goes bankrupt/insolvent/no longer carries on business 3) You include $10-0.0001 * 50% in your income as employment income for the benefit you recieved from options. The tax base of the shares is now $10. 4) You claim a business investment loss of $10 per share. This can be deducted against all income. This in effect negatives 2x the tax you would have had to pay.
Please keep in mind this does not apply to public companies or large non-small business companies. Only to this example he has proposed. Again i suggest approaching a tax accountant.