Comments on: Tax Treatment of ESPP Benefits http://www.canadiancapitalist.com/tax-treatment-of-espp-benefits/ Helping you invest and prosper Sun, 12 Feb 2012 00:54:40 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: zad886 http://www.canadiancapitalist.com/tax-treatment-of-espp-benefits/#comment-222683 zad886 Mon, 31 May 2010 06:22:26 +0000 http://www.canadiancapitalist.com/2007/09/26/tax-treatment-of-espp-benefits#comment-222683 Thanks Ken...much appreciated!!! Thanks Ken…much appreciated!!!

]]> By: Ken Thompson http://www.canadiancapitalist.com/tax-treatment-of-espp-benefits/#comment-222528 Ken Thompson Sun, 30 May 2010 17:34:12 +0000 http://www.canadiancapitalist.com/2007/09/26/tax-treatment-of-espp-benefits#comment-222528 To zad886 There are two U.S. groups that co-operated with each other and lobbied the U.S.governemnt ro amend their defective "Alternative Minimum Tax" (AMT) legislation to stop taxing U.S. citizens on phantom income plus providing fair compensation retroactively to those that had already paid such taxes/penalties. Try contacting WWW.reformamt.org and www.fair-iso.org. One of them should be able to answer your question. So far Canadians are not getting the same, or similar, tax treatment of taxes levied on their phantom income. To zad886
There are two U.S. groups that co-operated with each other and lobbied the U.S.governemnt ro amend their defective “Alternative Minimum Tax” (AMT) legislation to stop taxing U.S. citizens on phantom income plus providing fair compensation retroactively to those that had already paid such taxes/penalties.

Try contacting http://WWW.reformamt.org and http://www.fair-iso.org. One of them should be able to answer your question.

So far Canadians are not getting the same, or similar, tax treatment of taxes levied on their phantom income.

]]> By: zad886 http://www.canadiancapitalist.com/tax-treatment-of-espp-benefits/#comment-222398 zad886 Sun, 30 May 2010 00:44:19 +0000 http://www.canadiancapitalist.com/2007/09/26/tax-treatment-of-espp-benefits#comment-222398 I, too, like Leo and JC Newgrad, participate in an ESPP in US stock for a Canadian company that is a wholly owned subsidiary of the US company. As a Canadian resident & US Citizen, I understand that I have to file a US tax return. My question is, how do I treat the employee benefit that was added in my T4 in my US return? I haven't sold any of my stocks and when I do, will I get double taxed on the same employee benefit on the US tax return? Since the benefit was included in my gross income, I did not subtract the benefit amount from my income when I claimed the exclusion for foreign income. Did I do the wrong thing in this year's US return? I, too, like Leo and JC Newgrad, participate in an ESPP in US stock for a Canadian company that is a wholly owned subsidiary of the US company. As a Canadian resident & US Citizen, I understand that I have to file a US tax return. My question is, how do I treat the employee benefit that was added in my T4 in my US return? I haven’t sold any of my stocks and when I do, will I get double taxed on the same employee benefit on the US tax return?
Since the benefit was included in my gross income, I did not subtract the benefit amount from my income when I claimed the exclusion for foreign income. Did I do the wrong thing in this year’s US return?

