Mr. Dietrich, who is employed by Public Co. Ltd., was granted an option in year one...

  

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Mr. Dietrich, who is employed by Public Co. Ltd., was granted an option in year one to purchase up to 5,000 common shares at $10 after completion of his fifth year of employment. The FMV of the common shares at the time of granting the right was $12. He does not have any other shares. During Mr. Dietrich's seventh year of employment, he decided to exercise part of his right and purchased 1,000 shares with a FMV of $15 as at that date. Three years later, Mr. Dietrich sold the shares for $25 per share. BR What are the tax implications of each of the above transactions? How would your answer differ if the option price was $13 instead of $10? Mr. Dietrich, who is employed by Public Co. Ltd., was granted an option in year one to purchase up to 5,000 common shares at $10 after completion of his fifth year of employment. The FMV of the common shares at the time of granting the right was $12. He does not have any other shares. During Mr. Dietrich's seventh year of employment, he decided to exercise part of his right and purchased 1,000 shares with a FMV of $15 as at that date. Three years later, Mr. Dietrich sold the shares for $25 per share. BR What are the tax implications of each of the above transactions? How would your answer differ if the option price was $13 instead of $10?

Answer rating: 100% (QA)

a There are no tax implications for the first transaction as Mr Dietrich has not yet ex... View the full answer