Question
In Year 1, a public company granted an employee resident in Canada an option to purchase 1,000 common shares of the employer company for $10
In Year 1, a public company granted an employee resident in Canada an option to purchase 1,000 common shares of the employer company for $10 per share. The fair market value of the shares at the date the option was granted was $8 per share. No other stock options were granted to this employee during Year 1. In Year 2, when the shares were worth $16 per share the employee exercised the option and purchased all 1,000 shares. In Year 5, the employee sold the 1,000 shares for $38 per share. The shares do not have any special dividend rights or restrictions.
Discuss the income tax consequences to the employee from these transactions (show calculations).
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started