]]> By: Ken Thompson http://www.canadiancapitalist.com/tax-treatment-of-espp-benefits/#comment-217478 Ken Thompson Mon, 26 Apr 2010 15:53:01 +0000 http://www.canadiancapitalist.com/2007/09/26/tax-treatment-of-espp-benefits#comment-217478 Stocknewb. Prior to the introduction of the 2010 Federal Budget (Mar 4 2010) when you took possession of ESPP stock (exercise date) and the Fair Market Value (FMV) of the shares, on that date, exceeds the Adjusted Cost Base (ACB) of those shares you were deemed to have received a taxable benefit equal to the exercise date equity FMV minus the ACB. regardless of whether, or not you actually sold them later at a loss. When the Hi-Tech Stock market BOOM went BUST in July 2000 thousands of honest, hard-working Canadian taxpayers were caught in this obscure tax trap and were levied taxes on paper profits that never actually materialized, i.e. phantom income.. This problem is addressed in the 2010 federal budget and changes are in the works but just exactly how the budget will treat the various types of victims of tax on phantom income wont be known until the budget is passed and becomes law. The Canadian Federal Budget is outlined in the following document: http://www.budget.gc.ca/2010/pdf/budget-planbudgetaire-eng.pdf On my computer this document displays two types of page references, i.e. (1) Each page of the document has a number (in blue) that can be seen at the bottom of the page AND the On-Screen (bottom of screen) displays a pdf page number that runs from 1 to 424. To give you the best directions I will quote both numbers. The reference to Tax regulations on ESO's (ESPP's?) begins on document page No. 353 and continues through document page No. 358. (blue numbers) The PDF page display at the bottom of my computer screen indicates pages 328 of 424 through page 333 of 424. for those same pages. Just how those proposed new tax regulations will look after the budget has gone through the Review and Approval process is anyones guess. Your best strategy would be to wait until the budget has been passed into law and the tax regulations are out in the 2010, T1 General tax guide. Stocknewb.

Prior to the introduction of the 2010 Federal Budget (Mar 4 2010) when you took possession of ESPP stock (exercise date) and the Fair Market Value (FMV) of the shares, on that date, exceeds the Adjusted Cost Base (ACB) of those shares you were deemed to have received a taxable benefit equal to the exercise date equity FMV minus the ACB. regardless of whether, or not you actually sold them later at a loss.

When the Hi-Tech Stock market BOOM went BUST in July 2000 thousands of honest, hard-working Canadian taxpayers were caught in this obscure tax trap and were levied taxes on paper profits that never actually materialized, i.e. phantom income..

This problem is addressed in the 2010 federal budget and changes are in the works but just exactly how the budget will treat the various types of victims of tax on phantom income wont be known until the budget is passed and becomes law.

The Canadian Federal Budget is outlined in the following document: http://www.budget.gc.ca/2010/pdf/budget-planbudgetaire-eng.pdf

On my computer this document displays two types of page references, i.e. (1) Each page of the document has a number (in blue) that can be seen at the bottom of the page AND the On-Screen (bottom of screen) displays a pdf page number that runs from 1 to 424.

To give you the best directions I will quote both numbers.

The reference to Tax regulations on ESO’s (ESPP’s?) begins on document page No. 353 and continues through document page No. 358. (blue numbers)
The PDF page display at the bottom of my computer screen indicates pages 328 of 424 through page 333 of 424. for those same pages.

Just how those proposed new tax regulations will look after the budget has gone through the Review and Approval process is anyones guess.

Your best strategy would be to wait until the budget has been passed into law and the tax regulations are out in the 2010, T1 General tax guide.

]]> By: StockNewb http://www.canadiancapitalist.com/tax-treatment-of-espp-benefits/#comment-217107 StockNewb Fri, 23 Apr 2010 04:15:41 +0000 http://www.canadiancapitalist.com/2007/09/26/tax-treatment-of-espp-benefits#comment-217107 If I receive ESPP at a discounted rate, but do not sell the stocks, hence making no profit, do I need to claim them on my Canadian taxes? Or do I only claim this income once I sell? If I receive ESPP at a discounted rate, but do not sell the stocks, hence making no profit, do I need to claim them on my Canadian taxes? Or do I only claim this income once I sell?

]]> By: JC NewGrad http://www.canadiancapitalist.com/tax-treatment-of-espp-benefits/#comment-189365 JC NewGrad Thu, 16 Apr 2009 19:51:34 +0000 http://www.canadiancapitalist.com/2007/09/26/tax-treatment-of-espp-benefits#comment-189365 Thanks KT and CC. For the record, if I do join the ESPP (which I haven't yet, and might not at all since the ESPP has some other unattractive features that I won't get into), I plan on selling the shares immediately. Thanks KT and CC.

