What does liquidating mean

Posted by / 05-Jan-2017 23:02

This article discusses the pros and cons of stock options vs shares for employees of Canadian – private and public – companies.The taxation issues are poorly understood and can be very confusing.The tax treatment is not the same for Canadian Controlled Private Companies (CCPCs) as it is for public or non-CCPC companies.CCPCs have an advantage over other Canadian companies.Options are also a key part of a compensation package.In larger companies, options contribute substantially – often many times the salary portion – to income.In a recent survey of executive compensation (see the top 100 BC-based public company executives all earned over

This article discusses the pros and cons of stock options vs shares for employees of Canadian – private and public – companies.The taxation issues are poorly understood and can be very confusing.The tax treatment is not the same for Canadian Controlled Private Companies (CCPCs) as it is for public or non-CCPC companies.CCPCs have an advantage over other Canadian companies.Options are also a key part of a compensation package.In larger companies, options contribute substantially – often many times the salary portion – to income.In a recent survey of executive compensation (see the top 100 BC-based public company executives all earned over $1 million in 2009 income.

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This article discusses the pros and cons of stock options vs shares for employees of Canadian – private and public – companies.

The taxation issues are poorly understood and can be very confusing.

The tax treatment is not the same for Canadian Controlled Private Companies (CCPCs) as it is for public or non-CCPC companies.

CCPCs have an advantage over other Canadian companies.

Options are also a key part of a compensation package.

In larger companies, options contribute substantially – often many times the salary portion – to income.

million in 2009 income.

If the shares are held for more than 2 years, this tax liability is calculated at 50% of the benefit.However, if the shares are later sold (or deemed to have been sold by virtue of a liquidation) at a lower price than the FMV at the time of acquisition, the tax on the deferred benefit is STILL DUE. the difference between FMV and the selling price) is a “capital loss”, it does not offset the tax owing.It may be possible to claim an ABIL (Allowable Business Investment Loss) to offset the tax owing on the deferred benefit, i.e.if you buy shares in a CCPC, you can claim 50% of your investment loss and deduct from other income.Other than issuing zero-cost founders shares, the next best approach is to sell shares to employees at a “good” price which one could argue is at FMV considering the substantial restrictions on the shares (eg reverse-vesting and risk of forfeiture).

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if an employee of a company (private or public) exercises options to buy shares, that employee may have a tax liability even if he sells the shares at a loss.

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