On January 1, 20X0, as part of his compensation package, Arkady Blasko was granted stock options that

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Question:

On January 1, 20X0, as part of his compensation package, Arkady Blasko was granted stock options that would allow him to purchase 20,000 of the company’s shares at $19 per share. When Blasko was granted the stock options, the fair market value was $15 per share. On January 1, 20X1 Blasko exercised half of these options and bought 10,000 shares at $27 per share. On January 1, 20X2, Blasko sold his shares for $25 per share.

Required:

(a) Calculate the income tax consequences, if any, of the transactions that took place during 20X0, 20X1, and 20X2, assuming that Blasko’s employer is a Canadian Controlled Private Corporation.

(b) Calculate the income tax consequences, if any, of the transactions that took place during 20X0, 20X1, and 20X2, assuming that Blasko’s employer is a public company. Continued on next page… APPENDIX A GST is 5% for HST for Ontario is 13% • Alberta • British Columbia HST is 15% for:

• Manitoba * New Brunswick • Northwest Territories * Newfoundland and Labrador • Nunavut * Nova Scotia • Quebec * Prince Edward Island • Saskatchewan

• Yukon HST is 13% for Ontario Federal Tax for Individuals: Taxable Income in Excess of Federal Tax Marginal Rate or Excess $0 $0 15% 49,020 7,353 20.5% 98,040 17,402 26.0% 151,978 31,426 29.0% 216,511 50,141 33.0% Basic Personal Amount: Income of $151,978 or less: $13,808 Income between $151,978 and $216,511: $13,808 – ($1,387)((net income – 151,978)/64,533) Income of $216,511 or higher: $12,421 Pension: 15% of up to $2,000 of eligible pension income for a maximum credit of $300. This credit is available to be transferred to a spouse or common-law partner. Canada Pension Plan: The maximum credit base for all individuals is $2,876. This produces a maximum tax credit of $431. The actual maximum CPP contributions for those individuals with pensionable earnings of $61,600 or more is $3,166. The difference of $290 is treated as a deduction under ITA 60(e.1) and reduces net income. Employment Insurance: With respect to EI premiums, the amount that will be withheld from employee earnings amounts to 1.58% of the first $56,300 in gross wages, with a maximum annual contribution of $890. The employer is assessed 1.4 times this amount, a maximum of $1,245. This represents an effective rate for the employer of 2.21%.