For the record, if I do join the ESPP (which I haven’t yet, and might not at all since the ESPP has some other unattractive features that I won’t get into), I plan on selling the shares immediately.

]]> By: Canadian Capitalist http://www.canadiancapitalist.com/tax-treatment-of-espp-benefits/#comment-189359 Canadian Capitalist Thu, 16 Apr 2009 19:22:33 +0000 http://www.canadiancapitalist.com/2007/09/26/tax-treatment-of-espp-benefits#comment-189359 @JC: When you sell your ESPP shares you can keep the proceeds in USD or convert the USD into CAD. If you convert to CAD, of course, there will be a foreign exchange charge. If you are planning on contributing in-kind to your RRSP, you may want to consider opening a RRSP account with the broker your ESPP shares are deposited. Otherwise, you have two options and both will cost you money. You could do a partial transfer of the ESPP shares into the investment account you have with your RRSP broker and then transfer it in kind to your RRSP. Or, you could sell the ESPP shares, withdraw the cash, buy the same stock with your RRSP broker and contribute in-kind to your RRSP. Both should cost roughly the same. Search the blog for in-kind transfers because there are certain rules you should be aware of. Also, think carefully before you decide to load up on company stock -- it is usually not a good idea to have your investments in the same place you get a paycheck. For the record, I almost always sell my ESPP shares immediately and invest the proceeds elsewhere. Also, I always cash in ESOPs and don't sell and hold them because of problems that Ken outlined in his comments. @JC: When you sell your ESPP shares you can keep the proceeds in USD or convert the USD into CAD. If you convert to CAD, of course, there will be a foreign exchange charge.

If you are planning on contributing in-kind to your RRSP, you may want to consider opening a RRSP account with the broker your ESPP shares are deposited. Otherwise, you have two options and both will cost you money. You could do a partial transfer of the ESPP shares into the investment account you have with your RRSP broker and then transfer it in kind to your RRSP. Or, you could sell the ESPP shares, withdraw the cash, buy the same stock with your RRSP broker and contribute in-kind to your RRSP. Both should cost roughly the same.

Search the blog for in-kind transfers because there are certain rules you should be aware of. Also, think carefully before you decide to load up on company stock — it is usually not a good idea to have your investments in the same place you get a paycheck.

For the record, I almost always sell my ESPP shares immediately and invest the proceeds elsewhere. Also, I always cash in ESOPs and don’t sell and hold them because of problems that Ken outlined in his comments.

]]> By: Ken Thompson http://www.canadiancapitalist.com/tax-treatment-of-espp-benefits/#comment-189355 Ken Thompson Thu, 16 Apr 2009 18:40:08 +0000 http://www.canadiancapitalist.com/2007/09/26/tax-treatment-of-espp-benefits#comment-189355 JC NewGrad If the ESPP shares you purchased are held in a US Broker Account you will be required when you sell those shares to sell them on the same market they were purchased on. then "yes" you will receive the benefit of the $ exchange rate at that time. If, however, your shares were paid for in U.S. $ but on a Canadian exchange, you should be able to sell them in Canada and not incur an exchange problem. As to putting them into your RRSP account before selling them is something outside my area of experience. I expect you should be able to make that move if their is no problem with the percent of your income that is allowed to be applied to your RRSP account. As gains made within an RRSP account are not taxed, as they occur, you might be better off with the shares in an RRSP allowing the economy recovers while the shares are still in the RRSP. If you haven't run into the following booby-trap then be aware that equities acquired by way of an Emloyer's Shares Purchase Plan (ESPP) or Employee Share Option (ESO) plan can result in the employee being levied devatating taxes on phantom income. This tax attrocity happens when the shares vested, (purchased) increase in value by the time they are delivered (exercised) and are taxed on the Fair Market Value (FMV) of the equities whether or not they are actually sold. The bust in the hi-tech stock market of the year 2000 set a series of events in motion whereby thousands of Canadian taxpayers were levied horrendous taxes on ESPP/ESO equities that they did not sell at time of exercise and which crashed in value shortly after. The economic recession of 2008 is another situation where the same thing is happening. For details visit www.cfet.ca, and www.fair-iso.org and www.reformAMT.org JC NewGrad
If the ESPP shares you purchased are held in a US Broker Account you will be required when you sell those shares to sell them on the same market they were purchased on. then “yes” you will receive the benefit of the $ exchange rate at that time.
If, however, your shares were paid for in U.S. $ but on a Canadian exchange, you should be able to sell them in Canada and not incur an exchange problem.

