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BDO Reminds Shareholders to Exercise their Tax Relief Election on Stock Options

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Stock options have been used for decades by companies to offer their employees financial incentives in lieu of higher salaries. Benefits from a stock option are generally included in the individual’s employment income in the year the option is exercised.

Additional Information:

Company: BDO Canada
Website: http://www.bdo.ca/en/pages/default.aspx
Stock Symbol: NA
Date Published: Dec 2, 2014
Transcript: Available

Video Transcript:

I’m Samantha Deutscher for InvestmentPitch Media

Stock options have been used for decades by companies to offer their employees financial incentives in lieu of higher salaries.

Benefits from a stock option are generally included in the individual’s employment income in the year the option is exercised.

Prior to March 2010, employees of a publicly-traded company could elect to defer the recognition of the employment benefit arising from the exercise of employee stock options until the shares were sold.

The amount of tax owing was fixed in value, just the payment of the tax was deferred.

This was great in theory, assuming the stock maintained its value so that when the person sold the stock the proceeds generated enough income to pay the tax liability, and hopefully leave some profit for the employee.

However, as we know, in the real world stocks often go down in value.

In many cases, employees continued to hold the depressed securities, rather than selling them and facing the tax liability.

The Canadian 2010 federal budget gave these unfortunate shareholders special relief, allowing them to elect to pay a tax equal to the proceeds of the disposition of the securities, instead of the tax that was previously payable.

Our friends at BDO have reminded us that this option will only apply to shares disposed of prior to 2015.

Therefore the settlement date must occur during 2014.

As securities traded on Canadian and foreign exchanges have different settlement dates, please check with your investment advisor to ensure you don’t lose this benefit.

To make this election, in addition to selling the shares, you must complete Form RC310 “Election for Special Relief for Tax Deferral Election on Employee Security Options”, and file it with your 2014 tax return.

I’m Samantha Deutscher for InvestmentPitch Media
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This video is for information purposes only and it is not a recommendation to buy or sell any securities.