CDN employee exercising U.S. stock options

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CDN employee exercising U.S. stock options

Post by toto » Wed Apr 01, 2020 6:52 pm


My question is regarding a scenario where a CDN employee receives stock options from a U.S. employer (private startup company). A small fraction of the stock options vested while the employee works in the U.S. for the U.S. company, with the bulk vesting when the employee returns to live in Canada. The employee then exercises the options haafter they have been in Canada for a couple of years.

- the Canadian tax form T1135 has to be filled out the year the stock is exercised if the CDN value of the shares are over $100,000 CDN. Does it have to be refiled every year thereafter (until sold or defunct) as long as the valueis over $100k CDN?

- Since it is a privately held company, how is the employee supposed to know what the shares are really worth? Do they have to try to get a valuation letter from the company every year? Good luck :-( What are your suggestions for valuation if no company valuation is forthcoming?

- What value is used for the T1135. Say the stock option is set at $0.10 and that is the Fair Market Value at the time the option is granted. At the time of exercise, the "value" is set at $1.00. Is the "adjusted cost basis" the $0.10 or the $1.00?

- A professional accounting firm has opined that the difference between the option price and FMV at exercise was an employee benefit which must have income tax paid on. Therefore, the adjusted cost basis of the shares was the exercise (FMV) of the shares. Does that sound correct?

Any help/insight from someone who knows would be GREATLY appreciated!

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