As to putting them into your RRSP account before selling them is something outside my area of experience. I expect you should be able to make that move if their is no problem with the percent of your income that is allowed to be applied to your RRSP account.

As gains made within an RRSP account are not taxed, as they occur, you might be better off with the shares in an RRSP allowing the economy recovers while the shares are still in the RRSP.

If you haven’t run into the following booby-trap then be aware that equities acquired by way of an Emloyer’s Shares Purchase Plan (ESPP) or Employee Share Option (ESO) plan can result in the employee being levied devatating taxes on phantom income.

This tax attrocity happens when the shares vested, (purchased) increase in value by the time they are delivered (exercised) and are taxed on the Fair Market Value (FMV) of the equities whether or not they are actually sold.
The bust in the hi-tech stock market of the year 2000 set a series of events in motion whereby thousands of Canadian taxpayers were levied horrendous taxes on ESPP/ESO equities that they did not sell at time of exercise and which crashed in value shortly after.

The economic recession of 2008 is another situation where the same thing is happening.

For details visit http://www.cfet.ca, and http://www.fair-iso.org and http://www.reformAMT.org

]]> By: JC NewGrad http://www.canadiancapitalist.com/tax-treatment-of-espp-benefits/#comment-189349 JC NewGrad Thu, 16 Apr 2009 16:20:28 +0000 http://www.canadiancapitalist.com/2007/09/26/tax-treatment-of-espp-benefits#comment-189349 Newbie question(s) here: I, like Leo above, work at the Canadian branch of a US stock company. My ESPP does the payroll deductions in $Cdn. and then makes the purchases in $US. I realize I'll get dinged on the exchange when purchasing, but am I going to get dinged on the exchange again when I sell? Also: should I keep these shares in the account they set up for me? Is it wiser to transfer to a brokerage account RRSP before I sell (since I plan on putting it into an RRSP anyway)? I was thinking the Questrade RRSP that can hold $US might be a good idea. Newbie question(s) here:
I, like Leo above, work at the Canadian branch of a US stock company. My ESPP does the payroll deductions in $Cdn. and then makes the purchases in $US.
I realize I’ll get dinged on the exchange when purchasing, but am I going to get dinged on the exchange again when I sell?
Also: should I keep these shares in the account they set up for me? Is it wiser to transfer to a brokerage account RRSP before I sell (since I plan on putting it into an RRSP anyway)? I was thinking the Questrade RRSP that can hold $US might be a good idea.

]]> By: Ken Thompson http://www.canadiancapitalist.com/tax-treatment-of-espp-benefits/#comment-189173 Ken Thompson Tue, 14 Apr 2009 01:07:24 +0000 http://www.canadiancapitalist.com/2007/09/26/tax-treatment-of-espp-benefits#comment-189173 What about the ESPP/ESOP Tax Remission Order (TRO) revoking the taxes imposed on money the empoyees never saw, for 37 former SDL Optics/JDSU employees in Saanich Gulf-Islands B.C. ? Has anyone else had their ESPP/ESO tax, on money they never saw, levy revoked? What about the ESPP/ESOP Tax Remission Order (TRO) revoking the taxes imposed on money the empoyees never saw, for 37 former SDL Optics/JDSU employees in Saanich Gulf-Islands B.C. ?

Has anyone else had their ESPP/ESO tax, on money they never saw, levy revoked?

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