Employee Stock Options

Employee Stock Options

Public Company Employees/Non-CCPC EmployeesCCPC Employees

Report taxable employment benefit when the options are exercised

  • Non-CCPC and Public Company stock option holders need to pay taxes when they exercise their share options.

Report taxable employment benefit when shares exercised are ultimately sold

  • CCPC Employees do not pay any taxes until the shares are sold.

Employment Benefit and Division C deduction:

Taxable Employment Benefit =  [FMV of the shares on the date the options are exercised] – [option price]

Division C deduction of 50% of the taxable benefit if the following condition is met:

  • Option not in the money at the grant date
    • “Not in the money” means that the FV of the shares at the grant date is less than or equal to the Exercise Price.

The Division C deduction is reported in the same tax year as the taxable employment benefits are reported (i.e. when the option is exercised)

Employment Benefit and Division C deduction:

Taxable Employment Benefit =[ FMV of the shares on the date the options are exercised]  – [option price]

Division C deduction of 50% of the taxable benefit if the following condition is met:

(i) If the option is not in the money, at the grant date

or

(ii) If the option is in the money when granted:

as long as the employee holds the shares for 24 months after exercising the option. Then you can still get a division C deduction.

The Division C deduction is reported in the same tax year as the taxable employment benefits are reported (i.e. when the exercised shares are ultimately sold)

Capital Gains:

When the shares are eventually sold:

Capital Gain = Proceeds of Disposition – FMV of the Shares on the date the shares were exercised.

Capital Gains:

 Capital Gain = Proceeds of Disposition – FMV of the shares on the date the shares were exercised.

Note: for CCPC employees, the capital gains and the taxable benefits are recognized on the same date.

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