D QUESTION 1: (PART A) Mr. John Savage has been employed for many years by a CCPC. Several years ago, Mr. Savage was granted options to acquire 4,000 shares of his employer for $54 per share. At that time, the FMV of the shares was $50 per share. On July 15, 2020, Mr. Savage exercises all of these options. At this time, the FMV of the shares is $82 per share. In February, 2021, he sells all of the shares for $97 per share. Calculate the effect of the transactions that took place during 2020 and 2021 on Mr. Savage's employment income, net income and taxable income. Where relevant, identify these effects separately. Answer: 10 When the shares are sold in 2021, the total increase in net income and taxable income is calculated as follows: CALCULATIONS 12 FMV at exercise 554 13 Cost of Shares 216,000 544000 14 Employment income $216.054 2 3 4 5 6 7 8 9 15 POD 16 ACB sos 0 $216,054 17 Capital Gain 18 Inclusion Rate 19 Increase in net income 20 Stock option deduction 21 Increase in taxable income $216,054