Stock market tax implications
Stock options can leave you with a nasty tax bill - The Globe and Mail
Jump to main navigation Jump to main content. Last updated Wednesday, Mar. Fairness is in the eyes of the beholder.
Kerviel was fired, but he claimed the bank was being unfair. There is one situation that has come up over and over again, however, where Canadian taxpayers have cried foul but the taxman has refused to call the tax system unfair.
A recent court decision sided with the taxman once again over the issue, and Canadians need to take heed. The fact is, this exercise of your options is going to trigger some tax. This will be taxable to you, not as a capital gain, but as employment income.
Tax Implications for Investing in Stocks | Finance - Zacks
Most stock option plans in Canada are structured to take advantage of a stock option deduction equal to 50 per cent of the taxable benefit.
Where are you going to get the money to pay your tax bill? The loss is considered to be a capital loss, whereas the taxable income was considered to be employment income.
Capital losses can be applied against capital gains, but not generally other types of income. There have been a few court cases in the past on this issue. Bing Zhu, a Canadian taxpayer, was the most recent casualty of the courts see Bing Zhu v. The Queen, TCC Zhu had acquiredshares in his employer, Canadian Solar Inc. CSI and in September,exercised his options and acquired 53, shares in his employer.
He tried to argue that his losses were not capital losses, but regular business losses, in an attempt to have his losses applied against his employment income. The court ruled against him. Even though it may not be fair to Mr.
Zhu, the court had no authority to give relief based on an argument of fairness. To avoid the fate of Mr. Zhu and so many others, consider selling any shares acquired under a stock option plan as soon as possible. As a minimum, sell enough shares stock trading canada dummies raise the cash to pay your taxes. Tim Cestnick is managing director of Advanced Wealth Planning, Scotiabank Global Wealth Management, and founder of WaterStreet Family Offices.
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