cross- border ISO treatment

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jaaron
Posts: 10
Joined: Tue Dec 04, 2012 9:08 pm
Location: Canada

cross- border ISO treatment

Post by jaaron »

I am an American / Canadian dual-citizen residing in Canada, filing taxes in both countries.
I have incentive stock options from my former employer, a Canadian company.
I was recently laid off, and am researching tax consequences of exercising these options.

My understanding is that the company is currently worth less than it was at the last round of financing. I do not know the current value of the shares and whether it is above or below the strike price.

I inquired as to the fair market value of the shares, and have been told the following by the Senior Director of Finance:

"There is no FMV since we are not a publicly traded company. Our last round of financing valued the preferred shares at $1.50, but common shares are always worth significantly less than preferred due to liquidation preferences. Our next round of financing could also value the preferred shares lower than the last round due to the financial conditions of the company."

Given this answer, how would the exercise tax be determined for IRS purposes? Are there better questions I should be asking of him? Are there other tax treatment considerations to keep in mind either for the US or Canada?

Thanks so much for your help!

best,
Jon
jaaron
Posts: 10
Joined: Tue Dec 04, 2012 9:08 pm
Location: Canada

Post by jaaron »

Update:
The ISOs are solidly underwater. Ignoring the questionable benefit of exercising underwater options, Will there be tax consequences for exercising them, either on the US or Canada side?

Thanks,
Jon
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