Just to clarify, earnings are taxed as employment income but there is a "stock option deduction" equal to half of the value of the gain. I have several banker clients who exercise options all the time and they get employment income treatment and get a huge deduction for half the value further on in the tax return.

So, in the end, treated in the same tax method as capital gains but qualifies for RRSP room and such.

EOD.

Jimbo