Understanding Employment Income: Stock Options and Employee

School: George Brown College Canada - Course: ACCT TAXATION - Subject: Accounting

Chapter 3 Employment Income W3 In Class Questions Table of Contents Problem 1: Stock Options............................................................................................................................2 Problem 2: Employee Benefits.....................................................................................................................5

Chapter 3 Employment Income W3 In Class Questions Problem 1: Stock Options You have been asked for advice on employee stock options by two different clients. (a) Omer is part of the management team of a Canadian public company and is eligible for the employee stock option plan. A few years ago he received an option on 1,000 shares. The current price of the shares is $35, and he is optimistic that it will go up. The option requires him to pay the option price of $30 (the fair market value at the time the option was granted) for the shares at the time he exercises his option. He plans to sell these shares when they reach $45. He has asked you to tell him the amount of income he will have to report and when he must report as a result of exercising the option and buying the shares for $30. (b) Hilda is part of the management team of a Canadian-controlled private company and is eligible for the employee stock option plan. A few years ago she received an option on 1,000 shares. The current price of the shares is $35, and she is optimistic that it will go up. The option requires her to pay the option price of $30 (the fair market value at the time the option was granted) for the shares at the time she exercises her option. She plans to sell these shares when they reach $45. She has asked you to tell her the amount of income she will have to report and when she must report as a result of exercising the option and buying the shares for $30.

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Chapter 3 Employment Income W3 In Class Questions

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Chapter 3 Employment Income W3 In Class Questions Problem 2: Employee Benefits You are working in the finance department at Auto Supply Inc. during your co-op work term. The CFO knows you have just taken a tax course and has asked you to do some research for him. The company is looking at possible employee benefit options and would like you to write a memo explaining whether each of the following would be considered taxable benefits of the employees. 1.Free parking. 2.Wedding or birthday gifts of up to $200.