Restricted stock of a private new US corporation

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Domeani
Posts: 30
Joined: Wed Jul 08, 2020 12:29 am

Restricted stock of a private new US corporation

Post by Domeani »

Hello,

I was looking for advice on receiving restricted stock from a US private corp as a Canadian citizen/resident through an EIP (equity incentive plan) over 3 years.

Corp is bootstrapped and at seed round stage. Not currently working for them but after seed round likely to become an independent contractor or use a PEO/EOR.

Rough scenario (numbers not accurate and just to figure out calcs):
-bought 1000 shares at $0.01/share (offer to join)
-bought 1000 shares at $1/share (investment/bootstrap on inside round)
-year 1,2,3 vest in 1000 shares each year
-at the end of year 3 I’ll have 5000 shares

Question:
What are the tax implications of the vesting?
1) The shares are totally illiquid so rational for $0 of income.
2) $3000 income in year 1
or
3) 1000 shares x FMV (how is that determined if illiquid?) each year. Year 1 would be $1000 but what if the seed round move the share price to $10? Is year 2 then $10k income.

Found this https://www.blg.com/en/insights/2021/01 ... plications but did not find it clear on restricted stock. In the US people file their 83(b)’s and declare $3k income in year one.

Thank you for any insights
Domeani
Posts: 30
Joined: Wed Jul 08, 2020 12:29 am

Re: Restricted stock of a private new US corporation

Post by Domeani »

Hello,

I'm still quite interested on this topic. Only thing I find that is similar as a question when searching on the web is this https://www.justanswer.com/canada-tax/a ... rants.html Does anyone have suggestions where to find answers on such matters? or have any experience/knowledge themselves? Thank you.
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